As filed with the Securities and Exchange Commission on October 27, 2004 Registration No. __________ U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / PRE-EFFECTIVE AMENDMENT NO.__ / / POST-EFFECTIVE AMENDMENT NO.__ / / OPPENHEIMER CASH RESERVES FUND (Exact Name of Registrant as Specified in Charter) 6803 South Tucson Way, Centennial, Colorado 80112 (Address of Principal Executive Offices) 303-768-3200 (Registrant's Telephone Number) Robert G. Zack, Esq. Executive Vice President & General Counsel OppenheimerFunds, Inc. Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10148 (212) 323-0250 (Name and Address of Agent for Service) As soon as practicable after the Registration Statement becomes effective. (Approximate Date of Proposed Public Offering) Title of Securities Being Registered: Class A, Class B, Class C, Class N and Class Y shares of Oppenheimer Cash Reserves Fund. It is proposed that this filing will become effective on November 26, 2004 pursuant to Rule 488. No filing fee is due because of reliance on Section 24(f) of the Investment Company Act of 1940.CONTENTS OF REGISTRATION STATEMENT This Registration Statement contains the following pages and documents: Front Cover Contents Page Part A Proxy Statement for Oppenheimer Capital Preservation Fund and Prospectus for Oppenheimer Cash Reserves
Part B Statement of Additional Information Part C Other Information Signatures Exhibits
OPPENHEIMER CAPITAL PRESERVATION FUND 6803 South Tucson Way, Centennial, Colorado 80112 1.800.708.7780 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 21, 2005 To the Shareholders of Oppenheimer Capital Preservation Fund: Notice is hereby given that a Special Meeting of the Shareholders of Oppenheimer Capital Preservation Fund ("Capital Preservation Fund" or the "Fund"), a registered investment management company, will be held at 6803 South Tucson Way, Centennial, CO 80112 at 1:00 P.M., Mountain time, on January 21, 2005, or any adjournments thereof (the "Meeting"), for the following purposes: 1. To approve an Agreement and Plan of Reorganization between Oppenheimer Capital Preservation Fund ("Capital Preservation Fund") and Oppenheimer Cash Reserves ("Cash Reserves"), and the transactions contemplated thereby, including (a) the transfer of substantially all the assets of Capital Preservation Fund to Cash Reserves in exchange for Class A, Class B, Class C and Class N shares of Cash Reserves, (b) the distribution of these shares of Cash Reserves to the corresponding Class A, Class B, Class C and Class N shareholders of Capital Preservation Fund in complete liquidation of Capital Preservation Fund and (c) the cancellation of the outstanding shares of Capital Preservation Fund (all of the foregoing being referred to as the "Proposal"). 2. To act upon such other matters as may properly come before the Meeting. Shareholders of record at the close of business on November 15, 2004 are entitled to notice of, and to vote at, the Meeting. The Proposal is more fully discussed in the Prospectus and Proxy Statement. Please read it carefully before telling us, through your proxy or in person, how you wish your shares to be voted. The Board of Trustees of Capital Preservation Fund recommends a vote in favor of the Proposal. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY. By Order of the Board of Trustees, Robert G. Zack, Secretary December 3, 2004 - -------------------------------------------------------------------------------------------- Shareholders who do not expect to attend the Meeting are requested to indicate voting instructions on the enclosed proxy and to date, sign and return it in the accompanying postage-paid envelope. To avoid unnecessary duplicate mailings, we ask your cooperation in promptly mailing your proxy no matter how large or small your holdings may be. OPPENHEIMER CASH RESERVES 6803 South Tucson Way, Centennial, Colorado 80112 1.800.708.7780 COMBINED PROSPECTUS AND PROXY STATEMENT DATED December 3, 2004 Special Meeting of Shareholders of Oppenheimer Capital Preservation Fund to be held on January 21, 2005 Acquisition of the Assets of OPPENHEIMER CAPITAL PRESERVATION FUND 6803 South Tucson Way, Centennial, Colorado 80112 1.800.708.7780 By and in exchange for Class A, Class B, Class C and Class N shares of OPPENHEIMER CASH RESERVES This combined Prospectus and Proxy Statement solicits proxies from the shareholders of Oppenheimer Capital Preservation Fund ("Capital Preservation Fund") to be voted at a Special Meeting of Shareholders (the "Meeting") to approve the Agreement and Plan of Reorganization (the "Reorganization Agreement") and the transactions contemplated thereby (the "Reorganization") between Capital Preservation Fund and Oppenheimer Cash Reserves ("Cash Reserves"). This combined Prospectus and Proxy Statement constitutes the Prospectus of Cash Reserves and the Proxy Statement of Capital Preservation Fund filed on Form N-14 with the Securities and Exchange Commission ("SEC"). If shareholders vote to approve the Reorganization Agreement and the Reorganization, the net assets of Capital Preservation Fund will be acquired by and in exchange for shares of Cash Reserves. The Meeting will be held at the offices of OppenheimerFunds, Inc. at 6803 South Tucson Way, Centennial, CO 80112 on January 21, 2005 at 1:00 P.M. Mountain time. The Board of Trustees of Capital Preservation Fund is soliciting these proxies on behalf of Capital Preservation Fund. This Prospectus and Proxy Statement will first be sent to shareholders on or about December 3, 2004. If the shareholders of Capital Preservation Fund vote to approve the Reorganization Agreement, you will receive Class A shares of Cash Reserves equal in value to the value as of the "Valuation Date" (which is the business day preceding the Closing Date of the Reorganization) of your Class A shares of Capital Preservation Fund; Class B shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class B shares of Capital Preservation Fund; Class C shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class C shares of Capital Preservation Fund or Class N shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class N shares of Capital Preservation Fund. Capital Preservation Fund will then be liquidated and de-registered under the Investment Company Act of 1940 (the "Investment Company Act"). Cash Reserves is a money market mutual fund that seeks the maximum current income that is consistent with stability if principal. This Prospectus and Proxy Statement gives information about Class A, Class B, Class C, and Class N shares of Cash Reserves that you should know before investing. You should retain it for future reference. A Statement of Additional Information relating to the Reorganization described in this Prospectus and Proxy Statement, dated December 3, 2004 (the "Proxy Statement of Additional Information") has been filed with the SEC ("SEC") as part of the Registration Statement on Form N-14 (the "Registration Statement") and is incorporated herein by reference. You may receive a free copy by writing to OppenheimerFunds Services (the "Transfer Agent") at P.O. Box 5270, Denver, Colorado 80217 or by calling toll-free 1.800.708.7780. That Statement of Additional Information includes the following documents: (i) the Prospectus of Capital Preservation Fund dated December 23, 2003 and its supplements dated December 29, 2003, July 6, 2004, September 30, 2004 and October 12, 2004.; (ii) the Statement of Additional Information of Capital Preservation Fund dated December 23, 2003 and its supplements dated December 29, 2003 and July 6, 2004, which include audited financial statements of Capital Preservation Fund for the 12-month period ended October 31, 2003; (iii) unaudited financial statements of Capital Preservation Fund for the 6-month period ended April 30, 2004; (iv) the Statement of Additional Information of Cash Reserves dated September 24, 2004, which includes audited financial statements of Cash Reserves for the 12-month period ended July 31, 2004; and (v) Combined Pro Forma financial statements as of September 30, 2004. The Prospectus of Cash Reserves dated September 27, 2004, is enclosed herewith and considered a part of this Prospectus and Proxy Statement. It is intended to provide you with information about Cash Reserves. The following documents have been filed with the SEC and are available without charge upon written request to the Transfer Agent or by calling toll-free number shown above: (i) a Prospectus for Capital Preservation Fund, dated December 23, 2003 and its supplements dated December 29, 2003, July 6, 2004, September 30, 2004 and October 11, 2004; (ii) a Statement of Additional Information for Capital Preservation Fund, dated December 29, 2003 and its supplements dated December 29, 2003 and July 6, 2004; and (iii) a Statement of Additional Information for Cash Reserves, dated September 27, 2004. Mutual fund shares are not deposits or obligations of any bank, and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other U.S. government agency. Mutual fund shares involve investment risks including the possible loss of principal. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus and Proxy Statement. Any representation to the contrary is a criminal offense. This Prospectus and Proxy Statement is dated December 3, 2004. TABLE OF CONTENTS COMBINED PROSPECTUS AND PROXY STATEMENT Page ---- Synopsis................................................................................................ What am I being asked to vote on?.............................................................. What are the general tax consequences of the Reorganization?............................. Comparisons of some important features...................................................... How do the investment objectives and policies of the Funds compare? ..................... Who manages the Funds?........................................................................ What are the fees and expenses of each Fund and what are they expected to be after the Reorganization?............................................................................... Where can I find more financial information about the Funds?............................. What are the capitalizations of the Funds and what would the capitalization be after the Reorganization?............................................................................... How have the Funds performed?................................................................ Other comparisons...................................................... Investment Management and Fees...................................................... Transfer Agency and Custody Services................................................ Distribution Services...................................................................... Purchases, Redemptions, Exchanges and other Shareholder Services............ Dividends and Distributions............................................................ What are the Principal Risks of an Investment in Capital Preservation Fund or Cash Reserves?...... Reasons for the Reorganization.................................................................... Information About the Reorganization .............................................................................. How will the Reorganization be carried out?.................................................. Who will pay the expenses of the Reorganization?........................................... What are the tax consequences of the Reorganization?....................................... What should I know about Class A, Class B, Class C and Class N shares of Cash Reserves?................................................................................... Comparison of Investment Objectives and Policies............................................ Are there any significant differences between the investment objectives and strategies of the Funds?...................................................................................... What are the main risks associated with an investment in the Funds? ....................... How do the investment policies of the Funds compare?...................................... What are the fundamental investment restrictions of the Funds?........................... How do the account features and shareholder services for the Funds compare?........... Investment Management................................................................. Distribution................................................................................. Purchases and Redemptions............................................................. Shareholder Services..................................................................... Dividends and Distributions............................................................ Voting Information................................................................................... How many votes are necessary to approve the Reorganization Agreement?............... How do I ensure my vote is accurately recorded?............................................. Can I revoke my proxy?........................................................................... What other matters will be voted upon at the Meeting?...................................... Who is entitled to vote?........................................................................... What other solicitations will be made?......................................................... Are there appraisal rights?........................................................................ Information About Capital Preservation Fund................................................ Information About Cash Reserves................................................................... Principal Shareholders............................................................................... Exhibit A - Agreement and Plan of Reorganization between Oppenheimer Capital Preservation Fund and Oppenheimer Cash Reserves....................................................... A-1 Exhibit B - Principal Shareholders.................................................................. B-1 Enclosure: Prospectus of Oppenheimer Cash Reserves dated September 27, 2004. SYNOPSIS This is only a summary and is qualified in its entirety by the more detailed information contained in or incorporated by reference in this Prospectus and Proxy Statement and by the Reorganization Agreement which is attached as Exhibit A. Shareholders should carefully review this Prospectus and Proxy Statement and the Reorganization Agreement in their entirety and, in particular, the current Prospectus of Cash Reserves which accompanies this Prospectus and Proxy Statement and is incorporated herein by reference. If shareholders of Capital Preservation Fund approve the Reorganization, the net assets of Capital Preservation Fund will be transferred to Cash Reserves, in exchange for an equal value of shares of Cash Reserves. The shares of Cash Reserves will then be distributed to Capital Preservation Fund shareholders, and Capital Preservation Fund will be liquidated. As a result of the Reorganization, you will cease to be a shareholder of Capital Preservation Fund and will become a shareholder of Cash Reserves. For federal income tax purposes, the holding period of your Capital Preservation Fund shares will be carried over to the holding period for shares you receive in connection with the Reorganization. This exchange will occur on the Closing Date (as such term is defined in the Agreement and Plan of Reorganization attached hereto as Exhibit A) of the Reorganization. What am I being asked to vote on? You are being asked to approve the reorganization of your fund, Capital Preservation Fund, with and into Cash Reserves. Capital Preservation Fund and Cash Reserves have similar investment objectives but differ in the investment strategies they employ to achieve their objectives. For the reasons set forth below and described more fully under "Reasons for the Reorganization" beginning on page ___, the Board of Trustees of Capital Preservation Fund and the Fund's investment manager, OpperheimerFunds, Inc. (the "Manager") believe that it is in the best interests of the Fund and its shareholders to recommend the Reorganization at this time. Capital Preservation Fund's investment objective is to seek high current income while seeking to maintain a stable value per share. Its shares are offered only to certain types of retirement plans, including participant-directed qualified retirement plans and 403(b)(7) custodial plans. The Fund tries to maintain a stable $10 per share net asset value by operating as a fund of funds that normally invests at least 85% of its assets in shares of Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer Strategic Income Fund, Oppenheimer U.S. Government Trust and Oppenheimer Money Market Fund, Inc. The balance of the Capital Preservation Fund's net assets, up to a maximum of 15%, is invested in specialized investment contracts, referred to as "wrapper agreements" issued by banks, insurance companies or other financial institutions that, among other things, obligate the wrapper providers to pay the excess of the book value over the net value of such assets for some or all of the assets in the Capital Preservation Fund's portfolio if certain "termination events" occur. The wrapper agreement is therefore intended to offset changes in the book value of the Capital Preservation Fund's other investments allowing the Fund to value its assets at the stable $10 per share under fair valuation methods adopted by the Fund's Board of Trustees. Cash Reserves' investment objective is to seek the maximum current income that is consistent with stability of principal. Cash Reserves' shares are offered to individual investors who want to earn income at current money market rates while seeking to preserve the value of their investment. Cash Reserves is a money market mutual fund that invests in high-quality money market instruments, such as commercial paper, repurchase agreements, and short-term government securities, that comply with the requirements of Rule 2a-7 under the Investment Company Act of 1940. Cash Reserves values its shares at a stable $1 per share provided the conditions of Rule 2a-7 are met. In February 2003, the staff of the Division of Investment Management of the U.S. Securities and Exchange Commission ("SEC") sent a letter to certain stable value funds, including Capital Preservation Fund, advising them that the staff was reviewing the methodologies used by stable value funds to value their portfolios, and, in particular, their wrapper agreements. As a part of that reevaluation, SEC staff has questioned whether the valuation methodology used by these funds for their wrappers is consistent with the Investment Company Act of 1940 and generally accepted accounting principles. The SEC and its staff have not, to date, issued any public statement regarding the results of its inquiry. However, any SEC or SEC staff conclusion could call into question the current fair valuation methodology used to value the Fund's wrapper agreement and to maintain a stable $10 per share net asset value. In that event, Capital Preservation Fund would be unable to achieve its investment objective using its current investment strategy. Such SEC or SEC staff conclusion could require the Fund to seek substantially restructured wrapper agreements the terms of which cannot be assessed at this time. Accordingly, the Manager proposed the Reorganization to the Fund's Board of Trustees. At a meeting held on October 6, 2004, the Board of Trustees of Capital Preservation Fund considered the proposed Reorganization and alternatives to the Reorganization including (i) continuing to manage the Fund without the wrapper agreement, by converting the Fund to a short-duration bond fund and attempting to seek a stable value through the use of derivatives or other investment techniques; and (ii) liquidating the Fund. The Board determined that these two options were not viable or in the best interests of shareholders. Managing Capital Preservation Fund as a short-duration bond fund would not meet the needs of the retirement plans, which are the Fund's current shareholders to offer a cash, money market or stable value investment option to plan participants. While short duration bond funds have reduced price volatility because of reduced interest rate exposure, it is unlikely that the Manager would be able to maintain a fully stable net asset value for the Fund even when coupled with the use of derivatives such as interest rate swaps. Additionally, the Board determined that liquidating the Fund would not benefit participants in plans that currently invest in the Fund, because plan fiduciaries would still have to find a stable value or money market fund alternative for plan participants. In deciding to recommend the Reorganization to shareholders, the Fund's Board of Trustees considered the fact that the Reorganization offers shareholders of Capital Preservation Fund a fund that seeks current income while seeking to maintain a net asset value of $1 per share. The Board also considered the fact that the surviving fund has the potential for lower overall operating expenses. In addition, the Board considered that both Funds have Class A, Class B, Class C and Class N shares offered under similar sales charge arrangements. The Board also considered that the Reorganization would be a tax-free reorganization, and there would be no sales charge imposed in effecting the Reorganization. In addition, due to the relatively moderate costs of the reorganization to both Funds, the Boards of both Funds concluded that neither Fund would experience dilution as a result of the Reorganization. If approved by shareholders, the Reorganization will result in the transfer of the net assets of Capital Preservation Fund to Cash Reserves, in exchange for an equal value of shares of Cash Reserves. The shares of Cash Reserves will then be distributed to Capital Preservation Fund shareholders and Capital Preservation Fund will subsequently be liquidated. Following the Reorganization, you will cease to be a shareholder of Capital Preservation Fund and will become a shareholder of Cash Reserves. This exchange will occur on the Closing Date (as such term is defined in the Agreement and Plan of Reorganization attached hereto as Exhibit A) of the Reorganization. Approval of the Reorganization means you will receive Class A shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class A shares of Capital Preservation Fund; Class B shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class B shares of Capital Preservation Fund; Class C shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class C shares of Capital Preservation Fund or Class N shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class N shares of Capital Preservation Fund. The shares you receive will be issued at net asset value without a sales charge or the payment of a contingent deferred sales charge ("CDSC") although if your shares of Capital Preservation Fund are subject to a CDSC, your Cash Reserves shares will continue to be subject to the same CDSC applicable to your shares. The period during which you held your Capital Preservation Fund shares will carry over to your Cash Reserves shares for purposes of determining the CDSC holding period. THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION What are the general tax consequences of the Reorganization? It is expected that shareholders of Capital Preservation Fund will not recognize any gain or loss for federal income tax purposes, as a result of the exchange of their shares for shares of Cash Reserves. You should, however, consult your tax advisor regarding the effect, if any, of the Reorganization in light of your individual circumstances. You should also consult your tax advisor about state and local tax consequences. For further information about the tax consequences of the Reorganization, please see the "Information About the Reorganization--What are the tax consequences of the Reorganization?" Comparisons of some important features How do the investment objectives and policies of the Funds compare? As shown in the chart below, the respective investment objectives of the funds are similar: ------------------------------------------------------------------ Capital Preservation Fund Cash Reserves ------------------------------------------------------------------ ------------------------------------------------------------------ Seeks high current income while Seeks the maximum current seeking to maintain a stable income that is consistent with value per share stability of principal ------------------------------------------------------------------ Capital Preservation Fund is a fund of funds that invests primarily in shares of other income-seeking Oppenheimer funds including Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer Strategic Income Fund, Oppenheimer U.S. Government Trust and Oppenheimer Money Market Fund, Inc. The Fund invests principally in Oppenheimer Limited-Term Government Fund and to a lesser extent in Oppenheimer Money Market Fund to help limit its duration and therefore to limit the volatility of its net asset value per share. However, the Fund's investment policies (and its wrapper agreement) permit it to hold up to 100% of its assets in money market securities (either shares of Oppenheimer Money Market Fund, Inc. or direct investments in money market instruments). In addition, Capital Preservation Fund invests up to 15% of its net assets in a wrapper agreement or agreements to help maintain a stable net asset value per share. Cash Reserves is a money market mutual fund that invests in high-quality money market instruments that comply with the requirements of Rule 2a-7 under the Investment Company Act to help maintain a stable net asset value while providing current income. Although money market investments are typically lower-yielding than intermediate or long-term bonds, both funds have investment policies that promote the goal of stability of principal, which is the chief goal of plan sponsors and fiduciaries that selected Capital Preservation Fund as an offering for their plans. In order to facilitate a tax-free reorganization of Capital Preservation Fund into Cash Reserves, Capital Preservation Fund must hold only Rule 2a-7 qualifying money market instruments at the time of the closing of the reorganization. Therefore, the Fund must redeem its holdings in Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer Strategic Income Fund, Oppenheimer U.S. Government Trust and Oppenheimer Money Market Fund, Inc. prior to the merger. The Manager is currently working to structure the redemptions gradually to ensure that the Fund is fully invested in Rule 2a-7 qualified money market instruments prior to the Reorganization. Please refer to the financial statements of both Funds for a complete listing (as of the respective report dates) of the portfolio investments for each Fund. These are included in the Statement of Additional Information, which is available free of charge (see page ii for instructions for requests). Who Manages the Funds? The day-to-day management of the business and affairs of each Fund is the responsibility of the Manager. Each Fund is an open-end diversified investment management company with an unlimited number of authorized shares of beneficial interest organized as a Massachusetts business trust. Capital Preservation Fund commenced operations on September 27, 1999, and Cash Reserves commenced operations on January 3, 1989. Both Funds are governed by a Board of Trustees, which is responsible for protecting the interests of shareholders under Massachusetts law and other applicable laws. Both Funds are located at 6803 South Tucson Way, Centennial, Colorado 80112. The Manager, located at 225 Liberty Street, 11th Floor, New York, New York 10281-1008, acts as investment advisor to both Funds, and employs their portfolio managers. Capital Preservation Fund is managed by a portfolio management team comprised of Angelo Manioudakis and other investment professionals selected from the Manager's high-grade bond team in its fixed-income department. This portfolio management team is primarily responsible for the day-to-day management of the Fund's portfolio. Mr. Manioudakis is a Vice President of the Fund and a Senior Vice President of the Manager. Prior to joining the Manager in April 2002, he was Executive Director and portfolio manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment Management (from August 1993 to April 2002). The portfolio managers for Cash Reserves are Carol E. Wolf and Barry D. Weiss. They are Vice Presidents of the Fund and are the persons principally responsible for the day-to-day management of the Fund's portfolio. Ms. Wolf has been a portfolio manager of the Fund since June 15, 1998 and Mr. Weiss, since July 2001. Ms. Wolf is a Senior Vice President of the Manager and Mr. Weiss is a Vice President of the Manager, and each is an officer and portfolio manager of other Oppenheimer funds. Prior to joining the Manager as Senior Credit Analyst in February 2000, Mr. Weiss was an Associate Director, Fitch IBCA Inc. (April 1998 - February 2000). What are the fees and expenses of each Fund and what are they expected to be after the Reorganization? Capital Preservation Fund and Cash Reserves each pay a variety of expenses directly for management of their assets, administration and distribution of their shares and other services. Those expenses are subtracted from each Fund's assets to calculate the fund's net asset values per share. Shareholders pay these expenses indirectly. Shareholders pay other expenses directly, such as sales charges. The following tables are provided to help you understand and compare the fees and expenses of investing in shares of Capital Preservation Fund with the fees and expenses of investing in shares of Cash Reserves. The pro forma expenses of the surviving Cash Reserves show what the fees and expenses are expected to be after giving effect to the Reorganization. For Capital Preservation Fund, the annual fund operating expenses includes both the "Direct Annual Fund Operating Expenses" as well as the "Combined Annual Fund Operating Expenses". The Direct Annual Fund Operating Expenses table includes those expenses paid directly by the Fund. The Combined Annual Fund Operating Expenses include the fees and expenses indirectly incurred by the Fund through its investments in shares of the underlying Oppenheimer funds. The "Management Fees" in Direct Annual Fund Operating Expenses have been reduced by the amount of the management fees paid to the Manager by the underlying funds on assets representing investments by Capital Preservation Fund in shares of those underlying funds. That is done so that shareholders of Capital Preservation Fund do not pay direct and indirect management fees in excess of 0.75%. PRO FORMA FEE TABLE For the 12 month period ended September 30, 2004 ----------------------------------------------------- Pro Forma Capital Preservation Cash Surviving Fund Reserves Cash Reserves Class A shares Class A Class A shares Shares - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Shareholder Transaction Expenses (charges paid directly from a shareholder's investment) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Sales Charge (Load) on purchases (as a 3.5% None None % of offering price) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (as a % of None1 None1 None1 the lower of the original offering price or redemption proceeds) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Redemption Fee (as a percentage of total 2.00%5 None None redemption proceeds) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Annual Fund Operating Expenses (as a percentage of average daily net assets) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Combined Direct Annual Fund Annual Operating Fund Expenses Operating Expenses - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Management Fees 0.73% 0.30% 0.47%6 0.46% - --------------------------------------------------------------------------------- Distribution and/or 0.25% 0.25% 0.20% 0.21% Service (12b-1) Fees - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Other Expenses7 0.70%8 0.60%8 0.55%9 0.54% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Total Fund Operating 1.68% 1.15% 1.22% 1.21% Expenses - --------------------------------------------------------------------------------- ----------------------------------------------------- Pro Forma Capital Preservation Cash Surviving Cash Fund Reserves Reserves Class B shares Class B Class B shares Shares - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Shareholder Transaction Expenses (charges paid directly from a shareholder's investment) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Sales Charge (Load) on purchases (as a None None None % of offering price) - --------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (as a % of 4%2 5%2 5%2 the lower of the original offering price or redemption proceeds) - --------------------------------------------------------------------------------- Redemption Fee (as a percentage of total 2.00%5 None None redemption proceeds) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Annual Fund Operating Expenses (as a percentage of average daily net assets) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Combined Direct Annual Fund Annual Operating Fund Expenses Operating Expenses - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Management Fees 0.73% 0.30% 0.47%6 0.46% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Distribution and/or 1.00% 1.00% 0.75%10 0.75% Service (12b-1) Fees - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Other Expenses7 1.02%8 0.92%8 0.37%9 0.39% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Total Fund Operating 2.75% 2.22% 1.59% 1.60% Expenses - --------------------------------------------------------------------------------- ----------------------------------------------------- Pro Forma Capital Preservation Cash Reserves Surviving Fund Class C Cash Reserves Class C Shares Shares Class C Shares ----------------------------------------------------- - --------------------------------------------------------------------------------- Shareholder Transaction Expenses (charges paid directly from a shareholder's investment) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Sales Charge (Load) on purchases (as a None None None % of offering price) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (as a % of 1%3 1%3 1%3 the lower of the original offering price or redemption proceeds) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Redemption Fee (as a percentage of total 2.00%5 None None redemption proceeds) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Annual Fund Operating Expenses (as a percentage of average daily net assets) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Combined Direct Annual Fund Annual Operating Fund Expenses Operating Expenses - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Management Fees 0.73% 0.30% 0.47%6 0.46% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Distribution and/or 1.00% 1.00% 0.75%10 0.75% Service (12b-1) Fees - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Other Expenses7 0.97%8 0.87%8 0.42%9 0.49% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Total Fund Operating 2.70% 2.17% 1.64% 1.70% Expenses - --------------------------------------------------------------------------------- ----------------------------------------------------- Pro Forma Capital Preservation Cash Surviving Cash Fund Reserves Reserves Class N shares Class N Class N shares Shares ----------------------------------------------------- - --------------------------------------------------------------------------------- Shareholder Transaction Expenses (charges paid directly from a shareholder's investment) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Sales Charge (Load) on purchases (as a None None None % of offering price) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (as a % of 1%4 1%4 1%4 the lower of the original offering price or redemption proceeds) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Redemption Fee (as a percentage of total 2.00%5 None None redemption proceeds) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Annual Fund Operating Expenses (as a percentage of average daily net assets) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Combined Direct Annual Fund Annual Operating Fund Expenses Operating Expenses - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Management Fees 0.73% 0.30% 0.47%6 0.45% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Distribution and/or 0.25% 0.25% 0.50% 0.50% Service (12b-1) Fees - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Other Expenses7 0.58%8 0.48%8 0.42%9 0.36% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Total Fund Operating 1.56% 1.03% 1.39% 1.32% Expenses - --------------------------------------------------------------------------------- Expenses may vary in future years. 1. A contingent deferred sales charge may apply to redemptions of investments of $1 million or more ($500,000 for retirement plan accounts) of Class A shares. See "How to Buy Shares" in each Fund's Prospectus. 2. Applies to redemptions within the first year after purchase. For Capital Preservation Fund, the contingent deferred sales charge declines to 1% in the fifth year and is eliminated after that. For Cash Reserves, the contingent deferred sales charge declines to 1% in the sixth year and is eliminated after that. 3. Applies to shares redeemed within 12 months of purchase. 4. Applies to shares redeemed within 18 months of retirement plan's first purchase of Class N shares. 5. Certain redemptions of shares that are made on less than 12 months' prior written notice to the Fund are subject to a redemption fee of 2% of the proceeds of the redemption. 6. The Manager has voluntarily agreed to waive a portion of its Management Fees so the fees do not exceed an annual rate of 0.40% of the average annual net assets for each class of shares. That undertaking may be amended or withdrawn at any time. After the Manager's waiver the "Management Fees" were 0.40% for all classes. "Other Expenses" include transfer agent fees and custodial, accounting and legal expenses. 7. The "Other Expenses" shown for Capital Preservation Fund are based on, among other things, the fees the Fund would have paid if the transfer agent had not waived a portion of its fee under a voluntary undertaking to the Fund to limit transfer agent fees to 0.35% of average daily net assets for all classes. That undertaking may be amended or withdrawn at any time. After the waiver, the actual "Other Expenses" and "Total Annual Operating Expenses" under the Direct Annual Fund Operating Expenses table as percentages of average daily net assets were 0.54% and 1.08% for Class A, 0.62% and 1.89% for Class B and 0.59% and 1.87% for Class C. Class N expenses were the same as shown above. 8. The "Other Expenses" shown for Cash Reserves are based on, among other things, the fees the Fund would have paid if the transfer agent had not waived a portion of its fees under a voluntary undertaking to the Fund to limit those fees to 0.35% of average daily net assets per fiscal year for all classes, or (effective April 28, 2003) in an amount necessary to allow each class of the Fund to maintain a 7 day yield of at least approximately 0.10%. Those undertakings may be amended or withdrawn at any time. After the waiver, the actual "Other Expenses" as percentages of average daily net assets were 0.40% for Class A shares, 0.18% for Class B shares, 0.20% for Class C and 0.20% for Class N shares. 9. The Distributor has voluntarily agreed to reduce Class B and Class C "Distribution and /or Service (12b-1) Fees" by 0.25% of the average annual net assets for each respective class of shares. That undertaking may be amended or withdrawn at any time. After that waiver the "Distribution and/or Service Fees" for Class B and Class C shares were 0.50%. After the "Management Fees", "Distribution and/or Other Expense" and "Other Expenses" waivers, the "Total Annual Operating Expenses" as a percentage of average daily net assets were 0.99% for Class A, 1.08% for Class B, 1.10% for Class C and 1.09% for Class N. Examples These examples below are intended to help you compare the cost of investing in each Fund and the proposed surviving Cash Reserves. These examples assume an annual return for each class of 5%, the operating expenses described in the tables above and reinvestment of your dividends and distributions. The examples for Capital Preservation Fund are based on the combined annual fund operating expenses for the Fund. Your actual costs may be higher or lower because expenses will vary over time. For each $10,000 investment, you would pay the following projected expenses if you sold your shares after the number of years shown or held your shares for the number of years shown without redeeming, according to the following examples. Capital Preservation Fund (with no redemption fee) - -------------------------------------------------------------------------------- If shares are 1 year 3 years 5 years 10 years redeemed1: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares $515 $861 $1,231 $2,267 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B shares $678 $1,053 $1,554 $2,5863 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C shares $373 $838 $1,430 $3,032 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N shares $259 $493 $850 $1,856 - -------------------------------------------------------------------------------- Capital Preservation Fund (with no redemption fee) - -------------------------------------------------------------------------------- If shares are not 1 year 3 years 5 years 10 years redeemed2: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares $515 $861 $1,231 $2,267 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B shares $278 $853 $1,454 $2,5863 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C shares $273 $838 $1,430 $3,032 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N shares $159 $493 $850 $1,856 - -------------------------------------------------------------------------------- Capital Preservation Fund (with the deduction of the redemption fee) If shares are 1 Year 3 Years 5 Years 10 Years redeemed2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares $527 $900 $1,296 $2,402 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B shares $691 $1,092 $1,618 $2,7171 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C shares $381 $862 $1,469 $3,109 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N shares $259 $493 $850 $1856 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class Y shares $109 $340 $590 $1,306 Cash Reserves - -------------------------------------------------------------------------------- If shares are 1 year 3 years 5 years 10 years redeemed1: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares $124 $387 $670 $1,477 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B shares $662 $802 $1,066 $1,7003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C shares $267 $517 $892 $1,944 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N shares $242 $440 $761 $1,669 - -------------------------------------------------------------------------------- Cash Reserves - -------------------------------------------------------------------------------- If shares are not 1 year 3 years 5 years 10 years redeemed2: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares $124 $387 $670 $1,477 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B shares $162 $502 $866 $1,7003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C shares $167 $517 $892 $1,944 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N shares $142 $440 $761 $1,669 - -------------------------------------------------------------------------------- Pro Forma Surviving Cash Reserves - -------------------------------------------------------------------------------- If shares are 1 year 3 years 5 years 10 years3 redeemed1: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares $123 $384 $665 $1,466 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B shares $663 $805 $1,071 $1,701 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C shares $272 $536 $923 $2,009 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N shares $234 $418 $723 $1,590 - -------------------------------------------------------------------------------- Pro Forma Surviving Cash Reserves - -------------------------------------------------------------------------------- If shares are not 1 year 3 years 5 years 10 years3 redeemed2: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares $123 $384 $665 $1,466 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B shares $163 $505 $871 $1,701 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C shares $173 $536 $923 $2,009 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N shares $134 $418 $723 $1,590 - -------------------------------------------------------------------------------- 1. In the "If shares are redeemed" examples, expenses include the initial sales charge for Class A and the applicable Class B, Class C and Class N contingent deferred sales charges. The expenses for Capital Preservation Fund are shown both with and without the redemption fee for that fund. 2. In the "If shares are not redeemed" examples, the Class A expenses include the initial sales charge, but Class B, Class C and Class N expenses do not include the contingent deferred sales charges. 3. Class B expenses for years 7 through 10 are based on Class A expenses, since Class B shares automatically convert to Class A after 6 years. Where can I find more financial information about the Funds? Performance information for both Capital Preservation Fund and Cash Reserves is set forth in each Fund's Prospectus under the section "The Fund's Past Performance." Cash Reserves' Prospectus accompanies this Prospectus and Proxy Statement and is incorporated by reference. The financial statements of Capital Preservation Fund for its fiscal year ended October 31, 2003 and for the six months ended April 30, 2004, and the financial statements of Cash Reserves for its fiscal year ended July 31, 2004, are included in the Proxy Statement of Additional Information and are incorporated herein by reference. See page ____ for instructions on how to obtain a free copy. What are the capitalizations of the Funds and what would the capitalization be after the Reorganization? The following table sets forth the capitalization (unaudited) of Capital Preservation Fund and Cash Reserves as of September 30, 2004 and indicates the pro forma combined capitalization as of September 30, 2004 as if the Reorganization had occurred on that date. - -------------------------------------------------------------------------------- Capital Preservation Net Assets Shares Net Asset Value Fund Outstanding Per Share - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A 99,059,407 9,905,365 $10.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B 11,394,641 1,139,699 $10.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C 30,979,859 3,098,367 $10.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N 246,511,780 24,648,426 $10.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL 387,945,687 38,791,857 - ------------------------------------------------------------- - -------------------------------------------------------------------------------- Cash Reserves Net Assets Shares Net Asset Value Outstanding Per Share - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A 388,627,941 388,634,425 $1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B 205,412,375 205,370,414 $1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C 102,302,195 102,290,462 $1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N 59,804,230 59,803,233 $1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL 756,146,741 756,098,534 - ------------------------------------------------------------- - -------------------------------------------------------------------------------- Cash Reserves Net Assets Shares Net Asset Value (Pro Forma Surviving Fund)* Outstanding Per Share - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A 487,687,348 487,693,832 $1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B 216,807,016 216,765,055 $1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C 133,282,054 133,270,321 $1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N 306,316,010 306,315,013 $1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL 1,144,092,428 1,144,044,221 - ------------------------------------------------------------- *Reflects the issuance of 99,059,407 Class A shares, 11,394,641 Class B shares, 30,979,859 Class C shares and 246,511,780 Class N shares of Cash Reserves in a tax-free exchange for the net assets of Capital Preservation Fund, aggregating $387,945,687. How have the Funds performed? The following past performance information for each Fund is set forth below, and for earlier periods, in its respective Prospectus: (i) a bar chart detailing annual total returns of Class A shares of each Fund as of December 31st for each of the ten most recent full calendar years (for Capital Preservation Fund, since that Fund's inception); and (ii) tables detailing how the average annual total returns for both funds. The past investment performance of either Fund is not necessarily an indication of how either Fund will perform in the future. Cash Reserves has had lower performance. This is because it is a money market fund and it is expected that a money market fund would generally have lower performance than a stable value product. Annual Total Returns for Cash Reserves (Class A) as of 12/31 each year [See appendix to prospectus and proxy statement for data in bar chart showing annual total returns for Oppenheimer Cash Reserves.] Sales charges and taxes are not included in the calculations of return in this bar chart, and if those charges and taxes were included, the returns may be less than those shown. For the period from January 1, 2004 through September 30, 2004, the cumulative total return (not annualized) before taxes for Class A shares of Cash Reserves was 0.19%. During the period shown in the bar chart, the highest return for Oppenheimer Cash Reserves (not annualized) before taxes for a calendar quarter was 1.40% (4th Qtr `00) and the lowest return (not annualized) before taxes for a calendar quarter was 0.04% (2nd Qtr `03 and 4th Qtr `03). Annual Total Returns for Capital Preservation Fund (Class A) as of 12/31 each year [See appendix to prospectus and proxy statement for data in bar chart showing annual total returns for Oppenheimer Capital Preservation Fund.] Sales charges and taxes are not included in the calculations of return in this bar chart, and if those charges and taxes were included, the returns may be less than those shown. For the period from January 1, 2004 through September 30, 2004, the cumulative total return (not annualized) before taxes for Class A shares of Capital Preservation Fund was 1.16%. During the period shown in the bar chart, the highest return for Oppenheimer Capital Preservation Fund (not annualized) before taxes for a calendar quarter was 1.56% (1st Qtr '00 and 01) and the lowest return (not annualized) before taxes for a calendar quarter was 0.36% (3rd Qtr `03). Average annual total returns for the Funds for the periods ended September 30, 2004 are as follows: Cash Reserves Average Annual Total Returns 1 Year 5 Years 10 Years (or life of for the periods ended September 30, class, if (or life of 2004 less) class, if less) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class A Shares (inception 1/3/89) 0.23% 2.24% 3.38% - ------------------------------------------------------------------------------- Class B Shares (inception 8/17/93) -4.85% 1.47% 3.04% - ------------------------------------------------------------------------------- Class C Shares (inception 12/01/93) -0.86% 1.84% 2.88% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class N Shares (inception 3/01/01) -0.86% 0.88% N/A - ------------------------------------------------------------------------------- The Fund's average annual total returns include the applicable sales charge: for Class B, the contingent deferred sales charges of 5% (1-year) and 2% (5-years) and for Class C and Class N, the contingent deferred sales charges of 1% for the 1-year period for Class C and Class N shares. Because Class B shares convert to Class A shares 72 months after purchase, Class B "life-of-class" performance does not include any contingent deferred sales charge and uses Class A performance for the period after conversion. The Fund's returns measure the performance of a hypothetical account and assume that all distributions have been reinvested in additional shares. Capital Preservation Fund Average Annual Total Returns 1 Year 5 Years Life of for the periods ended September 30, (or life of 2004 class, if less) Class - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A Shares (inception 9/27/99) -1.98% 3.56% 3.57% - -------------------------------------------------------------------------------- Class B Shares (inception 9/27/99) -3.21% 3.40% 3.58% - -------------------------------------------------------------------------------- Class C Shares (inception 9/27/99) -0.20% 3.57% 3.58% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class N Shares (inception 3/1/01) 0.65% 3.64% N/A - -------------------------------------------------------------------------------- The Fund's average annual total returns include the applicable sales charges: for Class A, the current maximum initial sales charge of 3.50%; for Class B, the contingent deferred sales charges of 4% (1-year) and 1% (5-year); and for Class C and Class N, the 1% contingent deferred sales charge for the 1-year period. The returns measure the performance of a hypothetical account and assume that all dividends and capital gains distributions have been reinvested in additional shares. Other Comparisons The description of certain key features of the Funds below is supplemented by each Fund's Prospectus and Statement of Additional Information, which are incorporated by reference. Investment Management and Fees - The Manager manages the assets of both Funds and makes their respective investment decisions. The portfolio managers of both Funds are employed by the Manager. Both Funds obtain investment management services from the Manager according to the terms of management agreements that are substantially similar except that because Cash Reserves is a money market fund, its management fee rates are significantly lower than those of Capital Preservation Fund. Under the management agreements, each Fund pays the Manager an advisory fee at the following rates that decline as each Fund's assets grow: - --------------------------------------------------------------------------- Capital Preservation Fund Cash Reserves - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- 0.75% of the first $200 million of 0.50% of the first $250 million of net assets; net assets; 0.72% of the next $200 million; 0.475% of the next $250 million; 0.69% of the next $200 million; 0.45% of the next $250 million; 0.66% of the next $200 million; 0.425% of the next $250 million; and 0.60% of the next $200 million; and 0.40% of net assets over $1 billion 0.50% of net asset assets over $1 billion - --------------------------------------------------------------------------- Capital Preservation Fund reduces it management fees by the amount of the fees that are received by the Manager on the assets of the underlying funds represented by Capital Preservation Fund's investments in those funds. This assures that the Manager is not paid twice for managing the same assets. The Manager has voluntarily agreed to limit the management fees it receives from Cash Reserves to 0.40% of the Fund's average net assets for each class of shares. That voluntary waiver was designed to reduce expenses to help provide current income for shareholders in the face of low interest rates in the debt securities markets, and the limitation can be amended or withdrawn at any time. After giving effect to the fee waivers set forth above, the management fee for Cash Reserves for the fiscal year ended July 31, 2004, was 0.40%. The management fee for Capital Preservation Fund for the fiscal year ended October 31, 2003, was 0.30%, although the total management fee (including the amounts paid on the assets invested in the underlying Oppenheimer funds) for assets represented by Capital Preservation Fund was 0.74% for the same period. For a detailed description of each Fund's investment management agreement, see the section below entitled "Comparison of Investment Objectives and Policies - How do the account features and shareholder services for the Funds compare?" Transfer Agency and Custody Services - Both Funds receive shareholder accounting and other clerical services from OppenheimerFunds Services in its capacity as transfer agent and dividend paying agent. It acts on an annual per-account fee basis for both Funds. The terms of the transfer agency agreement for both Funds, and of a voluntary undertaking to limit transfer agent fees (to 0.35% per fiscal year for each class of both Funds) are substantially similar. Citibank, N.A., located at 111 Wall Street, New York, NY 10005, acts as custodian of the securities and other assets of both Funds. Distribution Services - OppenheimerFunds Distributor, Inc. (the "Distributor") acts as the principal underwriter in a continuous public offering of shares of both Funds, but is not obligated to sell a specific number of shares. Both Funds have adopted a Service Plan and Agreement under Rule 12b-1 of the Investment Company Act ("Rule 12b-1") for their Class A shares. The Service Plan provides for the reimbursement to the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of accounts that hold Class A shares of the respective Funds. Under the Class A Service Plans, reimbursement is made quarterly at an annual rate that may not exceed 0.25% of the average annual net assets of Class A shares for Capital Preservation Fund and 0.20% for Class A shares of Cash Reserves. The Distributor currently 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 of the respective Funds. Both Funds have also adopted Distribution and Service Plans and Agreements under Rule 12b-1 for Class B, Class C and Class N shares. These plans compensate the Distributor for its services and costs in connection with the distribution of Class B, Class C and Class N shares and the personal service and maintenance of shareholder accounts. Under the Capital Preservation Fund Class B and Class C Plan, the Fund pays the Distributor a service fee at an annual rate of 0.25% of average annual net assets and an asset-based sales charge at an annual rate of 0.75% of average annual net assets. Under the Capital Preservation Fund Class N Plan, the Fund pays the Distributor a service fee at an annual rate of 0.25% of average annual net assets. Under the Cash Reserves Class B and Class C Plan, the Fund pays the Distributor an asset-based sales charge at an annual rate of 0.75% of average annual net assets. However, the Distributor has voluntarily agreed to reduce Class B and Class C "Distribution and /or Service (12b-1) Fees" by 0.25% of the average annual net assets for each respective class of shares. That undertaking may be amended or withdrawn at any time. After that waiver, the "Distribution and/or Service Fees" for Class B and Class C shares are 0.50%. Under the Cash Reserves Class N Plan, the Fund pays the Distributor a service fee at an annual rate of 0.25% of average annual net assets and an asset-based sales charge at an annual rate of 0.25% of average annual net assets. All fee amounts are computed on the average annual net assets of the class determined as of the close of each regular business day of each Fund. The Distributor uses all of the service fees to compensate dealers for providing personal services and maintenance of accounts of their customers that hold shares of the Funds. The Class B and Class N asset-based sales charge is retained by the Distributor. After the first year, the Class C asset-based sales charge is paid to the broker-dealer as an ongoing concession for shares that have been outstanding for a year or more. The terms of the Funds' respective Distribution and Service Plans are substantially similar. For a detailed description of each Fund's distribution-related services, see the section below titled "Comparison of Investment Objectives and Policies - How do the Account Features and Shareholder Services for the Funds Compare?" Purchases, Redemptions, Exchanges and other Shareholder Services - Both Funds have the same requirements and restrictions in connection with purchases, redemptions and exchanges. The only exception are that Capital Preservation Fund has been closed to new plans since September 27, 2004 and has a redemption fee of 2% for redemptions of Fund shares that are (i) redeemed for reasons other than to fund a "benefit sensitive withdrawal", and (ii) made on less than 12 months' prior written notice to the Fund. In addition, each Fund also offers the same types of shareholder services. More detailed information regarding purchases, redemptions, exchanges and shareholder services can be found below in the section below titled "Comparison of Investment Objectives and Policies - How do the Account Features and Shareholder Services for the Funds Compare?" Dividends and Distributions - Both Funds may declare dividends from net investment income each regular business day and pay those dividends to shareholder monthly. If applicable, either Fund may make distributions out of any capital gains separately for each class of shares annually and pay those capital gains distributions (if any) to shareholders in December on a date selected by the Board of each Fund. There can be no assurance that either Fund will pay any dividends or capital gains distributions in a particular year. For a detailed description of each Fund's policy on dividends and distributions, see the section entitled "Comparison of Investment Objectives and Policies - How do the account features and shareholder services for the Funds compare?" What are the Principal Risks of an Investment in Capital Preservation Fund or Cash Reserves? As with most investments, investments in Capital Preservation Fund and Cash Reserves involve risks. There can be no guarantee against loss resulting from an investment in either Fund, nor can there be any assurance that either Fund will achieve its investment objective. The risks associated with an investment in each Fund are similar. Funds that invest in debt obligations for income may be subject to credit risks and interest rate risks. However, the wrapper agreement for Capital Preservation Fund is designed to help ensure a stable net asset value for the Fund. Additionally, since Cash Reserves is a money market fund, its investments must meet strict standards following special rules for money market funds under federal law. Those standards include requirements for maintaining high credit quality in the Fund's portfolio, a short average portfolio maturity to reduce the effects of changes in prevailing interest rates on the value of the Fund's securities and diversifying the Fund's investments among issuers to reduce the effects of a default by any one issuer on the Fund's overall portfolio and the value of the Fund's shares. Even so, there are risks that any of the holdings by either Fund could have its credit rating downgraded, or the issuer could default, or that interest rates could rise sharply, causing the value of the Fund's investments (and its share prices) to fall. If there is a high redemption demand for the Fund's shares that was not anticipated, portfolio securities might have to be sold prior to their maturity at a loss. Also, there is the risk that the value of your investment could be eroded over time by the effects of inflation, and that poor security selection could cause either Fund to underperform other funds that have a similar objective. For more information about the risks of the Funds, see below "What are the main risks associated with an investment in the Funds?" under the heading "Comparison of Investment Objectives and Policies." REASONS FOR THE REORGANIZATION At a meeting of the Board of Trustees of Capital Preservation Fund held October 6, 2004, the Board considered whether to approve the proposed Reorganization and reviewed and discussed with the Manager and the Board's independent legal counsel the materials provided by the Manager relevant to the proposed Reorganization. Information with respect to the Funds' respective investment objectives and policies, management fees, distribution fees and other operating expenses, historical performance and asset size, was provided to and considered by the Board. The Board reviewed the recent SEC staff's actions including statements from the SEC staff that indicated that it had questions whether the valuation methodology used by stable value funds for their wrappers is consistent with the Investment Company Act of 1940 and generally accepted accounting principles. These wrapper agreements enable stable value funds to maintain their stable net asset value. Although the SEC staff has not issued any formal directives nor made any public statements regarding its review, the staff has informally questioned the continued use by stable value mutual funds of the valuation method most commonly employed to value their wrapper agreements. If the SEC staff determined that a different accounting method should be used that, in effect, would result in stable value funds having a fluctuating net asset value per share, then it would not be possible to continue to manage Capital Preservation Fund as a stable value fund. Since it does not appear to be an option to continue to utilize wrapper agreements to maintain a stable net asset value for the Fund, the Board of Trustees of Capital Preservation Fund then considered alternatives for the Fund including (i) continuing to manage the Fund without the wrapper agreement, by converting the Fund to a short-duration bond fund and attempting to seek a stable value through the use of derivatives or other investment techniques; (ii) liquidating the Fund; or (iii) merging the Fund into a money market fund. The Board determined that the first two options were not viable or in the best interests of shareholders. Managing the Fund as a short-duration bond fund would not offer retirement plans an acceptable "stable value" for the retirement plans that invest in Capital Preservation Fund. Converting the Fund to a very short duration bond fund, to reduce the effects of changes in interest rates on portfolio security values, cannot guarantee a fixed net asset value, even when coupled with the use of derivatives, such as interest rate swaps, because interest rate changes affect the values of even relatively short-duration bonds. A short-term bond fund having a fluctuating net asset value would not meet the needs of qualified plans to offer a stable net asset value product and could risk jeopardizing the qualified status of their plans that have elected to utilize the Fund as their stable value option. Additionally, the Board determined that liquidating the Fund would not benefit participants in plans that currently invest in the Fund, because plan fiduciaries would still have to find a stable value or money market fund alternative for plan participants. Therefore, the Board of Trustees of Capital Preservation Fund reviewed the alternatives for Capital Preservation Fund and determined that it would be in the best interests of shareholders of Capital Preservation Fund to reorganize into Cash Reserves. The Board considered the fact the Reorganization offers shareholders of Capital Preservation Fund a fund that seeks current income while seeking to maintain a net asset value of $1 per share. The Board also considered the fact that the surviving fund has the potential for lower overall operating expenses. In addition, the Board considered that both Funds have Class A, Class B, Class C and Class N shares offered under similar sales charge arrangements. In addition, due to the relatively moderate costs of the reorganization, the Boards of both Funds concluded that neither Fund would experience dilution as a result of the Reorganization. The Board noted that Cash Reserves' management fee ratio is lower than that of Capital Preservation Fund. It also considered that the procedures for purchases, exchanges and redemptions of shares of both Funds are substantially similar and that both Funds offer the same investor services and options. The Board also considered the terms and conditions of the Reorganization, including that there would be no sales charge imposed in effecting the Reorganization and that the Reorganization is expected to be a tax-free reorganization. The Board concluded that Capital Preservation Fund's participation in the Reorganization is in the best interests of the Fund and its shareholders. After consideration of the above factors, and such other factors and information as the Board of Capital Preservation Fund deemed relevant, the Board, including the Trustees who are not "interested persons" (as defined in the Investment Company Act) of either Capital Preservation Fund or the Manager (the "Independent Trustees"), unanimously approved the Reorganization and the Reorganization Agreement and voted to recommend its approval to the shareholders of Capital Preservation Fund. The Board of Cash Reserves, including the Independent Trustees, also determined that the Reorganization was in the best interests of Cash Reserves and its shareholders and that no dilution would result to those shareholders. Cash Reserves shareholders do not vote on the Reorganization. The Board of Cash Reserves, including the Independent Trustees, unanimously approved the Reorganization and the Reorganization Agreement. For the reasons discussed above, the Board, on behalf of Capital Preservation Fund, recommends that you vote FOR the Reorganization Agreement. If shareholders of Capital Preservation Fund do not approve the Reorganization Agreement, the Reorganization will not take place. INFORMATION ABOUT THE REORGANIZATION This is only a summary of the material terms of the Reorganization Agreement. You should read the actual form of Reorganization Agreement. It is attached as Exhibit A. How will the Reorganization be carried out? If the shareholders of Capital Preservation Fund approve the Reorganization Agreement, the Reorganization will take place after various conditions are satisfied by Capital Preservation Fund and Cash Reserves, including delivery of certain documents. The Closing Date is presently scheduled for January 28, 2005 and the Valuation Date is presently scheduled for January 27, 2005. If the shareholders of Capital Preservation Fund vote to approve the Reorganization Agreement, you will receive Class A shares of Cash Reserves equal in value to the value as of the "Valuation Date" (which is the business day preceding the Closing Date of the Reorganization) of your Class A shares of Capital Preservation Fund; Class B shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class B shares of Capital Preservation Fund; Class C shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class C shares of Capital Preservation Fund or Class N shares of Cash Reserves equal in value to the value as of the Valuation Date of your Class N shares of Capital Preservation Fund. Capital Preservation Fund will then be liquidated and its outstanding shares will be cancelled. The stock transfer books of Capital Preservation Fund will be permanently closed at the close of business on the Valuation Date. Only redemption requests received by the Transfer Agent in proper form on or before the close of business on the Valuation Date will be fulfilled by Capital Preservation Fund. Redemption requests received after that time will be considered requests to redeem shares of Cash Reserves. Shareholders of Capital Preservation Fund who vote their Class A, Class B, Class C, or Class N shares in favor of the Reorganization will be electing in effect to redeem their shares of Capital Preservation Fund at net asset value on the Valuation Date, after Capital Preservation Fund subtracts a cash reserve, and reinvest the proceeds in Class A, Class B, Class C or Class N shares of Cash Reserves at net asset value. The cash reserve is that amount retained by Capital Preservation Fund, which is deemed sufficient in the discretion of the Board for the payment of the Fund's outstanding debts, taxes and expenses of liquidation. The cash reserve will consist of approximately $________ in cash. This amount of cash reserve is reflected in the pro forma presentation of net asset value per share. Cash Reserves is not assuming any debts of Capital Preservation Fund except debts for unsettled securities transactions and outstanding dividend and redemption checks. Any debts paid out of the cash reserve will be those debts, taxes or expenses of liquidation incurred by Capital Preservation Fund on or before the Closing Date. Capital Preservation Fund will recognize capital gain or loss on any sales of portfolio securities made prior to the Reorganization. The sales of portfolio securities contemplated in the Reorganization are anticipated to be in the ordinary course of business of Capital Preservation Fund's activities. Under the Reorganization Agreement, within one year after the Closing Date, Capital Preservation Fund shall: (a) either pay or make provision for all of its debts and taxes; and (b) either (i) transfer any remaining amount of the cash reserve to Cash Reserves, if such remaining amount is not material (as defined below) or (ii) distribute such remaining amount to the shareholders of Capital Preservation Fund who were shareholders on the Valuation Date. The remaining amount shall be deemed to be material if the amount to be distributed, after deducting the estimated expenses of the distribution, equals or exceeds one cent per share of the number of Capital Preservation Fund shares outstanding on the Valuation Date. In order to qualify for this rebate, it is not necessary for a shareholder of Capital Preservation Fund to continue to hold Cash Reserves shares received in the Reorganization. If the cash reserve is insufficient to satisfy any of Capital Preservation Fund's liabilities, the Manager will assume responsibility for any such unsatisfied liability. Within one year after the Closing Date, Capital Preservation Fund will complete its liquidation. Under the Reorganization Agreement, either Capital Preservation Fund or Cash Reserves may abandon and terminate the Reorganization Agreement for any reason and there shall be no liability for damages or other recourse available to the other Fund, provided, however, that in the event that one of the Funds terminates this Reorganization Agreement without reasonable cause, it shall, upon demand, reimburse the other Fund for all expenses, including reasonable out-of-pocket expenses and fees incurred in connection with this Reorganization Agreement. To the extent permitted by law, the Funds may agree to amend the Reorganization Agreement without shareholder approval. They may also agree to terminate and abandon the Reorganization at any time before or, to the extent permitted by law, after the approval of shareholders of Capital Preservation Fund. Who will pay the expenses of the Reorganization? The cost of printing and mailing the proxies and this Prospectus and Proxy Statement will be borne by Capital Preservation Fund and are estimated to be $_________ and $________, respectively. The Funds will bear the cost of their respective tax opinions. Any documents such as existing prospectuses or annual reports that are included in the proxy mailing or at a shareholder's request will be a cost of the Fund issuing the document. Any other out-of-pocket expenses associated with the Reorganization will be paid by the Funds in the amounts incurred by each. The approximate cost of the Reorganization is $________ for Capital Preservation Fund and $_________ for Cash Reserves. What are the tax consequences of the Reorganization? The Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended. Based on certain assumptions and representations received from Capital Preservation Fund and Cash Reserves, it is expected to be the opinion of Deliotte & Touche LLP that shareholders of Capital Preservation Fund will not recognize any gain or loss for federal income tax purposes as a result of the exchange of their shares for shares of Cash Reserves, that shareholders of Cash Reserves will not recognize any gain or loss upon receipt of Capital Preservation Fund's assets, and that the holding period of Cash Reserves shares received in that exchange will include the period that Capital Preservation Fund shares were held (provided such shares were held as a capital asset on the Closing Date). Please see the Agreement and Plan of Reorganization for more details. If this tax opinion is not forthcoming by the Closing Date, the Fund may still choose to go forward with the Reorganization, pending re-solicitation of shareholders and shareholder approval. In addition, neither Fund is expected to recognize a gain or loss as a direct result of the Reorganization. Immediately prior to the Valuation Date, Capital Preservation Fund will pay a dividend which will have the effect of distributing to Capital Preservation Fund's shareholders all of Capital Preservation Fund's net investment company taxable income, if any, for taxable years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and all of its net capital gains, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any available capital loss carry-forward). Any such dividends will be included in the taxable income of Capital Preservation Fund's shareholders as ordinary income and capital gain, respectively. You will continue to be responsible for tracking the purchase cost and holding period of your shares and should consult your tax advisor regarding the effect, if any, of the Reorganization in light of your individual circumstances. You should also consult your tax advisor as to state and local and other tax consequences, if any, of the Reorganization because this discussion only relates to federal income tax consequences. What should I know about Class A, Class B, Class C and Class N shares of Cash Reserves? The rights of shareholders of both Funds are substantially the same. The only exceptions are that Capital Preservation Fund has a redemption fee and Cash Reserves does not. Following the Reorganization, there will be no redemption fee if shares are redeemed. Additionally, the contingent deferred sales charge structure for Class B shares of Capital Preservation Fund is lower than the contingent deferred sales charge structure for Class B shares of Cash Reserves. Following the Reorganization, any Class B shares of Capital Preservation Fund that were purchased prior to the Reorganization will be continue to be assessed the lower sales charge rates if those shares are redeemed. This ensures that Class B shareholders of Capital Preservation Fund are not disadvantaged by the Reorganization. Any new Class B shares purchased after the Reorganization will be subject to the contingent deferred sales charge rates applicable to Class B shares of Cash Reserves. Class A, Class B, Class C and/or Class N shares of Cash Reserves will be distributed to shareholders of Class A, Class B, Class C and/or Class N shares of Capital Preservation Fund, respectively, in connection with the Reorganization. Each share will be fully paid and nonassessable when issued will have no preemptive or conversion rights and will be transferable on the books of Cash Reserves. Each 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. Neither Fund permits cumulative voting. The shares of Cash Reserves will be recorded electronically in each shareholder's account. Cash Reserves will then send a confirmation to each shareholder. Shareholders of Capital Preservation Fund holding certificates representing their shares will not be required to surrender their certificates in connection with the reorganization. However, former shareholders of Capital Preservation Fund whose shares are represented by outstanding share certificates will not be allowed to redeem, transfer or pledge shares of Cash Reserves they receive in the Reorganization until the exchanged Capital Preservation Fund certificates have been returned to the Transfer Agent. Like Capital Preservation Fund, Cash Reserves does not routinely hold annual shareholder meetings. COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES This section describes key investment policies of Capital Preservation Fund and Cash Reserves, and certain noteworthy differences between the investment objectives and policies of the two Funds. Are there any significant differences between the investment objectives and strategies of the Funds? In considering whether to approve the Reorganization, shareholders of Capital Preservation Fund should consider the differences in investment objectives, policies and risks of the Funds. Further information about Cash Reserves is set forth in its Prospectus, as supplemented, which accompanies this Prospectus and Proxy Statement and is incorporated herein by reference. Additional information about both Funds is set forth in their respective Statements of Additional Information, Annual Reports and Semi-Annual Reports, which may be obtained upon request to the Transfer Agent. See "Information about Capital Preservation Fund" and "Information about Cash Reserves." Capital Preservation Fund and Cash Reserves have similar investment objectives. Capital Preservation Fund seeks high current income while seeking to maintain a stable value per share. Cash Reserves seek the maximum current income that is consistent with stability of principal. How do the investment policies of the Funds compare? Cash Reserves is a money market fund that seeks to maintain a stable net asset value of $1 per share. Capital Preservation fund is a stable value fund. Stable value products have the advantage of being permitted to invest in securities with longer durations than money market funds. They also can invest in securities guaranteed for their book value for participant directed withdrawals. Over the longer term, stable value products generally have a yield advantage over money market funds. Capital Preservation Fund is a fund of funds that invests primarily in shares of other income-seeking Oppenheimer funds including Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer Strategic Income Fund, Oppenheimer U.S. Government Trust and Oppenheimer Money Market Fund, Inc. The Fund invests principally in Oppenheimer Limited-Term Government Fund and to a lesser extent in Oppenheimer Money Market Fund to help limit its duration and therefore to limit the volatility of its net asset value per share. However, the Fund's investment policies (and its wrapper agreement) permit it to hold up to 100% of its assets in money market securities (either shares of Oppenheimer Money Market Fund, Inc. or direct investments in money market instruments). In addition, it invests in a wrapper agreement or agreements to help maintain a stable net asset value per share. Cash Reserves is a money market mutual fund that invests in high-quality money market instruments that comply with the requirements of Rule 2a-7 to help maintain a stable net asset value while providing current income. Although money market investments are typically lower-yielding than intermediate or long-term bonds, both funds have investment policies that promote the goal of stability of principal, which is the chief goal of plan sponsors and fiduciaries that selected Capital Preservation Fund as an offering for their plans. In order to facilitate the reorganization of Capital Preservation Fund into Cash Reserves, Capital Preservation Fund must hold only Rule 2a-7 qualifying money market instruments at the time of the closing of the reorganization. Therefore, the Fund must redeem its holdings in Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer Strategic Income Fund, Oppenheimer U.S. Government Trust and Oppenheimer Money Market Fund, Inc. prior to the merger. The Manager is currently working to structure the redemptions gradually to ensure that the Fund is fully invested in Rule 2a-7 qualified money market instruments prior to the Reorganization. What are the main risks associated with an investment in the Funds? Like all investments, an investment in either of the Funds involves risk. There is no assurance that either Fund will meet its investment objective. The achievement of the Funds' goals depends upon market conditions, generally, and on the portfolio manager's analytical and portfolio management skills. The risks described below collectively form the risk profiles of the Funds, and can affect the value of the Funds' investments, investment performance and prices per share. There is also the risk that poor securities selection by the Manager will cause a fund to underperform other funds having a similar objective. These risks mean that you can lose money by investing in either Fund. When you redeem your shares, they may be worth more or less than what you paid for them. Both Funds are subject to interest rate and credit rate risk. o Interest Rate Risks. The values of debt securities, including U.S. government securities, are subject to change when prevailing interest rates change. When interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally fall and they may sell at a discount from their face amount. The magnitude of those fluctuations will often be greater for debt securities having longer maturities than for shorter-term debt securities. For Capital Preservation Fund, some of the underlying funds in which the Fund invests, such as Oppenheimer Bond Fund and Oppenheimer Strategic Income Fund, typically invest in debt securities that have longer maturities, and changes in values of the shares of those funds when interest rates change could make the value of the Capital Preservation Fund's share prices change unless the Fund's wrapper agreements are sufficient to enable the Fund to maintain stable share prices. Additionally, when interest rates fall, the underlying funds' investments in new securities will have lower yields, possibly reducing the Fund's income from those investments. o Credit Risks. Debt securities are subject to credit risk. Credit risk is the risk that the issuer of a debt security might not make interest and principal payments on the security as they become due. If the issuer of a debt security held by the Fund directly or through an underlying fund fails to pay interest, that fund's income might be reduced. If the issuer fails to repay principal, the value of that security and the Funds' shares might fall. A downgrade in an issuer's credit rating or other adverse news about an issuer can reduce the market value of that issuer's securities. For Capital Preservation Fund, some of the underlying funds, such as Oppenheimer Bond Fund and Oppenheimer Strategic Income Fund, invest in securities that are below investment grade in credit quality, which have greater risks than U.S. government securities or other investment grade debt securities. Additional Risks for Capital Preservation Fund o Risks under its wrapper agreement. While a wrapper agreement is intended to offset changes in the book value of the Capital Preservation Fund's investments and help the Fund maintain stable share prices at $10.00 per share, there can be no guarantee that the Fund's wrapper agreements will enable the Fund to meet those goals. Because there is no active trading market for wrapper agreements, they are illiquid investments, which means that the Fund cannot quickly sell or assign its position at an acceptable price. There is the risk that the provider of a wrapper agreement might default on its obligations to the Fund. If the Fund defaults in its obligations under a wrapper agreement, for example, by violating any investment limitations imposed under the agreement, the issuer might terminate the agreement. The universe of financial institutions offering wrapper agreements is limited, and there is the risk that the Fund might not be able to purchase wrapper agreements or might not be able to buy them at a competitive cost. It is also possible that the Fund might not be able to buy wrapper agreements to cover all of its portfolio investments. If a wrapper agreement were terminated, the Fund might not be able to secure a replacement agreement as to the assets covered by the terminated agreement. The Fund pays fees to the wrapper provider, increasing the Fund's expenses and reducing the Fund's overall returns. If any of those events were to occur, there is a risk that the price of the Fund's shares could fall below $10.00 per share. That could occur if market or economic conditions or political events affect the value of the Fund's investments, if prevailing interest rates rise causing the values of the Fund's investments in debt securities to fall, if the Fund's attempts to limit its effective average portfolio duration are unsuccessful, or if the issuer of a debt security the Fund buys defaults on its obligation to pay interest or repay principal. The Fund's Board of Trustees has valued the wrapper agreement pursuant to its fair valuation procedures at "contract value," that is, the difference between book value of the wrapper agreement and the current market value of the Fund's assets that are covered by the wrapper agreement. If the Board were to determine in good faith to assign a value to the wrapper agreement other than contract value, then the Fund may not be able to maintain a stable net asset value per share. o Risks of investing in the underlying funds. Each of the underlying Oppenheimer funds in which Capital Preservation Fund invests has its own investment risks, and those risks can affect the value of each fund's shares and therefore the value of the Fund's investment. Oppenheimer Strategic Income Fund typically invests substantial portions of its assets in foreign securities. While foreign securities may offer special investment opportunities, they also have special risks that can reduce the share prices and income of that underlying fund. 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. Currency rate changes can also affect the distributions the underlying funds make from the income they receive from foreign securities if foreign currency values change against the U.S. dollar. Foreign investing can result in higher transaction and operating costs for the underlying funds, reducing the income they pay to shareholders such as the Fund. All investments have risks to some degree. However, Cash Reserves' investments must meet strict standards set by its Board of Trustees following special rules for money market funds under federal law. Those standards include requirements for maintaining high credit quality in the Fund's portfolio, a short average portfolio maturity to reduce the effects of changes in prevailing interest rates on the value of the Fund's securities and diversifying the Fund's investments among issuers to reduce the effects of a default by any one issuer on the Fund's overall portfolio and the value of the Fund's shares. Even so, there are risks that any of the Cash Reserves' holdings could have its credit rating downgraded, or the issuer could default, or that interest rates could rise sharply, causing the value of the Fund's investments (and its share prices) to fall. As a result, there is a risk that the Fund's shares could fall below $1.00 per share. If there is a high redemption demand for the Fund's shares that was not anticipated, portfolio securities might have to be sold prior to their maturity at a loss. Also, there is the risk that the value of an investment in Cash Reserves could be eroded over time by the effects of inflation, and that poor security selection could cause the Fund to underperform other funds that have a similar objective. Additionally, while Capital Preservation Fund's goal of maintaining stable share prices may reduce the volatility of investing in the Fund while seeking current income, because the Fund will not seek capital gains or growth in the value of its shares, the costs of its wrapper agreements will reduce its returns and there is the risk that its total return may be less than an investment in funds that focus on stocks or higher-yielding bonds. As Capital Preservation Fund moves to being more fully invested in money market securities, its investment risks will be more similar to those of Cash Reserves. What are the fundamental investment restrictions of the Funds? Both Capital Preservation Fund and Cash Reserves have certain additional investment restrictions that, together with their investment objectives, are fundamental policies, changeable only by shareholder approval. Generally, these investment restrictions are similar between the Funds and are discussed below: o Neither Fund can buy securities issued or guaranteed by any one issuer (other than an underlying fund for Capital Preservation Fund) if more than 5% of its total assets would be invested in securities of that issuer or if it would then own more than 10% of that issuer's voting securities. That restriction applies to 75% of the Fund's total assets. The limit does not apply to securities issued by the U.S. government or any of its agencies or instrumentalities. This means that each Fund is presently a "diversified" investment company under the Investment Company Act. o Neither Fund can buy or sell real estate. However, Cash Reserves can purchase securities of issuers holding real estate or interests in real estate. o Neither Fund can underwrite securities of other companies. A permitted exception is in case a Fund is deemed to be an underwriter under the Securities Act of 1933 when reselling any securities held in its own portfolio. o Neither Fund can issue "senior securities," but this does not prohibit certain investment activities for which assets of the Funds are designated as segregated, or margin, collateral or escrow arrangements are established, to cover the related obligations. For Capital Preservation Fund, some examples of those activities may include borrowing money, reverse repurchase agreements, delayed-delivery and when-issued arrangements for portfolio securities transactions, and contracts to buy or sell derivatives, hedging instruments, options or futures. o Neither Fund can lend money. However, the Funds can invest in debt instruments, repurchase agreements, and make loans of portfolio securities. Additionally, Capital Preservation Fund can lend money to other affiliated funds provided that no such loan may be made if, as a result, the aggregate of such loans would exceed 33 1/3% of the value of its total assets (taken at market value at the time of such loans) subject to obtaining all required authorizations and regulatory approvals; o Neither Fund can concentrate investments. That means neither Fund can invest 25% or more of its total assets in companies in any one industry. Obligations of the U.S. government, its agencies and instrumentalities are not considered to be part of an "industry" for the purposes of this restriction. Additionally, for Cash Reserves obligations of foreign banks or foreign branches of domestic banks, time deposits, and other bank obligations are not considered to be part of an "industry" for purposes of this restriction. o Neither fund can invest in commodities or commodity contracts; however, the Capital Preservation Fund may use hedging instruments approved by its Board whether or not such hedging instruments are considered commodities or commodity contracts; o Capital Preservation Fund cannot borrow money in excess of one-third of the value of its total assets. The Fund can borrow only from other affiliated funds and from banks for temporary or emergency purposes, and the Fund can borrow only from banks for investment purposes. 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; o Cash Reserves cannot borrow money in excess of 10% of the value of its total assets or make any investment when borrowings exceed 5% of the value of its total assets; it may borrow only as a temporary measure for extraordinary or emergency purposes; no assets of the Fund may be pledged, mortgaged or assigned to secure a debt. o Cash Reserves cannot invest in or hold securities of any issuer if officers and Trustees of the Fund or the Manager individually beneficially own more than 1/2 of 1% of the securities of that issuer and together own more than 5% of the securities of that issuer. o Neither Fund can buy securities on margin or make short sales. However, the Funds can make margin deposits in connection with its use of hedging instruments. For Capital Preservation Fund, this is a non-fundamental policy. o Capital Preservation Fund cannot invest in companies for the purpose of acquiring control or management of those companies. o Cash Reserves cannot invest in securities of other investment companies, except if it acquires them as part of a merger, consolidation or acquisition of assets. This is a non-fundamental policy. o Cash Reserves cannot invest more than 5% of its total assets in securities of companies that have operated less than three years, including the operations of predecessors How do the account features and shareholder services for the Funds compare? Investment Management- Pursuant to each Fund's investment advisory agreement, the Manager acts as the investment advisor for both Funds. The Manager selects securities for each Fund's portfolio and handles its day-to-day business. The portfolio manager of each Fund is employed by the Manager and is the person who is principally responsible for the day-to-day management of that Fund's portfolio. Other members of the Manager's portfolio staff provide the portfolio managers with counsel and support in managing each Fund's portfolio. The advisory agreements require the Manager, at its expense, to provide the Funds with adequate office space, facilities and equipment. The agreements also require the Manager to provide and supervise the activities of all administrative and clerical personnel required to provide effective administration for the Funds. Those responsibilities include the compilation and maintenance of records with respect to their operations, the preparation and filing of specified reports, and composition of proxy materials and registration statements for continuous public sale of shares of the Funds. Each Fund pays expenses not expressly assumed by the Manager under the advisory agreement. The advisory agreements list examples of expenses paid by each Fund. The major categories relate to interest, taxes, brokerage commissions, fees to Independent Trustees, legal and audit expenses, custodian bank and transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring expenses, including litigation costs. Both investment advisory agreements generally provide that in the absence of willful misfeasance, bad faith, gross negligence in the performance of its duties or reckless disregard of its obligations and duties under the investment advisory agreement, the Manager is not liable for any loss sustained by reason of good faith errors or omissions in connection with any matters to which the agreement(s) relate. The agreements permit the Manager to act as investment advisor for any other person, firm or corporation. Pursuant to each agreement, the Manager is permitted to use the name "Oppenheimer" in connection with other investment companies for which it may act as investment advisor or general distributor. If the Manager shall no longer act as investment advisor to either Fund, the Manager may withdraw the right of that Fund to use the name "Oppenheimer" as part of its name. The Manager is controlled by Oppenheimer Acquisition Corp., a holding company owned in part by senior officers of the Manager and ultimately controlled by Massachusetts Mutual Life Insurance Company, a mutual life insurance company that also advises pension plans and investment companies. The Manager has been an investment advisor since January 1960. The Manager (including subsidiaries and an affiliate) managed more than $150 billion in assets as of September 30, 2004, including other Oppenheimer funds with more than 7 million shareholder accounts. The Manager is located at 225 Liberty Street, 11th Floor, New York, New York 10281-1008. OppenheimerFunds Services, a division of the Manager, acts as transfer and shareholder servicing agent for both Capital Preservation Fund and Cash Reserves and for certain other open-end funds managed by the Manager and its affiliates. Distribution - Pursuant to each Fund's General Distributor's Agreement, the Distributor acts as principal underwriter in a continuous public offering of shares of Capital Preservation Fund and Cash Reserves, but is not obligated to sell a specific number of shares. Expenses normally attributable to sales, including advertising and the cost of printing and mailing prospectuses other than those furnished to existing shareholders, are borne by the Distributor, except for those for which the Distributor is paid under each Fund's Rule 12b-1 Distribution and Service Plan, described above. Purchases and Redemptions - Both Funds are part of the OppenheimerFunds family of mutual funds. The procedures for purchases, exchanges and redemptions of shares of the Funds are substantially the same. Shares of either Fund may be exchanged for shares of the same class of other Oppenheimer funds offering such shares. Exchange privileges are subject to amendment or termination at any time. The initial and subsequent minimum investment amounts for the purchase of shares are substantially the same except that Cash Reserves has a minimum initial investment for non-retirement plans of $1,000. Cash Reserves has no initial sales charge for the purchases of Class A shares. Capital Preservation Fund has a maximum initial sales charge of 3.5% on Class A shares for purchases of less than $100,000. The sales charge of 3.5% is reduced for purchases of Class A shares of $100,000 or more. Investors who purchase $1 million or more of Class A shares of Capital Preservation Fund pay no initial sales charge but may have to pay a contingent deferred sales charge of up to 1% if the shares are sold within 18 calendar months from the beginning of the calendar month during which they were purchased. Class B shares of the Funds are sold without a front-end sales charge but may be subject to a contingent deferred sales charge ("CDSC") upon redemption depending on the length of time the shares are held. For Cash Reserves the CDSC begins at 5% for shares redeemed in the first year and declines to 1% in the sixth year and is eliminated after that. For Capital Preservation Fund the CDSC begins at 4% for shares redeemed in the first year and declines to 1% in the fifth year and is eliminated after that. Class B shares for both funds convert to Class A shares 72 months after they were purchased. Following the Reorganization, any Class B shares of Capital Preservation Fund that were purchased prior to the Reorganization will continue to be assessed the lower sales charge rates if those shares are redeemed. This ensures that Class B shareholders of Capital Preservation Fund are not disadvantaged by the Reorganization. Any new Class B shares purchased after the Reorganization will be subject to the contingent deferred sales charge rates applicable to Class B shares of Cash Reserves. Class C shares may be purchased without an initial sales charge, but if redeemed within 12 months of buying them, a CDSC of 1% may be deducted. Class N shares are purchased without an initial sales charge, but if redeemed within 18 months of the retirement plan's first purchase of N shares, a CDSC of 1% may be deducted. Additionally, Capital Preservation Fund assesses a redemption fee of 2% for redemptions of Fund shares that are (i) redeemed for reasons other than to fund a "benefit sensitive withdrawal, and (ii) made on less than 12 months' prior written notice to the Fund. The redemption fee does not apply to any redemptions of the Fund shares for the purpose of exchanging the redemption proceeds to another Plan investment option provided that Plan investment option does not have a duration of 3 years or less. A "benefit sensitive withdrawal" is a withdrawal that occurs (i) due to the Plan participant's death, retirement, disability, separation from service, (ii) to fund Plan participant loans, or (iii) as another type of "in service" withdrawal made under terms of the Plan. The Fund reserves the right to deduct the redemption fee from the redemption proceeds if 15% or more of Plan assets invested in the Fund are redeemed within five business days, pending a determination by the Fund of whether the redemption fee is applicable. See the Statement of Additional Information for Capital Preservation Fund for more information about how the redemption fee applies to withdrawals caused by certain events affecting the employer. Class A, Class B, Class C and Class N shares of Cash Reserves received in the Reorganization will be issued at net asset value, without a sales charge and no CDSC or redemption fee will be imposed on any Capital Preservation Fund shares exchanged for Cash Reserves shares as a result of the Reorganization. However, any CDSC that applies to Capital Preservation Fund shares as of the date of the exchange will carry over to Cash Reserves shares received in the Reorganization. Shareholder Services--Both Funds also offer the following privileges: (i) Right of Accumulation, (ii) Letter of Intent, (iii) reinvestment of dividends and distributions at net asset value, (iv) net asset value purchases by certain individuals and entities, (v) Asset Builder (automatic investment) Plans, (vi) Automatic Withdrawal and Exchange Plans for shareholders who own shares of the Funds valued at $5,000 or more, (vii) AccountLink and PhoneLink arrangements, (viii) exchanges of shares for shares of the same class of certain other funds at net asset value, and (ix) telephone and Internet redemption and exchange privileges. Cash Reserves also offers wire redemptions of fund shares and checkwriting for accounts that are not subject to a CDSC. All of such services and privileges are subject to amendment or termination at any time and are subject to the terms of the Funds' respective prospectuses. Dividends and Distributions - Both Funds intend to declare dividends separately for each class of shares from net investment income on a daily basis and to pay those dividends to shareholders monthly. Dividends and the distributions paid on Class A, Class B, Class C or Class N shares may vary over time, depending on market conditions, the composition of the Funds' portfolios, and expenses borne by the particular class of shares. Dividends paid on Class A shares will generally be higher than those paid on Class B, Class C or Class N shares, which normally have higher expenses than Class A. The Funds have no fixed dividend rates and there can be no guarantee that either Fund will pay any dividends or distributions. Either Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in December of each year. The Funds may make supplemental distributions of dividends and capital gains following the end of their fiscal years. VOTING INFORMATION How many votes are necessary to approve the Reorganization Agreement? The affirmative vote of the holders of a "majority of the outstanding voting securities" (as defined in the Investment Company Act) of Capital Preservation Fund, voting in the aggregate and not by class, is necessary to approve the Reorganization Agreement and the transactions contemplated thereby. As defined in the Investment Company Act, the vote of a majority of the outstanding voting securities means the vote of (1) 67% or more of Capital Preservation Fund's outstanding shares present at a meeting if the holders of more than 50% of the outstanding shares of the Fund are present or represented by proxy; or (2) more than 50% of the Fund's outstanding shares, whichever is less. Each shareholder will be entitled to one vote for each full share, and a fractional vote for each fractional share of Capital Preservation Fund held on the Record Date. If sufficient votes to approve the proposal are not received by the date of the Meeting, the Meeting may be adjourned to permit further solicitation of proxies. The holders of a majority of shares entitled to vote at the Meeting and present in person or by proxy (whether or not sufficient to constitute a quorum) may adjourn the Meeting to permit further solicitation of proxies. How do I ensure my vote is accurately recorded? You can vote in either of three ways: o By mail, with the enclosed proxy card. o In person at the Meeting (if you are a record owner). o By telephone (please see the insert for instructions). A proxy card is, in essence, a ballot. If you simply sign and date the proxy but give no voting instructions, your shares will be voted in favor of the Reorganization Agreement. Shareholders may also be able to vote by telephone to the extent permitted by state law. Can I revoke my proxy? Yes. You may revoke your proxy at any time before it is voted by (i) writing to the Secretary of Capital Preservation Fund at 225 Liberty Street, 11th Floor, New York, New York 10281-1008 (if received in time to be acted upon); (ii) attending the Meeting and voting in person; or (iii) signing and returning a later-dated proxy (if returned and received in time to be voted). What other matters will be voted upon at the Meeting? The Board of Trustees of Capital Preservation Fund does not intend to bring any matters before the Meeting other than those described in this proxy. It is not aware of any other matters to be brought before the Meeting by others. If any other matters legally come before the Meeting, the proxy ballots confer discretionary authority with respect to such matters, and it is the intention of the persons named to vote proxies to vote in accordance with their judgment in such matters. Who is entitled to vote? Shareholders of record of Capital Preservation Fund at the close of business on November 15, 2004, (the "record date") will be entitled to vote at the Meeting. On November 15, 2004, there were __________ outstanding shares of Capital Preservation Fund, consisting of ___________ Class A shares, _________ Class B shares, ___________ Class C shares, and ___________ Class N shares. Proxies representing abstentions and broker non-votes will be included for purposes of determining whether a quorum is present at the Meeting, but will be treated as votes not cast and, therefore, will not be counted for purposes of determining whether the matters and proposals and motions to be voted upon at the Meeting have been approved. For purposes of the Meeting, a majority of shares outstanding and entitled to vote, present in person or represented by proxy, constitutes a quorum. Cash Reserves shareholders do not vote on the Reorganization. What other solicitations will be made? Capital Preservation Fund will request broker-dealer firms, custodians, nominees and fiduciaries to forward proxy material to the beneficial owners of the shares of record, and may reimburse them for their reasonable expenses incurred in connection with such proxy solicitation. In addition to solicitations by mail, officers of Capital Preservation Fund or officers and employees of OppenheimerFunds Services, without extra pay, may conduct additional solicitations personally or by telephone or telegraph. Any expenses so incurred will be borne by OppenheimerFunds Services. Proxies may also be solicited by a proxy solicitation firm hired at Capital Preservation Fund's expense. If a proxy solicitation firm is hired, it is anticipated that the cost to Capital Preservation Fund of engaging a proxy solicitation firm would not exceed $____________, plus the additional costs which would be incurred in connection with contacting those shareholders who have not voted, in the event of a need for resolicitation of votes. Shares owned of record by broker-dealers for the benefit of their customers ("street account shares") will be voted by the broker-dealer based on instructions received from its customers. If no instructions are received, and the broker-dealer does not have discretionary power to vote such street account shares under applicable stock exchange rules, the shares represented thereby will be considered to be present at the Meeting for purposes of only determining the quorum ("broker non-votes"). Because of the need to obtain a vote of the majority of the outstanding voting securities for the Reorganization proposal to pass, abstentions and broker non-votes will have the same effect as a vote "against" the Proposal. INFORMATION ABOUT CAPITAL PRESERVATION FUND Information about Capital Preservation Fund is included in the current Capital Preservation Fund Prospectus dated December 23, 2003 and its supplements dated July 6, 2004, September 30, 2004 and October 11, 2004. These documents have been filed with the SEC (SEC file no. 811-09097) and are incorporated herein by reference. Additional information about Capital Preservation Fund is also included in the Fund's Statement of Additional Information dated December 23, 2003 and its supplements dated December 23, 2003 and July 6, 2004, its Annual Report dated October 31, 2003 and Semi-Annual Report dated April 30, 2004, respectively, which have been filed with the SEC. You may request free copies of these or other documents relating to Capital Preservation Fund by calling 1.800.708.7780 or by writing to OppenheimerFunds Services, P.O. Box 5270, Denver, CO 80217. Reports and other information filed by Capital Preservation Fund can be inspected and copied at: the SEC's Public Reference Room in Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's Internet website at www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. INFORMATION ABOUT CASH RESERVES Information about Cash Reserves is included in Cash Reserves' Prospectus dated September 24, 2004, which accompanies and is considered a part of this Prospectus and Proxy Statement. Additional information about Cash Reserves is included in the Fund's Statement of Additional Information dated September 24, 2004 and its Annual Report dated July 31, 2004, which have been filed with the SEC (SEC file no. 811-1810). You may request a free copy of these materials and other information by calling 1.800.708.7780 or by writing to Cash Reserves at OppenheimerFunds Services, P.O. Box 5270, Denver, CO 80217. Cash Reserves also files proxy materials, reports and other information with the SEC in accordance with the informational requirements of the Securities and Exchange Act of 1934 and the Investment Company Act. These materials can be inspected and copied at: the SEC's Public Reference Room in Washington, D.C. (Phone: 1.202.942.8090) or the EDGAR database on the SEC's Internet website at www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. PRINCIPAL SHAREHOLDERS As of November 15, 2004, the officers and Trustees of Capital Preservation Fund as a group and of Cash Reserves as a group, owned less than 1% of the outstanding voting shares of their respective Fund. As of November 15, 2004, the only persons who owned of record or were known by Capital Preservation Fund or Cash Reserves to own beneficially 5% or more of any class of the outstanding shares of that respective Fund are listed in Exhibit B. By Order of the Board of Trustees, Robert G. Zack, Secretary December 3, 2004 Appendix to Proxy Statement Graphic Material included in the Proxy Statement for both Oppenheimer Cash Reserves and Oppenheimer Capital Preservation Fund regarding the "Annual Total Return (Class A) (as of 12/31 each year)": A bar chart will be included in the Proxy Statement for both Oppenheimer Capital Preservation Fund and Oppenheimer Cash Reserves depicting the annual total return of a hypothetical investment in Class A shares of each Fund for the end of the most recent calendar years , without deducting sales charges or taxes. Set forth below are the relevant data points that will appear on the bar chart. - -------------------------------------------------------------------------------- Calendar Year Ended: Oppenheimer Cash Reserves Annual Total Returns - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/94 3.22% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/95 4.84% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/96 4.51% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/97 4.48% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/98 4.57% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/99 4.40% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/00 5.51% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/01 3.29% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/02 0.82% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/03 0.28% - -------------------------------------------------------------------------------- Calendar Oppenheimer Year Capital Preservation Fund Ended Annual Total Returns - ----- -------------------- 12/31/00 6.21% 12/31/01 5.94% 12/31/02 4.76% 35 EXHIBITS TO THE COMBINED PROXY STATEMENT AND PROSPECTUS Exhibit - ------- A Agreement and Plan of Reorganization between Oppenheimer Capital Preservation Fund and Oppenheimer Cash Reserves B Major Shareholders A-12 EXHIBIT A AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of October 6, 2004 by and between Oppenheimer Capital Preservation Fund ("Capital Preservation Fund"), a Massachusetts business trust and Oppenheimer Cash Reserves ("Cash Reserves"), a Massachusetts business trust. W I T N E S S E T H: WHEREAS, the parties are each open-end investment companies of the management type; and WHEREAS, the parties hereto desire to provide for the reorganization pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), of Capital Preservation Fund through the acquisition by Cash Reserves of substantially all of the assets of Capital Preservation Fund in exchange for the voting shares of beneficial interest ("shares") of Class A, Class B, Class C and Class N shares of Cash Reserves and the assumption by Cash Reserves of certain liabilities of Capital Preservation Fund, which Class A, Class B, Class C, and Class N shares of Cash Reserves are to be distributed by Capital Preservation Fund pro rata to its shareholders in complete liquidation of Capital Preservation Fund and complete cancellation of its shares; NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto agree as follows: 1. The parties hereto hereby adopt this Agreement and Plan of Reorganization (the "Agreement") pursuant to Section 368(a)(1) of the Code as follows: The reorganization will be comprised of the acquisition by Cash Reserves of substantially all of the assets of Capital Preservation Fund in exchange for Class A, Class B, Class C and Class N shares of Cash Reserves and the assumption by Cash Reserves of certain liabilities of Capital Preservation Fund, followed by the distribution of such Class A, Class B, Class C and Class N shares of Cash Reserves to the Class A, Class B, Class C and Class N shareholders of Capital Preservation Fund in exchange for their Class A, Class B, Class C and Class N shares of Capital Preservation Fund, all upon and subject to the terms of the Agreement hereinafter set forth. The share transfer books of Capital Preservation Fund will be permanently closed at the close of business on the Valuation Date (as hereinafter defined) and only redemption requests received in proper form on or prior to the close of business on the Valuation Date shall be fulfilled by Capital Preservation Fund; redemption requests received by Capital Preservation Fund after that date shall be treated as requests for the redemption of the shares of Cash Reserves to be distributed to the shareholder in question as provided in Section 5 hereof. 2. On the Closing Date (as hereinafter defined), all of the assets of Capital Preservation Fund on that date, excluding a cash reserve (the "cash reserve") to be retained by Capital Preservation Fund sufficient in its discretion for the payment of the expenses of Capital Preservation Fund's dissolution and its liabilities, but not in excess of the amount contemplated by Section 10E, shall be delivered as provided in Section 8 to Cash Reserves, in exchange for and against delivery to Capital Preservation Fund on the Closing Date of a number of Class A, Class B, Class C and Class N shares of Cash Reserves, having an aggregate net asset value equal to the value of the assets of Capital Preservation Fund so transferred and delivered. 3. The net asset value of Class A, Class B, Class C and Class N shares of Cash Reserves and the value of the assets of Capital Preservation Fund to be transferred shall in each case be determined as of the close of business of The New York Stock Exchange on the Valuation Date. The computation of the net asset value of the Class A, Class B, Class C and Class N shares of Cash Reserves and the Class A, Class B, Class C and Class N shares of Capital Preservation Fund shall be done in the manner used by Cash Reserves and Capital Preservation Fund, respectively, in the computation of such net asset value per share as set forth in their respective prospectuses. The methods used by Cash Reserves in such computation shall be applied to the valuation of the assets of Capital Preservation Fund to be transferred to Cash Reserves. Capital Preservation Fund shall declare and pay, immediately prior to the Valuation Date, a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to Capital Preservation Fund's shareholders all of Capital Preservation Fund's investment company taxable income for taxable years ending on or prior to the Closing Date (computed without regard to any dividends paid) and all of its net capital gain, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any capital loss carry-forward). 4. The closing (the "Closing") shall be at the offices of OppenheimerFunds, Inc. (the "Agent"), 6803 S. Tucson Way, Centennial, CO 80112, on such time or such other place as the parties may designate or as provided below (the "Closing Date"). The business day preceding the Closing Date is herein referred to as the "Valuation Date." In the event that on the Valuation Date either party has, pursuant to the Investment Company Act of 1940, as amended (the "Act"), or any rule, regulation or order thereunder, suspended the redemption of its shares or postponed payment therefore, the Closing Date shall be postponed until the first business day after the date when both parties have ceased such suspension or postponement; provided, however, that if such suspension shall continue for a period of 60 days beyond the Valuation Date, then the other party to the Agreement shall be permitted to terminate the Agreement without liability to either party for such termination. 5. In conjunction with the Closing, Capital Preservation Fund shall distribute on a pro rata basis to the shareholders of Capital Preservation Fund as of the Valuation Date Class A, Class B, Class C and Class N shares of Cash Reserves received by Capital Preservation Fund on the Closing Date in exchange for the assets of Capital Preservation Fund in complete liquidation of Capital Preservation Fund; for the purpose of the distribution by Capital Preservation Fund of Class A, Class B, Class C and Class N shares of Cash Reserves to Capital Preservation Fund's shareholders, Cash Reserves will promptly cause its transfer agent to: (a) credit an appropriate number of Class A, Class B, Class C and Class N shares of Cash Reserves on the books of Cash Reserves to each Class A, Class B, Class C and Class N shareholder of Capital Preservation Fund in accordance with a list (the "Shareholder List") of Capital Preservation Fund shareholders received from Capital Preservation Fund; and (b) confirm an appropriate number of Class A, Class B, Class C and Class N shares of Cash Reserves to each Class A, Class B, Class C and Class N shareholder of Capital Preservation Fund. The Shareholder List shall indicate, as of the close of business on the Valuation Date, the name and address of each shareholder of Capital Preservation Fund, indicating his or her share balance. Capital Preservation Fund agrees to supply the Shareholder List to Cash Reserves not later than the Closing Date. Shareholders of Capital Preservation Fund holding certificates representing their shares shall not be required to surrender their certificates to anyone in connection with the reorganization. After the Closing Date, however, it will be necessary for such shareholders to surrender their certificates in order to redeem, transfer or pledge the shares of Cash Reserves which they received. 6. Within one year after the Closing Date, Capital Preservation Fund shall (a) either pay or make provision for payment of all of its liabilities and taxes, and (b) either (i) transfer any remaining amount of the cash reserve to Cash Reserves, if such remaining amount (as reduced by the estimated cost of distributing it to shareholders) is not material (as defined below) or (ii) distribute such remaining amount to the shareholders of Capital Preservation Fund on the Valuation Date. Such remaining amount shall be deemed to be material if the amount to be distributed, after deduction of the estimated expenses of the distribution, equals or exceeds one cent per share of Capital Preservation Fund outstanding on the Valuation Date. 7. Prior to the Closing Date, there shall be coordination between the parties as to their respective portfolios so that, after the Closing, Cash Reserves will be in compliance with all of its investment policies and restrictions. At the Closing, Capital Preservation Fund shall deliver to Cash Reserves two copies of a list setting forth the securities then owned by Capital Preservation Fund. Promptly after the Closing, Capital Preservation Fund shall provide Cash Reserves a list setting forth the respective federal income tax bases thereof. 8. Portfolio securities or written evidence acceptable to Cash Reserves of record ownership thereof by Captial Preservation Fund's Custodian Bank, The Depository Trust Company or through the Federal Reserve Book Entry System or any other depository approved by Capital Preservation Fund pursuant to Rule 17f-4 and Rule 17f-5 under the Act shall be endorsed and delivered, or transferred by appropriate transfer or assignment documents, by Capital Preservation Fund on the Closing Date to Cash Reserves, or at its direction, to its custodian bank, in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the custom of brokers and shall be accompanied by all necessary state transfer stamps, if any. The cash delivered shall be in the form of certified or bank cashiers' checks or by bank wire or intra-bank transfer payable to the order of Cash Reserves for the account of Cash Reserves. Class A, Class B, Class C and Class N shares of Cash Reserves representing the number of Class A, Class B, Class C and Class N shares of Cash Reserves being delivered against the assets of Capital Preservation Fund, registered in the name of Capital Preservation Fund, shall be transferred to Capital Preservation Fund on the Closing Date. Such shares shall thereupon be assigned by Capital Preservation Fund to its shareholders so that the shares of Cash Reserves may be distributed as provided in Section 5. If, at the Closing Date, Capital Preservation Fund is unable to make delivery under this Section 8 to Cash Reserves of any of its portfolio securities or cash for the reason that any of such securities purchased by Capital Preservation Fund, or the cash proceeds of a sale of portfolio securities, prior to the Closing Date have not yet been delivered to it or Capital Preservation Fund's custodian, then the delivery requirements of this Section 8 with respect to said undelivered securities or cash will be waived and Capital Preservation Fund will deliver to Cash Reserves by or on the Closing Date with respect to said undelivered securities or cash executed copies of an agreement or agreements of assignment in a form reasonably satisfactory to Cash Reserves, together with such other documents, including a due bill or due bills and brokers' confirmation slips as may reasonably be required by Cash Reserves. 9. Cash Reserves shall not assume the liabilities (except for portfolio securities purchased which have not settled and for shareholder redemption and dividend checks outstanding) of Capital Preservation Fund, but Capital Preservation Fund will, nevertheless, use its best efforts to discharge all known liabilities, so far as may be possible, prior to the Closing Date. The cost of printing and mailing the proxies and proxy statements will be borne by Capital Preservation Fund. Capital Preservation Fund and Cash Reserves share the cost of the tax opinion. Any documents such as existing prospectuses or annual reports that are included in that mailing will be a cost of the Fund issuing the document. Any other out-of-pocket expenses of Cash Reserves and Capital Preservation Fund associated with this reorganization, including legal, accounting and transfer agent expenses, will be borne by Capital Preservation Fund and Cash Reserves, respectively, in the amounts so incurred by each. 10. The obligations of Cash Reserves hereunder shall be subject to the following conditions: A. The Board of Trustees of Capital Preservation Fund shall have authorized the execution of the Agreement, and the shareholders of Capital Preservation Fund shall have approved the Agreement and the transactions contemplated hereby, and Capital Preservation Fund shall have furnished to Cash Reserves copies of resolutions to that effect certified by the Secretary or the Assistant Secretary of Capital Preservation Fund; such shareholder approval shall have been by the affirmative vote required by the Massachusetts Law and its charter documents at a meeting for which proxies have been solicited by the Proxy Statement and Prospectus (as hereinafter defined). B. Cash Reserves shall have received an opinion dated as of the Closing Date from counsel to Capital Preservation Fund, to the effect that (i) Capital Preservation Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full corporate powers to carry on its business as then being conducted and to enter into and perform the Agreement; and (ii) that all action necessary to make the Agreement, according to its terms, valid, binding and enforceable on Capital Preservation Fund and to authorize effectively the transactions contemplated by the Agreement have been taken by Capital Preservation Fund. Massachusetts counsel may be relied upon for this opinion. C. The representations and warranties of Capital Preservation Fund contained herein shall be true and correct at and as of the Closing Date, and Cash Reserves shall have been furnished with a certificate of the President, or a Vice President, or the Secretary or the Assistant Secretary or the Treasurer or the Assistant Treasurer of Capital Preservation Fund, dated as of the Closing Date, to that effect. D. On the Closing Date, Capital Preservation Fund shall have furnished to Cash Reserves a certificate of the Treasurer or Assistant Treasurer of Capital Preservation Fund as to the amount of the capital loss carry-over and net unrealized appreciation or depreciation, if any, with respect to Capital Preservation Fund as of the Closing Date. E. The cash reserve shall not exceed 10% of the value of the net assets, nor 30% in value of the gross assets, of Capital Preservation Fund at the close of business on the Valuation Date. F. A Registration Statement on Form N-14 filed by Cash Reserves under the Securities Act of 1933, as amended (the "1933 Act"), containing a preliminary form of the Proxy Statement and Prospectus, shall have become effective under the 1933 Act. G. On the Closing Date, Cash Reserves shall have received a letter of Robert G. Zack or other senior executive officer of OppenheimerFunds, Inc. acceptable to Cash Reserves, stating that nothing has come to his or her attention which in his or her judgment would indicate that as of the Closing Date there were any material, actual or contingent liabilities of Capital Preservation Fund arising out of litigation brought against Capital Preservation Fund or claims asserted against it, or pending or to the best of his or her knowledge threatened claims or litigation not reflected in or apparent from the most recent audited financial statements and footnotes thereto of Capital Preservation Fund delivered to Cash Reserves. Such letter may also include such additional statements relating to the scope of the review conducted by such person and his or her responsibilities and liabilities as are not unreasonable under the circumstances. H. Cash Reserves shall have received an opinion, dated as of the Closing Date, of Deloitte & Touche LLP (or an appropriate substitute tax expert), to the same effect as the opinion contemplated by Section 11.E. of the Agreement. I. Cash Reserves shall have received at the Closing all of the assets of Capital Preservation Fund to be conveyed hereunder, which assets shall be free and clear of all liens, encumbrances, security interests, restrictions and limitations whatsoever. 11. The obligations of Capital Preservation Fund hereunder shall be subject to the following conditions: A. The Board of Trustees of Cash Reserves shall have authorized the execution of the Agreement, and the transactions contemplated thereby, and Cash Reserves shall have furnished to Capital Preservation Fund copies of resolutions to that effect certified by the Secretary or the Assistant Secretary of Cash Reserves. B. Capital Preservation Fund's shareholders shall have approved the Agreement and the transactions contemplated hereby, by an affirmative vote required by the Massachusetts Law and its charter documents and Capital Preservation Fund shall have furnished Cash Reserves copies of resolutions to that effect certified by the Secretary or an Assistant Secretary of Capital Preservation Fund. C. Capital Preservation Fund shall have received an opinion dated as of the Closing Date from counsel to Cash Reserves, to the effect that (i) Cash Reserves is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full powers to carry on its business as then being conducted and to enter into and perform the Agreement; (ii) all actions necessary to make the Agreement, according to its terms, valid, binding and enforceable upon Cash Reserves and to authorize effectively the transactions contemplated by the Agreement have been taken by Cash Reserves, and (iii) the shares of Cash Reserves to be issued hereunder are duly authorized and when issued will be validly issued, fully-paid and non-assessable, except as set forth under "Shareholder and Trustee Liability" in Cash Reserves' Statement of Additional Information. Massachusetts counsel may be relied upon for this opinion. D. The representations and warranties of Cash Reserves contained herein shall be true and correct at and as of the Closing Date, and Capital Preservation Fund shall have been furnished with a certificate of the President, a Vice President or the Secretary or the Assistant Secretary or the Treasurer or the Assistant Treasurer of the Trust to that effect dated as of the Closing Date. E. Capital Preservation Fund shall have received an opinion of Deloitte & Touche LLP (or an appropriate substitute tax expert) to the effect that the federal tax consequences of the transaction, if carried out in the manner outlined in the Agreement and in accordance with (i) Capital Preservation Fund's representation that there is no plan or intention by any Capital Preservation Fund shareholder who owns 5% or more of Capital Preservation Fund's outstanding shares, and, to Capital Preservation Fund's best knowledge, there is no plan or intention on the part of the remaining Capital Preservation Fund shareholders, to redeem, sell, exchange or otherwise dispose of a number of Cash Reserves shares received in the transaction that would reduce Capital Preservation Fund shareholders' ownership of Cash Reserves shares to a number of shares having a value, as of the Closing Date, of less than 50% of the value of all of the formerly outstanding Capital Preservation Fund shares as of the same date, and (ii) the representation by each of Capital Preservation Fund and Cash Reserves that, as of the Closing Date, Capital Preservation Fund and Cash Reserves will qualify as regulated investment companies or will meet the diversification test of Section 368(a)(2)(F)(ii) of the Code, will be as follows: 1. The transactions contemplated by the Agreement will qualify as a tax-free "reorganization" within the meaning of Section 368(a)(1) of the Code, and under the regulations promulgated thereunder. 2. Capital Preservation Fund and Cash Reserves will each qualify as a "party to a reorganization" within the meaning of Section 368(b)(2) of the Code. 3. No gain or loss will be recognized by the shareholders of Capital Preservation Fund upon the distribution of Class A, Class B, Class C and Class N shares of beneficial interest in Cash Reserves to the shareholders of Capital Preservation Fund pursuant to Section 354 of the Code. 4. Under Section 361(a) of the Code no gain or loss will be recognized by Capital Preservation Fund by reason of the transfer of substantially all its assets in exchange for Class A, Class B, Class C and Class N shares of Cash Reserves. 5. Under Section 1032 of the Code no gain or loss will be recognized by Cash Reserves by reason of the transfer of substantially all of Capital Preservation Fund's assets in exchange for Class A, Class B, Class C and Class N shares of Cash Reserves and Cash Reserves' assumption of certain liabilities of Capital Preservation Fund. 6. The shareholders of Capital Preservation Fund will have the same tax basis and holding period for the Class A, Class B, Class C and Class N shares of beneficial interest in Cash Reserves that they receive as they had for Capital Preservation Fund shares that they previously held, pursuant to Section 358(a) and 1223(1), respectively, of the Code. 7. The securities transferred by Capital Preservation Fund to Cash Reserves will have the same tax basis and holding period in the hands of Cash Reserves as they had for Capital Preservation Fund, pursuant to Section 362(b) and 1223(1), respectively, of the Code. F. The cash reserve shall not exceed 10% of the value of the net assets, nor 30% in value of the gross assets, of Capital Preservation Fund at the close of business on the Valuation Date. G. A Registration Statement on Form N-14 filed by Cash Reserves under the 1933 Act, containing a preliminary form of the Proxy Statement and Prospectus, shall have become effective under the 1933 Act. H. On the Closing Date, Capital Preservation Fund shall have received a letter of Robert G. Zack or other senior executive officer of OppenheimerFunds, Inc. acceptable to Capital Preservation Fund, stating that nothing has come to his or her attention which in his or her judgment would indicate that as of the Closing Date there were any material, actual or contingent liabilities of Cash Reserves arising out of litigation brought against Cash Reserves or claims asserted against it, or pending or, to the best of his or her knowledge, threatened claims or litigation not reflected in or apparent by the most recent audited financial statements and footnotes thereto of Cash Reserves delivered to Capital Preservation Fund. Such letter may also include such additional statements relating to the scope of the review conducted by such person and his or her responsibilities and liabilities as are not unreasonable under the circumstances. I. Capital Preservation Fund shall acknowledge receipt of the Class A, Class B, Class C and Class N shares of Cash Reserves. 12. Capital Preservation Fund hereby represents and warrants that: A. The audited financial statements of Capital Preservation Fund as of October 31, 2003 and unaudited financial statements as of April 30, 2004 heretofore furnished to Cash Reserves, present fairly the financial position, results of operations, and changes in net assets of Capital Preservation Fund as of that date, in conformity with generally accepted accounting principles applied on a basis consistent with the preceding year; and that from April 30, 2004 through the date hereof there have not been, and through the Closing Date there will not be, any material adverse change in the business or financial condition of Capital Preservation Fund that have not been disclosed to Cash Reserves, it being agreed that a decrease in the size of Capital Preservation Fund due to a diminution in the value of its portfolio and/or redemption of its shares shall not be considered a material adverse change; B. Contingent upon approval of the Agreement and the transactions contemplated thereby by Capital Preservation Fund's shareholders, Capital Preservation Fund has authority to transfer all of the assets of Capital Preservation Fund to be conveyed hereunder free and clear of all liens, encumbrances, security interests, restrictions and limitations whatsoever; C. The Prospectus, as amended and supplemented, contained in Capital Preservation Fund's Registration Statement under the 1933 Act, as amended, is true, correct and complete, conforms to the requirements of the 1933 Act and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Registration Statement, as amended, was, as of the date of the filing of the last Post-Effective Amendment, true, correct and complete, conformed to the requirements of the 1933 Act and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; D. There is no material contingent liability of Capital Preservation Fund and no material claim and no material legal, administrative or other proceedings pending or, to the knowledge of Capital Preservation Fund, threatened against Capital Preservation Fund, not reflected in such Prospectus; E. Except for the Agreement, there are no material contracts outstanding to which Capital Preservation Fund is a party other than those ordinary in the conduct of its business; F. Capital Preservation Fund is a Massachusetts business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; and has all necessary and material Federal and state authorizations to own all of its assets and to carry on its business as now being conducted; and Capital Preservation Fund that is duly registered under the Act and such registration has not been rescinded or revoked and is in full force and effect; G. All Federal and other tax returns and reports of Capital Preservation Fund required by law to be filed have been filed, and all federal and other taxes shown due on said returns and reports have been paid or provision shall have been made for the payment thereof and to the best of the knowledge of Capital Preservation Fund no such return is currently under audit and no assessment has been asserted with respect to such returns; and H. Capital Preservation Fund has elected that Capital Preservation Fund be treated as a regulated investment company and, for each fiscal year of its operations, Capital Preservation Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and Capital Preservation Fund intends to meet such requirements with respect to its current taxable year. 13. Cash Reserves hereby represents and warrants that: A. The audited financial statements of Cash Reserves as of July 31, 2004 heretofore furnished to Capital Preservation Fund, present fairly the financial position, results of operations, and changes in net assets of Cash Reserves, as of that date, in conformity with generally accepted accounting principles applied on a basis consistent with the preceding year; and that from July 31, 2004 through the date hereof there have not been, and through the Closing Date there will not be, any material adverse changes in the business or financial condition of Cash Reserves that have not been disclosed to Capital Preservation, it being understood that a decrease in the size of Cash Reserves due to a diminution in the value of its portfolio and/or redemption of its shares shall not be considered a material or adverse change; B. The Prospectus, as amended and supplemented, contained in Cash Reserves' Registration Statement under the 1933 Act, is true, correct and complete, conforms to the requirements of the 1933 Act and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Registration Statement, as amended, was, as of the date of the filing of the last Post-Effective Amendment, true, correct and complete, conformed to the requirements of the 1933 Act and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; C. Except for this Agreement, there is no material contingent liability of Cash Reserves and no material claim and no material legal, administrative or other proceedings pending or, to the knowledge of Cash Reserves, threatened against Cash Reserves, not reflected in such Prospectus; D. Except for this Agreement, there are no material contracts outstanding to which Cash Reserves is a party other than those ordinary in the conduct of its business; E. Cash Reserves is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; Cash Reserves has all necessary and material Federal and state authorizations to own all its properties and assets and to carry on its business as now being conducted; the Class A, Class B, Class C and Class N shares of Cash Reserves which it issues to Capital Preservation Fund pursuant to the Agreement will be duly authorized, validly issued, fully-paid and non-assessable, except as set forth under "Shareholder & Trustee Liability" in Cash Reserves' Statement of Additional Information, will conform to the description thereof contained in Cash Reserves' Registration Statement and will be duly registered under the 1933 Act and in the states where registration is required; and Cash Reserves is duly registered under the Act and such registration has not been revoked or rescinded and is in full force and effect; F. All federal and other tax returns and reports of Cash Reserves required by law to be filed have been filed, and all federal and other taxes shown due on said returns and reports have been paid or provision shall have been made for the payment thereof and to the best of the knowledge of Cash Reserves, no such return is currently under audit and no assessment has been asserted with respect to such returns and to the extent such tax returns with respect to the taxable year of Cash Reserves ended July 31, 2004 have not been filed, such returns will be filed when required and the amount of tax shown as due thereon shall be paid when due; G. Cash Reserves has elected to be treated as a regulated investment company and, for each fiscal year of its operations, Cash Reserves has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and Cash Reserves intends to meet such requirements with respect to its current taxable year; H. Cash Reserves has no plan or intention (i) to dispose of any of the assets transferred by Capital Preservation Fund, other than in the ordinary course of business, or (ii) to redeem or reacquire any of the Class A, Class B, Class C and Class N shares issued by it in the reorganization other than pursuant to valid requests of shareholders; and I. After consummation of the transactions contemplated by the Agreement, Cash Reserves intends to operate its business in a substantially unchanged manner. 14.Each party hereby represents to the other that no broker or finder has been employed by it with respect to the Agreement or the transactions contemplated hereby. Each party also represents and warrants to the other that the information concerning it in the Proxy Statement and Prospectus will not as of its date contain any untrue statement of a material fact or omit to state a fact necessary to make the statements concerning it therein not misleading and that the financial statements concerning it will present the information shown fairly in accordance with generally accepted accounting principles applied on a basis consistent with the preceding year. Each party also represents and warrants to the other that the Agreement is valid, binding and enforceable in accordance with its terms and that the execution, delivery and performance of the Agreement will not result in any violation of, or be in conflict with, any provision of any charter, by-laws, contract, agreement, judgment, decree or order to which it is subject or to which it is a party. Cash Reserves hereby represents to and covenants with Capital Preservation Fund that, if the reorganization becomes effective, Cash Reserves will treat each shareholder of Capital Preservation Fund who received any of Cash Reserves' shares as a result of the reorganization as having made the minimum initial purchase of shares of Cash Reserves received by such shareholder for the purpose of making additional investments in shares of Cash Reserves, regardless of the value of the shares of Cash Reserves received. 15.Cash Reserves agrees that it will prepare and file a Registration Statement on Form N-14 under the 1933 Act which shall contain a preliminary form of proxy statement and prospectus contemplated by Rule 145 under the 1933 Act. The final form of such proxy statement and prospectus is referred to in the Agreement as the "Proxy Statement and Prospectus." Each party agrees that it will use its best efforts to have such Registration Statement declared effective and to supply such information concerning itself for inclusion in the Proxy Statement and Prospectus as may be necessary or desirable in this connection. Capital Preservation Fund covenants and agrees to liquidate and dissolve under the laws of the Commonwealth of Massachusetts, following the Closing, and, upon Closing, to cause the cancellation of its outstanding shares. 16.The obligations of the parties shall be subject to the right of either party to abandon and terminate the Agreement for any reason and there shall be no liability for damages or other recourse available to a party not so terminating this Agreement, provided, however, that in the event that a party shall terminate this Agreement without reasonable cause, the party so terminating shall, upon demand, reimburse the party not so terminating for all expenses, including reasonable out-of-pocket expenses and fees incurred in connection with this Agreement. 17.The Agreement may be executed in several counterparts, each of which shall be deemed an original, but all taken together shall constitute one Agreement. The rights and obligations of each party pursuant to the Agreement shall not be assignable. 18.All prior or contemporaneous agreements and representations are merged into the Agreement, which constitutes the entire contract between the parties hereto. No amendment or modification hereof shall be of any force and effect unless in writing and signed by the parties and no party shall be deemed to have waived any provision herein for its benefit unless it executes a written acknowledgment of such waiver. 19.Cash Reserves understands that the obligations of Capital Preservation Fund under the Agreement are not binding upon any Trustee or shareholder of Capital Preservation Fund personally, but bind only Capital Preservation Fund and Capital Preservation Fund's property. Cash Reserves represents that it has notice of the provisions of the Declaration of Trust of Capital Preservation Fund disclaiming shareholder and trustee liability for acts or obligations of Capital Preservation Fund. 20.Capital Preservation Fund understands that the obligations of Cash Reserves under the Agreement are not binding upon any trustee or shareholder of Cash Reserves personally, but bind only Cash Reserves and Cash Reserves' property. Capital Preservation Fund represents that it has notice of the provisions of the Declaration of Trust of Cash Reserves disclaiming shareholder and trustee liability for acts or obligations of Cash Reserves. IN WITNESS WHEREOF, each of the parties has caused the Agreement to be executed and attested by its officers thereunto duly authorized on the date first set forth above. OPPENHEIMER CAPITAL PRESERVATION FUND By:/s/ Robert G. Zack ------------------ Robert G. Zack Secretary OPPENHEIMER CASH RESERVES By: /s/ Robert G. Zack ------------------ Robert G. Zack Secretary B-6 EXHIBIT B PRINCIPAL SHAREHOLDERS A. Major Shareholders of Capital Preservation Fund. As of November 15, 2004, the only persons who owned of record, or who were known by Capital Preservation Fund to own beneficially 5% or more of any class of that Fund's outstanding shares, and their holdings of that class as of that date, were the following: B. Major Shareholders of Cash Reserves. As of November 15, 2004, the only persons who owned of record or who were known by Cash Reserves to own beneficially 5% or more of any class of that Fund's outstanding shares, and their holdings of that class as of that date, were the following: STATEMENT OF ADDITIONAL INFORMATION TO PROSPECTUS AND PROXY STATEMENT PART B Acquisition of the Assets of OPPENHEIMER CAPITAL PRESERVATION FUND By and in exchange for Shares of OPPENHEIMER CASH RESERVES This Statement of Additional Information to this Prospectus and Proxy Statement (the "SAI") relates specifically to the proposed delivery of substantially all of the assets of Oppenheimer Capital Preservation Fund ("Capital Preservation Fund") for shares of Oppenheimer Cash Reserves ("Cash Reserves"). This SAI consists of this Cover Page and the following documents: (i) the Prospectus of Capital Preservation Fund dated December 23, 2003 and its supplements dated December 29, 2003, July 6, 2004, September 30, 2004 and October 12, 2004.; (ii) the Statement of Additional Information of Capital Preservation Fund dated December 23, 2003 and its supplements dated December 29, 2003 and July 6, 2004, which include audited financial statements of Capital Preservation Fund for the 12-month period ended October 31, 2003; (iii) unaudited financial statements of Capital Preservation Fund for the 6-month period ended April 30, 2004; (iv) the Statement of Additional Information of Cash Reserves dated September 24, 2004, which includes audited financial statements of Cash Reserves for the 12-month period ended July 31, 2004; and (v) Combined Pro Forma financial statements dated September 30, 2004. This SAI is not a Prospectus; you should read this SAI in conjunction with the Prospectus and Proxy Statement dated December 3, 2004, relating to the above-referenced transaction. You can request a copy of the Prospectus and Proxy Statement by calling 1.800.708.7780 or by writing OppenheimerFunds Services at P.O. Box 5270, Denver, Colorado 80217. The date of this SAI is December 3, 2005. PROXY CARD OPPENHEIMER CAPITAL PRESERVATION FUND PROXY CARD PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 21, 2005 The undersigned, revoking prior proxies, hereby appoints Brian Wixted, Philip Vottiero and Kathleen Ives, and each of them, as attorneys-in-fact and proxies of the undersigned, with full power of substitution, to vote shares held in the name of the undersigned on the record date at the Special Meeting of Shareholders of Oppenheimer Capital Preservation Fund (the "Fund") to be held at 6803 South Tucson Way, Centennial, Colorado, 80112, on January 21, 2005, at 1:00 p.m. Mountain time, or at any adjournment thereof, upon the proposal described in the Notice of Meeting and accompanying Prospectus and Proxy Statement, which have been received by the undersigned. This proxy is solicited on behalf of the Fund's Board of Trustees, and the proposal (set forth on the reverse side of this proxy card) has been proposed by the Board of Trustees. When properly executed, this proxy will be voted as indicated on the reverse side or "FOR" the proposal if no choice is indicated. The proxy will be voted in accordance with the proxy holders' best judgment as to any other matters that may arise at the Meeting. VOTE VIA THE TELEPHONE: 1-866-241-6192 CONTROL NUMBER: 999 9999 9999 999 Note: Please sign this proxy exactly as your name or names appear hereon. Each joint owner should sign. Trustees and other fiduciaries should indicate the capacity in which they sign. If a corporation, partnership or other entity, this signature should be that of a duly authorized individual who should state his or her title. Signature Signature of joint owner, if any Date PLEASE VOTE ON THE REVERSE SIDE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example: [ ] 2 1. To approve an Agreement and Plan of Reorganization between Oppenheimer Capital Preservation Fund ("Capital Preservation Fund"), and Oppenheimer Cash Reserves ("Cash Reserves") and the transactions contemplated thereby, including: (a) the transfer of substantially all the assets of Capital Preservation Fund to Cash Reserves in exchange for Class A, Class B, Class C, Class N and Class Y shares of Cash Reserves, (b) the distribution of such shares of Cash Reserves to the corresponding Class A, Class B, Class C, Class N and Class Y shareholders of Capital Preservation Fund in complete liquidation of Capital Preservation Fund and (c) the cancellation of the outstanding shares of Capital Preservation Fund.
- ------------------------------------------------------------------------------ Oppenheimer Cash Reserves - ------------------------------------------------------------------------------ 6803 S. Tucson Way, Centennial, Colorado 80112-3924 1.800.225.5677 Statement of Additional Information dated September 29, 2004 This Statement of Additional Information is not a Prospectus. This document contains additional information about the Fund and supplements information in the Prospectus dated September 29, 2004. 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, by calling the Transfer Agent at the toll-free number shown above, or by downloading it from the OppenheimerFunds Internet website at www.oppenheimerfunds.com. Contents Page About the Fund Additional Information about the Fund's Investment Policies and Risks........2 The Fund's Investment Policies............................................2 Other Investment Strategies...............................................6 Investment Restrictions...................................................8 How the Fund is Managed......................................................9 Organization and History..................................................9 Board of Trustees and Oversight Committees...............................11 Trustees and Officers of the Fund........................................12 The Manager..............................................................20 Distribution and Service Plans..............................................23 Performance of the Fund.....................................................28 About Your Account How To Buy Shares...........................................................31 How To Sell Shares..........................................................38 How To Exchange Shares......................................................43 Dividends and Taxes.........................................................48 Additional Information About the Fund.......................................50 Financial Information About the Fund Report of Independent Registered Public Accounting Firm.....................51 Financial Statements........................................................52 Appendix A: Ratings Definitions............................................A-1 Appendix B: Industry Classifications.......................................B-1 Appendix C: OppenheimerFunds Special Sales Charge Arrangements and Waivers.C-1 - ------------------------------------------------------------------------------ ABOUT THE FUND - ------------------------------------------------------------------------------ Additional Information About the Fund's Investment Policies and Risks The investment objective and the principal investment policies of the Fund are described in the Prospectus. This Statement of Additional Information contains supplemental information about those policies and the types of securities that the Fund's investment Manager, OppenheimerFunds, Inc. will select for the Fund. Additional explanations are also provided about the strategies the Fund may use to try to achieve its objective. The Fund's Investment Policies. The Fund's objective is to seek the maximum current income that is consistent with stability of principal. The Fund will not make investments with the objective of seeking capital growth. However, the value of the securities held by the Fund may be affected by changes in general interest rates. Because the current value of debt securities varies inversely with changes in prevailing interest rates, if interest rates increase after a security is purchased, that security would normally decline in value. Conversely, if interest rates decrease after a security is purchased, its value would rise. However, those fluctuations in value will not generally result in realized gains or losses to the Fund since the Fund does not usually intend to dispose of securities prior to their maturity. A debt security held to maturity is redeemable by its issuer at full principal value plus accrued interest. The Fund may sell securities prior to their maturity, to attempt to take advantage of short-term market variations, or because of a revised credit evaluation of the issuer or other considerations. The Fund may also do so to generate cash to satisfy redemptions of Fund shares. In such cases, the Fund may realize a capital gain or loss on the security. |X| Ratings of Securities -- Portfolio Quality, Maturity and Diversification. Under Rule 2a-7 of the Investment Company Act, the Fund uses the amortized cost method to value its portfolio securities to determine the Fund's net asset value per share. Rule 2a-7 places restrictions on a money market fund's investments. Under that Rule, the Fund may purchase only those securities that the Manager, under Board-approved procedures, has determined have minimal credit risks and are "Eligible Securities." The rating restrictions described in the Prospectus and this Statement of Additional Information do not apply to banks in which the Fund's cash is kept. An "Eligible Security" is one that has been rated in one of the two highest short-term rating categories by any two "nationally-recognized statistical rating organizations." That term is defined in Rule 2a-7 and they are referred to as "Rating Organizations" in this Statement of Additional Information. If only one Rating Organization has rated that security, it must have been rated in one of the two highest rating categories by that Rating Organization. An unrated security that is judged by the Manager, subject to review by the Fund's Board of Directors, to be of comparable quality to Eligible Securities rated by Rating Organizations may also be an "Eligible Security." Rule 2a-7 permits the Fund to purchase any number of "First Tier Securities." These are Eligible Securities that have been rated in the highest rating category for short-term debt obligations by at least two Rating Organizations. If only one Rating Organization has rated a particular security, it must have been rated in the highest rating category by that Rating Organization. Comparable unrated securities may also be First Tier Securities. Under Rule 2a-7, the Fund may invest only up to 5% of its total assets in "Second Tier Securities." Those are Eligible Securities that are not "First Tier Securities." In addition, the Fund may not invest more than: o 5% of its total assets in the securities of any one issuer (other than the U.S. government, its agencies or instrumentalities) or o 1% of its total assets or $1 million (whichever is greater) in Second Tier Securities of any one issuer. Under Rule 2a-7, the Fund must maintain a dollar-weighted average portfolio maturity of not more than 90 days, and the maturity of any single portfolio investment may not exceed 397 days. The Board regularly reviews reports from the Manager to show the Manager's compliance with the Fund's procedures and with the Rule. If a security's rating is downgraded, the Manager or the Board of Trustees may have to reassess the security's credit risk. If a security is downgraded, the Manager or the Board of Trustees will promptly reassess whether the security continues to present minimal credit risk, reassess the status of the security as an "eligible security," and take such actions as is appropriate. If the Fund disposes of the security within five days of the Manager learning of the downgrade, the Manager will provide the Board of Trustees with subsequent notice of such downgrade. If a security is in default, or ceases to be an Eligible Security, or is determined no longer to present minimal credit risks, the Board of Trustees must determine whether it would be in the best interests of the Fund to dispose of the security. The Rating Organizations currently designated as nationally-recognized statistical rating organizations by the Securities and Exchange Commission (the "SEC") are Standard & Poor's (a division of the McGraw-Hill Companies), Moody's Investors Service, Inc., Fitch, Inc. and Dominion Bond Rating Service Limited. Appendix A to this Statement of Additional Information contains descriptions of the rating categories of those Rating Organizations. Ratings at the time of purchase will determine whether securities may be acquired under the restrictions described above. |X| U.S. Government Securities. U.S. government securities are obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. They include Treasury Bills (which mature within one year of the date they are issued) and Treasury Notes and Bonds (which are issued with longer maturities). All Treasury securities are backed by the full faith and credit of the United States. U.S. government agencies and instrumentalities that issue or guarantee securities include, but are not limited to, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Government National Mortgage Association, General Services Administration, Bank for Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Maritime Administration, the Tennessee Valley Authority and the District of Columbia Armory Board. Securities issued or guaranteed by U.S. government agencies and instrumentalities are not always backed by the full faith and credit of the United States. Some, such as securities issued by the Federal National Mortgage Association ("Fannie Mae"), are backed by the right of the agency or instrumentality to borrow from the Treasury. Others, such as securities issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported only by the credit of the instrumentality and not by the Treasury. If the securities are not backed by the full faith and credit of the United States, the purchaser must look principally to the agency issuing the obligation for repayment and may not be able to assert a claim against the United States if the issuing agency or instrumentality does not meet its commitment. Among the U.S. government securities that may be purchased by the Fund are "mortgage-backed securities" of Fannie Mae, Government National Mortgage Association ("Ginnie Mae") and Freddie Mac. Timely payment of principal and interest on Ginnie Mae pass-through is guaranteed by the full faith and credit of the United States. These mortgage-backed securities include "pass-through" securities and "participation certificates." Both types of securities are similar, in that they represent pools of mortgages that are assembled by a vendor who sells interests in the pool. Payments of principal and interest by individual mortgagors are passed through to the holders of the interests in the pool. Another type of mortgage-backed security is the "collateralized mortgage obligation." It is similar to a conventional bond and is secured by groups of individual mortgages. |X| Time Deposits and Other Bank Obligations. The types of "banks" whose securities the Fund may buy include commercial banks, savings banks, and savings and loan associations, which may or may not be members of the Federal Deposit Insurance Corporation. The Fund may also buy securities of "foreign banks" that are: o foreign branches of U.S. banks (which may be issuers of "Eurodollar" money market instruments), o U.S. branches and agencies of foreign banks (which may be issuers of "Yankee dollar" instruments), or o foreign branches of foreign banks. The Fund may invest in fixed time deposits. These are non-negotiable deposits in a bank for a specified period of time at a stated interest rate. They may or may not be subject to withdrawal penalties. However, the Fund's investments in time deposits that are subject to penalties (other than time deposits maturing in less than 7 days) are subject to the 10% investment limitation for investing in illiquid or restricted securities, set forth in "Illiquid and Restricted Securities" in the Prospectus. The Fund will buy bank obligations only from a domestic bank with total assets of at least $2.0 billion or from a foreign bank with total assets of at least $30.0 billion. Those asset requirements apply only at the time the obligations are acquired. |X| Insured Bank Obligations. The Federal Deposit Insurance Corporation ("FDIC") insures the deposits of banks and savings and loan associations up to $100,000 per investor. Within the limits set forth in the Prospectus, the Fund may purchase bank obligations that are fully insured as to principal by the FDIC. To remain fully insured as to principal, these investments must currently be limited to $100,000 per bank. If the principal amount and accrued interest together exceed $100,000, then the accrued interest in excess of that $100,000 will not be insured. |X| Bank Loan Participation Agreements. The Fund may invest in bank loan participation agreements, subject to the investment limitation set forth in the Prospectus as to investments in illiquid securities. Participation agreements provide an undivided interest in a loan made by the bank issuing the participation interest in the proportion that the buyer's investment bears to the total principal amount of the loan. Under this type of arrangement, the issuing bank may have no obligation to the buyer other than to pay principal and interest on the loan if and when received by the bank. Thus, the Fund must look to the creditworthiness of the borrower, which is obligated to make payments of principal and interest on the loan. If the borrower fails to pay scheduled principal or interest payments, the Fund may experience a reduction in income. |X| Asset-Backed Securities. These securities, issued by trusts and special purpose corporations, are backed by pools of assets, primarily automobile and credit-card receivables and home equity loans. They pass through the payments on the underlying obligations to the security holders (less servicing fees paid to the originator or fees for any credit enhancement). The value of an asset-backed security is affected by changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans, or the financial institution providing any credit enhancement. Payments of principal and interest passed through to holders of asset-backed securities are typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or having a priority to certain of the borrower's other securities. The degree of credit enhancement varies, and generally applies to only a fraction of the asset-backed security's par value until exhausted. If the credit enhancement of an asset-backed security held by the Fund has been exhausted, and if any required payments of principal and interest are not made with respect to the underlying loans, the Fund may experience losses or delays in receiving payment. The risks of investing in asset-backed securities are ultimately dependent upon payment of consumer loans by the individual borrowers. As a purchaser of an asset-backed security, the Fund would generally have no recourse to the entity that originated the loans in the event of default by a borrower. The underlying loans are subject to prepayments, which shorten the weighted average life of asset-backed securities and may lower their return, in the same manner as for prepayments of a pool of mortgage loans underlying mortgage-backed securities. However, asset-backed securities do not have the benefit of the same security interest in the underlying collateral as do mortgage-backed securities. |X| Repurchase Agreements. In a repurchase transaction, the Fund acquires a security from, and simultaneously resells it to, an approved vendor for delivery on an agreed-upon future date. 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. An "approved vendor" may be a U.S. commercial bank, the U.S. branch of a foreign bank, or a broker-dealer which has been designated a primary dealer in government securities. They must meet the credit requirements set by the Manager from time to time. 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. The Fund will not enter into a repurchase agreement that will cause more than 10% of its net assets to be subject to repurchase agreements maturing in more than seven days. Repurchase agreements are considered "loans" under the Investment Company Act of 1940 ("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 collateral's value must equal or exceed the repurchase price to fully collateralize the repayment obligation. Additionally, the Manager will monitor the vendor's creditworthiness to confirm that the vendor is financially sound and will continuously monitor the collateral's value. 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. Pursuant to an Exemptive Order issued by the SEC, the Fund, along with other affiliated entities managed by the Manager may transfer uninvested cash balances into one or more joint repurchase accounts. These balances are invested in one or more repurchase agreements, secured by U.S. government securities. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each joint repurchase arrangement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. Other Investment Strategies |X| Floating Rate/Variable Rate Obligations. The Fund may invest in instruments with floating or variable interest rates. The interest rate on a floating rate obligation is based on a stated prevailing market rate, such as a bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of return on commercial paper or bank certificates of deposit, or some other standard. The rate on the investment is adjusted automatically each time the market rate is adjusted. The interest rate on a variable rate obligation is also based on a stated prevailing market rate but is adjusted automatically at a specified interval of not less than one year. Some variable rate or floating rate obligations in which the Fund may invest have a demand feature entitling the holder to demand payment of an amount approximately equal to the amortized cost of the instrument or the principal amount of the instrument plus accrued interest at any time, or at specified intervals not exceeding 397 days. These notes may or may not be backed by bank letters of credit. Variable rate demand notes may include master demand notes, which are obligations that permit the Fund to invest fluctuating amounts in a note. The amount may change daily without penalty, pursuant to direct arrangements between the Fund, as the note purchaser, and the issuer of the note. The interest rates on these notes fluctuate from time to time. The issuer of this type of obligation normally has a corresponding right in its discretion, after a given period, to prepay the outstanding principal amount of the obligation plus accrued interest. The issuer must give a specified number of days' notice to the holders of those obligations. Generally, the changes in the interest rate on those securities reduce the fluctuation in their market value. As interest rates decrease or increase, the potential for capital appreciation or depreciation is less than that for fixed-rate obligations having the same maturity. Because these types of obligations are direct lending arrangements between the note purchaser and issuer of the note, these instruments generally will not be traded. Generally, there is no established secondary market for these types of obligations, although they are redeemable from the issuer at face value. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the Fund's right to redeem them is dependent on the ability of the note issuer to pay principal and interest on demand. These types of obligations usually are not rated by credit rating agencies. The Fund may invest in obligations that are not rated only if the Manager determines at the time of investment that the obligations are of comparable quality to the other obligations in which the Fund may invest. The Manager, on behalf of the Fund, will monitor the creditworthiness of the issuers of the floating and variable rate obligations in the Fund's portfolio on an ongoing basis. |X| Loans of Portfolio Securities. To attempt to increase its income, the Fund may lend its portfolio securities to brokers, dealers and other financial institutions. These loans are limited to not more than 25% of the value of the Fund's total assets and are subject to other conditions described below. There are some risks in lending securities. The Fund could experience a delay in receiving additional collateral to secure a loan, or a delay in recovering the loaned securities. The Fund presently does not intend to lend its securities, but if it does, the value of securities loaned is not expected to exceed 5% of the value of the Fund's total assets. The Fund must receive collateral for a loan. Under current applicable regulatory requirements (which are subject to change), on each business day the loan collateral must be at least equal to the market value of the loaned securities. The collateral must consist of cash, bank letters of credit, U.S. government securities or other cash equivalents in which the Fund is permitted to invest. 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. When it lends securities, 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. It may also receive negotiated loan fees and the interest on the collateral securities, less any finders', custodian bank, administrative or other fees the Fund pays in connection with the loan. The Fund may share the interest it receives on the collateral securities with the borrower as long as it realizes at least a minimum amount of interest required by the lending guidelines established by its Board of Trustees. The Fund will not lend its portfolio securities to any officer, Trustee, employee or affiliate of the Fund or its Manager. The terms of the Fund's loans must meet certain tests under the Internal Revenue Code and permit the Fund to reacquire loaned securities on five business days notice or in time to vote on any important matter. |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. Illiquid securities the Fund can buy include issues that may be redeemed only by the issuer upon more than seven days notice or at maturity, repurchase agreements maturing in more than seven days, fixed time deposits subject to withdrawal penalties which mature in more than seven days, and other securities that cannot be sold freely due to legal or contractual restrictions on resale. Contractual restrictions on the resale of illiquid securities might prevent or delay their sale by the Fund at a time when such sale would be desirable. Illiquid securities include repurchase agreements maturing in more than 7 days, or certain participation interests other than those with puts exercisable within 7 days. There are restricted securities that are not illiquid that the Fund can buy. They include certain master demand notes redeemable on demand, and short-term corporate debt instruments that are not related to current transactions of the issuer and therefore are not exempt from registration as commercial paper. Investment Restrictions |X| What Are "Fundamental Policies?" Fundamental policies are those policies that the Fund has adopted to govern its investments that can be changed only by the vote of a "majority" of the Fund's outstanding voting securities. Under the Investment Company Act, a "majority" vote is defined as the vote of the holders of the lesser of: o 67% or more of the shares present or represented by proxy at a shareholder meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy, or o more than 50% of the outstanding shares. The Fund's investment objective is a fundamental policy. Other policies described in the Prospectus or this Statement of Additional Information are "fundamental" only if they are identified as such. The Fund's Board of Trustees can change non-fundamental policies without shareholder approval. However, significant changes to investment policies will be described in supplements or updates to the Prospectus or this Statement of Additional Information, as appropriate. The Fund's most significant investment policies are described in the Prospectus. |X| Does the Fund Have Additional Fundamental Policies? The following investment restrictions are fundamental policies of the Fund: o The Fund cannot invest in commodities or commodity contracts; o The Fund cannot invest in real estate; however, the Fund may purchase debt securities issued by companies which invest in real estate or interests therein; o The Fund cannot purchase securities on margin or make short sales of securities; o The Fund cannot invest in or hold securities of any issuer if those officers and trustees or directors of the Fund or its Manager who beneficially own individually more than1/2of 1% of the securities of such issuer together own more than 5% of the securities of such issuer; o The Fund cannot underwrite securities of other companies except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933 in connection with the disposition of portfolio securities; o The Fund cannot invest more than 5% of its total assets in securities of companies that have operated less than three years, including the operations of predecessors; o The Fund cannot issue "senior securities," but this does not prohibit certain investment activities for which assets of the Fund are designated as segregated, or margin, collateral or escrow arrangements are established, to cover the related obligations; o With respect to 75% of its assets, the Fund cannot purchase securities issued or guaranteed by any one issuer (except the U.S. Government or its agencies or instrumentalities), if more than 5% of the Fund's total assets would be invested in securities of that issuer or Fund would then own more than 10% of that issuer's voting securities; o The Fund cannot concentrate investments to the extent of 25% of its assets in any industry; except for obligations of foreign banks or foreign branches of domestic banks, time deposits, other bank obligations and U.S. government securities as described in the Prospectus and Statement of Additional Information; o The Fund cannot make loans, except that the Fund may purchase debt instruments and repurchase agreements as described in the Prospectus and Statement of Additional Information, and the Fund may lend its portfolio securities as described under "Loans of Portfolio Securities" in the Statement of Additional Information; or o The Fund cannot borrow money in excess of 10% of the value of its total assets or make any investment when borrowings exceed 5% of the value of its total assets; it may borrow only as a temporary measure for extraordinary or emergency purposes; no assets of the Fund may be pledged, mortgaged or assigned to secure a debt. Unless the Prospectus or this Statement of Additional Information states that a percentage restriction applies on an ongoing basis, it applies only at the time the Fund makes an investment (except in the case of borrowing and investments in illiquid securities). 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. |X| Does the Fund Have Additional Restrictions That Are Not "Fundamental" Policies? The Fund has additional operating policies that are not "fundamental," and which can be changed by the Board of Trustees without shareholder approval. The Fund cannot invest in securities of other investment companies, except if it acquires them as part of a merger, consolidation or acquisition of assets. For purposes of the Fund's policy not to concentrate its investments in securities of issuers, the Fund has adopted the industry classifications set forth in Appendix B to this Statement of Additional Information. This is not a fundamental policy. How the Fund Is Managed Organization and History. The Fund is an open-end diversified management company organized as a Massachusetts business trust in 1988, with an unlimited number of authorized shares of beneficial interest. 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. |X| Classes of Shares. The Trustees are authorized, without shareholder approval, to create new series and classes of shares. The Trustees may reclassify unissued shares of the Fund into additional series or classes of shares. The Trustees also may divide or combine the shares of a class into a greater or lesser number of shares without changing the proportionate beneficial interest of a shareholder in the Fund. Shares do not have cumulative voting rights or preemptive or subscription rights. Shares may be voted in person or by proxy at shareholder meetings. The Fund currently has four classes of shares: Class A, Class B, Class C, and Class N. All classes invest in the same investment portfolio. Only retirement plans may purchase Class N shares. Each class of shares: o has its own dividends and distributions, o pays certain expenses which may be different for the different classes, o may have a different net asset value (although this is highly unlikely), o may have separate voting rights on matters in which interests of one class are different from interests of another class, and o votes as a class on matters that affect that class alone. Shares are freely transferable, and each share of each class has one vote at shareholder meetings, with fractional shares voting proportionally on matters submitted to the vote of shareholders. Each share of the Fund represents an interest in the Fund proportionately equal to the interest of each other share of the same class. |X| Meetings of Shareholders. 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. It will also do so 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. If the Trustees receive a request from at least 10 shareholders 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. The shareholders making the request must have been shareholders for at least six months and must hold shares of the Fund valued at $25,000 or more or constituting at least 1% of the Fund's outstanding shares. The Trustees may also take other action as permitted by the Investment Company Act. |X| Shareholder and Trustee Liability. The Fund's Declaration of Trust contains an express disclaimer of shareholder or Trustee liability for the Fund's obligations. It also provides for indemnification and reimbursement of expenses out of the Fund's property for any shareholder held personally liable for its obligations. The Declaration of Trust also states that upon request, the Fund shall assume the defense of any claim made against a shareholder for any act or obligation of the Fund and shall satisfy any judgment on that claim. Massachusetts law permits a shareholder of a business trust (such as the Fund) to be held personally liable as a "partner" under certain circumstances. However, the risk that a Fund shareholder will incur financial loss from being held liable as a "partner" of the Fund is limited to the relatively remote circumstances in which the Fund would be unable to meet its obligations. The Fund's contractual arrangements state that any person doing business with the Fund (and each shareholder of the Fund) agrees under its Declaration of Trust to look solely to the assets of the Fund for satisfaction of any claim or demand that may arise out of any dealings with the Fund. Additionally, the Trustees shall have no personal liability to any such person, to the extent permitted by law. Board of Trustees and Oversight Committees. 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. 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 an Audit Committee, a Review Committee and Governance Committe. The Audit Committee is comprised solely of Independent Trustees. The Audit Committee is comprised solely of Independent Trustees. The members of the Audit Committee are Edward L. Cameron (Chairman), George C. Bowen Robert J. Malone and F. William Marshall, Jr. The Audit Committee held 6_ meetings during the fiscal year ended July 31, 2004. The Audit Committee furnishes the Board with recommendations regarding the selection of the Fund's independent auditors. Other main functions of the Audit Committee include, but are not limited to: (i) reviewing the scope and results of financial statement audits and the audit fees charged; (ii) reviewing reports from the Fund's independent auditors regarding the Fund's internal accounting procedures and controls; (iii) review reports from the Manager's Internal Audit Department; (iv) maintaining a separate line of communication between the Fund's independent auditors and its Independent Trustees; and (v) exercise all other functions outlined in the Audit Committee Charter, including but not limited to reviewing the independence of the Fund's independent auditors and the pre-approval of the performance by the Fund's independent auditors of any non-audit service, including tax service, for the Fund that is not prohibited by the Sarbanes-Oxley Act. The Audit Committee's functions include selecting and nominating, to the full Board, nominees for election as Trustees, and selecting and nominating Independent Trustees for election. The Audit Committee may, but need not, consider the advice and recommendation of the Manager and its affiliates in selecting nominees. The full Board elects new trustees except for those instances when a shareholder vote is required. To date, the Committee has been able to identify from its own resources an ample number of qualified candidates. Nonetheless, shareholders may submit names of individuals, accompanied by complete and properly supported resumes, for the Audit Committee's consideration by mailing such information to the Committee in care of the Fund. The Committee may consider such persons at such time as it meets to consider possible nominees. The Committee, however, reserves sole discretion to determine the candidates to present to the Board and/or shareholders when it meets for the purpose of considering potential nominees. The members of the Review Committee are Jon S. Fossel (Chairman), Robert G. Avis, Sam Freedman and Beverly Hamilton. The Review Committee held _6 meetings during the fiscal year ended July 31, 2004. Among other functions, the Review Committee reviews reports and makes recommendations to the Board concerning the fees paid to the Fund's transfer agent and the services provided to the Fund by the transfer agent. The Review Committee also reviews the Fund's investment performance and policies and procedures adopted by the Fund to comply with Investment Company Act and other applicable law. The members of the Governance Committee are Robert Malone (Chairman), William Armstrong, Beverly Hamilton and F. William Marshall, Jr. The Governance Committee was established in August 2004 and did not hold any meetings during the Fund's fiscal year ended July 31, 2004. The Governance Committee is expected to review general governance matters. Trustees and Officers of the Fund. Except for Mr. Murphy, each of the Trustees is an "Independent Trustee," as defined in the Investment Company Act. Mr. Murphy is an "Interested Trustee," because he is affiliated with the Manager by virtue of his positions as an officer and director of the Manager, and as a shareholder of its parent company. Mr. Murphy was elected as a Trustee of the Fund with the understanding that in the event he ceases to be the chief executive officer of the Manager, he will resign as a trustee of the Fund and the other Board II Funds (defined below) for which he is a trustee or director. The Fund's Trustees and officers and their positions held with the Fund and length of service in such position(s) and their principal occupations and business affiliations during the past five years are listed in the chart below. The information for the Trustees also includes the dollar range of shares of the Fund as well as the aggregate dollar range of shares beneficially owned in any of the Oppenheimer funds overseen by the Trustees. All of the Trustees are also trustees or directors of the following Oppenheimer funds (except for Ms. Hamilton and Mr. Malone, who are not Trustees of Oppenheimer Senior Floating Rate Fund and Mr. Murphy is not a Trustee or Managing General Partner of any of the Centennial trusts) (referred to as "Board II Funds"): Oppenheimer Cash Reserves Oppenheimer Real Asset Fund Oppenheimer Senior Floating Rate Oppenheimer Champion Income Fund Fund Oppenheimer Capital Income Fund Oppenheimer Strategic Income Fund Oppenheimer Equity Fund, Inc. Oppenheimer Variable Account Funds Oppenheimer High Yield Fund Panorama Series Fund, Inc. Oppenheimer International Bond Fund Oppenheimer Integrity Funds Centennial America Fund, L. P. Centennial California Tax Exempt Oppenheimer Limited-Term Government Fund Trust Oppenheimer Main Street Funds, Inc. Centennial Government Trust Oppenheimer Main Street Opportunity Fund Centennial Money Market Trust Centennial New York Tax Exempt Oppenheimer Main Street Small Cap Fund Trust Oppenheimer Municipal Fund Centennial Tax Exempt Trust Oppenheimer Principal Protected Trust Oppenheimer Principal Protected Trust II Present or former officers, directors, trustees and employees (and their immediate family members) of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees are permitted to purchase Class A shares of the Fund and the other Oppenheimer funds at net asset value without sales charge. The sales charges on Class A shares is waived for that group because of the economies of sales efforts realized by the Distributor. Messrs. Murphy, Petersen, Wixted, WeissVandehey, Vottiero and Zack, and Mses.Bloomberg, Ives, Lee and Wolf who are officers of the Fund, respectively hold the same offices with one or more of the other Board II Funds as with the Fund. As of August 30___, 2004, the Trustees and officers of the Fund as a group owned of record or beneficially less than 1% of each class of 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, other than the shares beneficially owned under that plan by the officers of the Fund listed above. In addition, each Independent Trustee, and his family members, do not own securities of either the Manager or Distributor of the Board II Funds or any person directly or indirectly controlling, controlled by or under common control with the Manager or Distributor. The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until his or her resignation, retirement, death or removal. - ------------------------------------------------------------------------------------- Independent Trustees - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Name, Principal Occupation(s) During Past 5 Dollar Aggregate Dollar Range Of Shares Beneficially Owned in Years; Range of Any of the Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer with Fund, Trustee; BeneficiallFunds Length of Service, Number of Portfolios in Fund Complex Owned in Overseen Age Currently Overseen by Trustee the Fund by Trustee - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- As of December 31, 2003 - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- William L. Chairman of the following private $None Over Armstrong, mortgage banking companies: Cherry Creek $100,000 Chairman Mortgage Company (since 1991), Since 2003 and Centennial State Mortgage Company (since Trustee since 1999 1994), The El Paso Mortgage Company Age: 67 (since 1993), Transland Financial Services, Inc. (since 1997); Chairman of the following private companies: Great Frontier Insurance (insurance agency) (since 1995), Ambassador Media Corporation and Broadway Ventures (since 1984); a director of the following public companies: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992) and UNUMProvident (insurance company) (since 1991). Mr. Armstrong is also a Director/Trustee of Campus Crusade for Christ and the Bradley Foundation. Formerly a director of the following: Storage Technology Corporation (a publicly-held computer equipment company) (1991-February 2003), and International Family Entertainment (television channel) (1992-1997), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-1999), and Frontier Title (title insurance agency) (1995-June 1999); a U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Robert G. Avis, Formerly, Director and President of A.G. $None $Over Trustee since 1993 Edwards Capital, Inc. (General Partner $100,000 Age: 73 of private equity funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until March 2000); Vice Chairman and Director of A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons, Inc. (its brokerage company subsidiary) (until March 1999); Chairman of A.G. Edwards Trust Company and A.G.E. Asset Management (investment advisor) (until March 1999); and a Director (until March 2000) of A.G. Edwards & Sons and A.G. Edwards Trust Company. Oversees 38 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- George C. Bowen, Mr. Bowen held several positions in $None Over Trustee since 1997 OppenheimerFunds Inc. and subsidiary or $100,000 Age: 67 affiliated companies. Oversees 38 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Edward L. Cameron, A member of The Life Guard of Mount $None $50,001- Trustee since 1999 Vernon, George Washington's home (since $100,000 Age: 66 June 2000). Formerly (March 2001 - May 2002) Director of Genetic ID, Inc. and its subsidiaries (a privately held biotech company); a partner with PricewaterhouseCoopers LLP (from 1974-1999) (an accounting firm) and Chairman (from 1994-1998), Price Waterhouse LLP Global Investment Management Industry Services Group. Oversees 38 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Jon S. Fossel, Mr. Fossel held several positions with $None Over Trustee since 1990 OppenheimerFunds, Inc. and subsidiary $100,000 Age: 62 and affiliated companies. Oversees 38 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Sam Freedman, Director of Colorado Uplift (a $None Over Trustee since 1996 non-profit charity) (since September $100,000 Age: 63 1984). Formerly (until October 1994) Mr. Freedman held several positions in subsidiary or affiliated companies of OppenheimerFunds, Inc. Oversees 38 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Beverly L. Trustee of Monterey International $None $10,001-$50,000 Hamilton, Studies (an educational organization) Trustee since 2002 (since February 2000); a director of The Age: 57 California Endowment (a philanthropic organization) (since April 2002) and of Community Hospital of Monterey Peninsula (educational organization) (since February 2002); a director of America Funds Emerging Markets Growth Fund (since October 1991) (an investment company); an advisor to Credit Suisse First Boston's Sprout venture capital unit. Mrs. Hamilton also is a member of the investment committees of the Rockefeller Foundation and of the University of Michigan. Formerly, Trustee of MassMutual Institutional Funds (open-end investment company) (1996-May 2004); a director of MML Series Investment Fund (April 1989-May 2004) and MML Services (April 1987-May 2004) (investment companies); member of the investment committee (2000-2003) of Hartford Hospital; an advisor (2000-2003) to Unilever (Holland)'s pension fund; and President (February 1991-April 2000) of ARCO Investment Management Company. Oversees 37 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Robert J. Malone, Chairman, Chief Executive Officer and $None Over Trustee since 2002 Director of Steele Street State Bank (a $100,000 Age: 60 commercial banking entity) (since August 2003); director of Colorado UpLIFT (a non-profit organization) (since 1986); trustee (since 2000) of the Gallagher Family Foundation (non-profit organization). Formerly, Chairman of U.S. Bank-Colorado (a subsidiary of U.S. Bancorp and formerly Colorado National Bank,) (July 1996-April 1, 1999), a director of: Commercial Assets, Inc. (a REIT) (1993-2000), Jones Knowledge, Inc. (a privately held company) (2001-July 2004) and U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 37 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- F. William Trustee of MassMutual Institutional $None Over Marshall, Jr., Funds (since 1996) and MML Series $100,000 Trustee since 2000 Investment Fund (since 1987) (both Age: 62 open-end investment companies) and the Springfield Library and Museum Association (since 1995) (museums) and the Community Music School of Springfield (music school) (since 1996); Trustee (since 1987), Chairman of the Board (since 2003) and Chairman of the investment committee (since 1994) for the Worcester Polytech Institute (private university); and President and Treasurer (since January 1999) of the SIS Fund (a private not for profit charitable fund). Formerly, member of the investment committee of the Community Foundation of Western Massachusetts (1998 - 2003); Chairman (January 1999-July 1999) of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank); and Executive Vice President (January 1999-July 1999) of Peoples Heritage Financial Group, Inc. (commercial bank). Oversees 38 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- The address of Mr. Murphy in the chart below is Two World Financial Center, 225 Liberty Street-11th Floor, New York, NY 10281-1008. Mr. Murphy serves for an indefinite term, until his resignation, death or removal. - ------------------------------------------------------------------------------------- Interested Trustee and Officer - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Name, Principal Occupation(s) During Past 5 Dollar Aggregate Dollar Range Of Shares Years; Range of Beneficially Position(s) Held Other Trusteeships/Directorships Held by Shares Owned in with Fund, Trustee; BeneficiallAny of the Length of Service, Number of Portfolios in Fund Complex Owned in Oppenheimer Age Currently Overseen by Trustee the Fund Funds - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- As of December 31, 2003 - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- John V. Murphy, Chairman, Chief Executive Officer and $None Over President and director (since June 2001) and President $100,000 Trustee since 2001 (since September 2000) of the Manager; Age: 55 President and a director or trustee of other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager); President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company that owns the shares of Babson Capital Management LLC); a member of the Investment Company Institute's Board of Governors (elected to serve from October 3, 2003 through September 30, 2006). Formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 73 portfolios as Trustee/Director and 10 portfolios as Officer in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- The address of the Officers in the chart below is as follows: for Mr. Zack and Mses. Bloomberg and Lee, Two World Financial Center, 225 Liberty Street-11th Floor, New York, NY 10281-1008, for Messrs.Petersen, Vandehey, Vottiero, Weiss and Wixted and Mses. Ives and Wolf, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until his or her earlier resignation, death or removal. - ------------------------------------------------------------------------------------- Officers of the Fund - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Name, Principal Occupation(s) During Past 5 Years Position(s) Held with Fund, Length of Service, Age - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Barry D. Weiss, Vice Vice President of the Manager (since July 2001) and of President and Portfolio HarbourView Asset Management Corporation (since June 2003); Manager since 2001 an officer of 6 portfolios in the OppenheimerFunds complex. Age: 40 Formerly Assistant Vice President and Senior Credit Analyst of the Manager (February 2000-June 2001). Prior to joining the Manager in February 2000, he was Associate Director, Structured Finance, Fitch IBCA Inc. (April 1998 - February 2000). - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Carol E. Wolf, Vice Senior Vice President of the Manager (since June 2000) and President of HarbourView Asset Management Corporation (since June and Portfolio Manager 2003); an officer of 6 portfolios in the OppenheimerFunds since 1998 complex. Formerly Vice President of the Manager (June 1990 Age: 52 - June 2000). - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of Treasurer since 1999 the Manager; Treasurer of HarbourView Asset Management Age: 44 Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private Investments, Inc. (since March 2000), of OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), of OFI Institutional Asset Management, Inc. (since November 2000), and of OppenheimerFunds Legacy Program (a Colorado non-profit corporation) (since June 2003); Treasurer and Chief Financial Officer (since May 2000) of OFI Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. Formerly Assistant Treasurer of Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 83 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Mark S. Vandehey, Senior Vice President and Chief Compliance Officer (since Vice President and March 2004) of the Manager; Vice President (since June Chief Compliance 1983) of OppenheimerFunds Distributor, Inc., Centennial Officer since 2004 Asset Management Corporation and Shareholder Services, Inc. Age: 54 Formerly (until February 2004) Vice President and Director of Internal Audit of OppenheimerFunds, Inc. An officer of 83 portfolios in the Oppenheimer funds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Philip Vottiero, Vice President/Fund Accounting of the Manager since March Assistant Treasurer 2002. Formerly Vice President/Corporate Accounting of the since 2002 Manager (July 1999-March 2002) prior to which he was Chief Age: 41 Financial Officer at Sovlink Corporation (April 1996-June 1999). An officer of 83 portfolios in the OppenheimerFunds complex.. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Robert G. Zack, Executive Vice President (since January 2004) and General Vice President & Counsel (since February 2002) of the Manager; General Secretary since 2001 Counsel and a director (since November 2001) of the Age: 55 Distributor; General Counsel (since November 2001) of Centennial Asset Management Corporation; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Secretary and General Counsel (since November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a director (since October 1997) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and a director (since November 2001) of Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private Investments, Inc. and OFI Trust Company; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Senior Vice President and General Counsel (since November 2001) of OFI Institutional Asset Management, Inc.; a director (since June 2003) of OppenheimerFunds (Asia) Limited. Formerly Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); and OppenheimerFunds International Ltd. (October 1997-November 2001). An officer of 83 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and Assistant Secretary Assistant Secretary (since October 2003) of the Manager; since 2001 Vice President (since 1999) and Assistant Secretary (since Age: 38 October 2003) of the Distributor; Assistant Secretary (since October 2003) of Centennial Asset Management Corporation; Vice President and Assistant Secretary (since 1999) of Shareholder Services, Inc.; Assistant Secretary (since December 2001) of OppenheimerFunds Legacy Program and of Shareholder Financial Services, Inc.. Formerly an Assistant Counsel (August 1994-October 2003) and Assistant Vice President of the Manager (August 1997-June 1998). An officer of 83 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Brian Petersen, Assistant Vice President of the Manager since August 2002; Assistant Treasurer formerly Manager/Financial Product Accounting (November since 2004 1998-July 2002) of the Manager. An officer of 83 portfolios Age: 34 in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Dina C. Lee, Assistant Vice President and Assistant Counsel of the Assistant Secretary Manager (since December 2000); formerly an attorney and since 2004 Assistant Secretary of Van Eck Global (until December Age: 34 2000). An officer of 83 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager since Assistant Secretary May 2004; formerly First Vice President and Associate since 2004 General Counsel of UBS Financial Services Inc. (formerly, Age: 36 PaineWebber Incorporated) (May 1999 - April 2004) prior to which she was an Associate at Skaden, Arps, Slate, Meagher & Flom, LLP (September 1996 - April 1999). An officer of 83 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- |X| Remuneration of Trustees. The officers of the Fund and one Trustee of the Fund (Mr. Murphy) are affiliated with the Manager and receive no salary or fee from the Fund. The remaining Trustees of the Fund received the compensation shown below from the Fund with respect to the Fund's fiscal year ended July 31, 2004. The compensation from all 38 of the Board II Funds (including the Fund) represents compensation received for serving as a director or trustee and member of a committee (if applicable) of the boards of those funds during the calendar year ended December 31, 2003. - ------------------------------------------------------------------------------- Trustee Name and Other Fund Aggregate Total Compensation From Fund and Fund Compensation from Complex Paid to Position(s) (as applicable) Fund1 Trustees* - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- William L. Armstrong $1,134 $118,499 Chairman of the Board and Governance Committee Member - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Robert G. Avis $745 $101,499 Review Committee Member - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- George C. Bowen $745 $101,499 Audit Committee Member - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Edward L. Cameron $857 $115,503 Audit Committee Chairman - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Jon S. Fossel $857 $115,503 Review Committee Chairman - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Sam Freedman $745 $101,499 Review Committee Member - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Beverly Hamilton $7452 $150,5423, 4 Review and Governance Committee Member - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Robert J. Malone $7455 $100,1793 Governance Committee Chairman and Audit Committee Member - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- F. William Marshall, Jr. Audit and Governance Committee $745 $149,4996 Member - ------------------------------------------------------------------------------- Effective December 15, 2003, Mr. James C. Swain retired as Trustee from the Board II Funds. For the Fund's fiscal year ended July 31, 2004, Mr. Swain received $279 aggregate compensation from the Fund. For the calendar year ended December 31, 2003, Mr. Swain received $178,000from all of the Oppenheimer funds for which he served as Trustee. 1. Aggregate Compensation from Fund includes fees and deferred compensation, if any, for a Trustee. 2. Includes $745 deferred under Deferred Compensation Plan described below. 3. Mrs. Hamilton and Mr. Malone were elected as Trustees of the Board II Funds effective June 1, 2002. Compensation for Mrs. Hamilton and Mr. Malone was paid by all the Board II Funds, with the exception of Oppenheimer Senior Floating Rate Fund for which they currently do not serve as Trustees (total of 37 Oppenheimer funds at December 31, 2003). 4. Includes $50,363 compensation (of which 100% was deferred under a deferred compensation plan) paid to Mrs. Hamilton for serving as a trustee by two open-end investment companies (MassMutual Institutional Funds and MML Series Investment Fund) the investment adviser for which is the indirect parent company of the Fund's Manager. The Manager also serves as the Sub-Advisor to the MassMutual International Equity Fund, a series of MassMutual Institutional Funds. 5. Includes $745 deferred under Deferred Compensation Plan described below. 6. Includes $48,000 compensation paid to Mr. Marshall for serving as a trustee by two open-end investment companies (MassMutual Institutional Funds and MML Series Investment Fund) the investment adviser for which is the indirect parent company of the Fund's Manager. The Manager also serves as the Sub-Advisor to the MassMutual International Equity Fund, a series of MassMutual Institutional Funds. * For purposes of this section only, "Fund Complex" includes the Oppenheimer funds, MassMutual Institutional Funds and MML Series Investment Fund in accordance with the instructions for Form N-1A. The Manager does not consider MassMutual Institutional Funds and MML Series Investment Fund to be part of the OppenheimerFunds "Fund Complex" as that term may be otherwise interpreted. |X| Deferred Compensation Plan for Trustees. 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 Trustee under this plan will be determined based upon the performance of the selected funds. Deferral of Trustees' fees under this plan will not materially affect the Fund's assets, liabilities or net income per share. This 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 SEC, the Fund may invest in the funds selected by the Trustee under this plan without shareholder approval for the limited purpose of determining the value of the Trustees' deferred fee accounts. |X| Major Shareholders. As of August 30, 2004 no persons owned of record or was known by the Fund to own beneficially 5% or more of any class of the Fund's outstanding shares. The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding company controlled by Massachusetts Mutual Life Insurance Company. The portfolio managers of the Fund are principally responsible for the day-to-day management of the Fund's investment portfolio. Other members of the Manager's fixed-income portfolio department, particularly security analysts, traders and other portfolio managers, have broad experience with fixed-income securities. They provide the Fund's portfolio managers with research and support in managing the Fund's investments. |X| The Investment Advisory Agreement. The Manager provides investment advisory and management services to the Fund under an investment advisory agreement between the Manager and the Fund. The Manager selects securities for the Fund's portfolio and handles its day-to-day business. The agreement requires the Manager, at its expense, to provide the Fund with adequate office space, facilities and equipment. It also requires the Manager to provide and supervise the activities of all administrative and clerical personnel required to provide effective administration for the Fund. Those responsibilities include 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 are paid by the Fund. The investment advisory agreement lists examples of expenses paid by the Fund. The major categories relate to interest, taxes, fees to unaffiliated Trustees, legal and audit expenses, custodian bank and transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring expenses, including litigation costs. The management fees paid by the Fund to the Manager are calculated at the rates described in the Prospectus. ----------------------------------------------------------------------------- Fiscal Year ended 7/31 Management Fee Paid to OppenheimerFunds, Inc. ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- 2002 $3,774,010 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- 2003 $4,215,556* ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- 2004 $3,230,456* ----------------------------------------------------------------------------- * Effective December 6, 2002, the Manager agreed to limit the Fund's management fees to 0.40% of average net assets for each class. That expense limitation can be amended or terminated at any time without advance notice. If the management fee had not been reduced, the management fee paid for fiscal years 2003 and 2004 would have been $4,619,828 and $3,804,838, respectively. The investment advisory agreement states that in the absence of willful misfeasance, bad faith, gross negligence in the performance of its duties or reckless disregard of its obligations and duties under the investment advisory agreement, the Manager is not liable for any loss the Fund sustains by reason of good faith errors or omissions in connection with any matters to which that agreement relates. The agreement permits the Manager to act as investment advisor 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 advisor or general distributor. If the Manager shall no longer act as investment advisor to the Fund, the Manager may withdraw the right of the Fund to use the name "Oppenheimer" as part of its name. |X| Annual Approval of Investment Advisory Agreement. Each year, the Board of Trustees, including a majority of the Independent Trustees, is required to approve the renewal of the investment advisory agreement. The Investment Company Act requires that the Board request and evaluate and the Manager provide such information as may be reasonably necessary to evaluate the terms of the investment advisory agreement. The Board employs an independent consultant to prepare a report that provides such information as the Board requests for this purpose. The Board also receives information about the 12b-1 distribution fees the Fund pays. These distribution fees are reviewed and approved at a different time of the year. The Board reviewed the foregoing information in arriving at its decision to renew the investment advisory agreement. Among other factors, the Board considered: o The nature, cost, and quality of the services provided to the Fund and its shareholders; o The profitability of the Fund to the Manager; o The investment performance of the Fund in comparison to regular market indices; o Economies of scale that may be available to the Fund from the Manager; o Fees paid by other mutual funds for similar services; o The value and quality of any other benefits or services received by the Fund from its relationship with the Manager; and o The direct and indirect benefits the Manager received from its relationship with the Fund. These included services provided by the Distributor and the Transfer Agent, and brokerage and soft dollar arrangements permissible under Section 28(e) of the Securities Exchange Act. The Board considered that the Manager must be able to pay and retain high quality personnel at competitive rates to provide services to the Fund. The Board also considered that maintaining the financial viability of the Manager is important so that the Manager will be able to continue to provide quality services to the Fund and its shareholders in adverse times. The Board also considered the investment performance of other mutual funds advised by the Manager. The Board is aware that there are alternatives to the use of the Manager. These matters were also considered by the Independent Trustees, meeting separately from the full Board with experienced Counsel to the Fund who assisted the Board in its deliberations. The Fund's Counsel is independent of the Manager within the meaning and intent of the SEC Rules regarding the independence of counsel. After careful deliberation, the Board concluded that it was in the best interest of shareholders to continue the investment advisory agreement for another year. In arriving at a decision, the Board did not single out any one factor or group of factors as being more important than other factors, but considered all factors together. The Board judged the terms and conditions of the investment advisory agreement, including the investment advisory fee, in light of all of the surrounding circumstances. |X| Portfolio Transactions. Portfolio decisions are based upon recommendations and judgment of the Manager subject to the overall authority of the Board of Trustees. Most purchases made by the Fund are principal transactions at net prices, so the Fund incurs little or no brokerage costs. The Fund deals directly with the selling or purchasing principal or market maker without incurring charges for the services of a broker on its behalf unless the Manager determines that a better price or execution may be obtained by using the services of a broker. Purchases of portfolio 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 prices. The Fund seeks to obtain prompt execution of orders at the most favorable net price. If dealers are used for portfolio transactions, transactions may be directed to dealers for their execution and research services. 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. 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. Investment research services may be supplied to the Manager by a third party at the instance of a broker through which trades are placed. It may include 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 in commission dollars. The research services provided by brokers broaden the scope and supplement the research activities of the Manager. That research provides additional views and comparisons for consideration, and helps the Manager obtain market information for the valuation of securities held in the Fund's portfolio or being considered for purchase. The Fund's policy of investing in short-term debt securities results in high portfolio turnover and may increase the Fund's transaction costs. However, since brokerage commissions, if any, are small, high turnover does not have an appreciable adverse effect upon the income of the Fund. Distribution and Service Plans 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 different classes of shares of the Fund. The Distributor bears the expenses normally attributable to sales, including advertising and the cost of printing and mailing prospectuses, other than those furnished to existing shareholders. The Distributor is not obligated to sell a specific number of shares. Expenses normally attributable to sales are borne by the Distributor, except those paid by the Fund under its Distribution and Service Plans described below. The concessions paid to, or retained by, the Distributor from the sale of shares during the Fund's three most recent fiscal years, and the contingent deferred sales charges retained by the Distributor on the redemption of shares for the most recent fiscal year are shown in the tables below. - ---------------------------------------------------------------------------------- Fiscal Concessions on Class B Concessions on Class Concessions on Class N Year Ended Shares Advanced by C Shares Advanced by Shares Advanced by 7/31: Distributor1 Distributor1 Distributor1,2 - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- 2002 $954,517 $233,346 $635,960 - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- 20033 $363,611 $208,888 $887,944 - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- 2004 $138,410 $93,032 $589,607 - ---------------------------------------------------------------------------------- 1. The Distributor advances concession payments to dealers for certain sales of Class B, Class C and Class N shares from its own resources at the time of sale. 2. The inception date of Class N shares was March 1, 2001. 3. The Distributor's sales concession rates on Class B, Class C and Class N shares sold prior to January 20, 2003 were higher than the current rates (shown on page 18 of the Prospectus). - --------------------------------------------------------------------------------- Fiscal Class A Class B Class C Class N Contingent Contingent Contingent Contingent Deferred Sales Deferred Sales Deferred Sales Year Deferred Sales Charges Charges Retained Charges Retained Ended Charges Retained Retained by by Distributor by Distributor 7/31 by Distributor Distributor - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2004 $192,874 $298,926 $94,152 $336,882 - --------------------------------------------------------------------------------- Distribution and Service Plans. The Fund has adopted a Service Plan for Class A shares and Distribution and Service Plans for Class B, Class C and Class N shares under Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the Distributor for all or a portion of its costs incurred in connection with the distribution and/or servicing of the shares of the particular class. Each plan has been approved by a vote of the Board of Trustees, including a majority of the Independent Trustees1, cast in person at a meeting called for the purpose of voting on that plan. Under the Plans, the Manager and the Distributor may make payments to affiliates. In their sole discretion, they may also from time to time make substantial payments from their own resources, which include the profits the Manager derives from the advisory fees it receives from the Fund, to compensate brokers, dealers, financial institutions and other intermediaries for providing distribution assistance and/or administrative services or that otherwise promote sales of the Fund's shares. These payments, some of which may be referred to as "revenue sharing," may relate to the Fund's inclusion on a financial intermediary's preferred list of funds offered to its clients. Financial intermediaries, brokers and dealers may receive other payments from the Distributor or the Manager from their own resources in connection with the promotion and/or sale of shares of the Fund, including payments to defray expenses incurred in connection with educational seminars and meetings. The Manager or Distributor may share expenses incurred by financial intermediaries in conducting training and educational meetings about aspects of the Fund for employees of the intermediaries or for hosting client seminars or meetings at which the Fund is discussed. In their sole discretion, the Manager and/or the Distributor may increase or decrease the amount of payments they make from their own resources for these purposes. Unless a plan is terminated as described below, the plan continues in effect from year to year but only if the Fund's Board of Trustees and its Independent Trustees specifically vote annually to approve its continuance. Approval must be by a vote cast in person at a meeting called for the purpose of voting on continuing the plan. A 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. The Board of Trustees and the Independent Trustees must approve all material amendments to a plan. An amendment to increase materially the amount of payments to be made under a plan must be approved by shareholders of the class affected by the amendment. Because Class B shares of the Fund automatically convert into Class A shares 72 months after purchase, the Fund must obtain the approval of both Class A and Class B shareholders for a proposed material amendment to the Class A Plan that would materially increase payments under the plan. That approval must be by a "majority" (as defined in the Investment Company Act) of the shares of each class, voting separately by class. While the plans are in effect, the Treasurer of the Fund shall provide separate written reports on the plans to the Board of Trustees at least quarterly for its review. The Reports shall detail the amount of all payments made under a plan and the purpose for which the payments were made. Those reports are subject to the review and approval of the Independent Trustees. Each plan states 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 the selection and nomination process as long as the final decision as to selection or nomination is approved by a majority of the Independent Trustees. Under the plan for a class, no payment will be made to any recipient in any quarter in which the aggregate net asset value of all Fund shares of that class held by the recipient for itself and its customers does not exceed a minimum amount, if any, that may be set from time to time by a majority of the Independent Trustees. The Board of Trustees has set no minimum amount of assets to qualify for payments under the plans. |X|Class A Service Plan Fees. Under the Class A service plan, the Distributor currently uses the fees it receives from the Fund to pay brokers, dealers and other financial institutions (they are referred to as "recipients") for personal services and account maintenance services they provide for their customers who hold Class A shares. The services 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. The Class A service plan permits reimbursements to the Distributor at a rate of up to 0.20% of average annual net assets of Class A shares. While the plan permits the Board to authorize payments to the Distributor to reimburse itself for services under the plan, the Board has not yet done so. The Distributor makes payments to plan recipients quarterly at an annual rate not to exceed 0.20% of the average annual net assets consisting of Class A shares held in the accounts of the recipients or their customers. For the fiscal year ended July 31, 2004 payments under the Class A Plan totaled $794,910, all but $27,997 of which was paid by the Distributor to recipients. That included $129,958 paid to an affiliate of the Distributor's parent company. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. The Distributor may not use payments received under the Class A Plan to pay any of its interest expenses, carrying charges, or other financial costs, or allocation of overhead. |X| Class B, Class C and Class N Service and Distribution Plans. Under each plan, service fees (if any) and distribution 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. Each plan provides provide for the Distributor to be compensated at a flat rate, whether the Distributor's distribution expenses are more or less than the amounts paid by the Fund under the plan during the period for which the fee is paid. The types of services that recipients provide are similar to the services provided under the Class A service plan, described above. Each Plan permits the Distributor to retain both the asset-based sales charges and the service fees or to pay recipients the service fee on a quarterly basis, without payment in advance. However, no service fees are paid on Class B and Class C shares at this time. The Distributor currently intends to pay the service fee to recipients in advance for the first year after Class N shares are purchased. After the first year Class N shares are outstanding, after their purchase, the Distributor makes service fee payments quarterly on those shares. The advance payment is based on the net asset value of shares sold. Shares purchased by exchange do not qualify for the advance service fee payment. If Class N shares are redeemed during the first year after their purchase, the recipient of the service fees on those shares will be obligated to repay the Distributor a pro rata portion of the advance payment of the service fee made on those shares. The Distributor retains the asset-based sales charge on Class B and Class N shares. The Distributor retains the asset-based sales charge on Class C shares during the first year the shares are outstanding. It pays the asset-based sales charge as an ongoing concession to the recipient on Class C shares outstanding for a year or more. If a dealer has a special agreement with the Distributor, the Distributor will pay the Class B, Class C and/or Class N asset-based sales charge and the Class N service fee to the dealer quarterly in lieu of paying the sales concessions and service fee in advance at the time of purchase. .......The asset-based sales charges on Class B, Class C and Class N shares allow investors to buy 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 each class of shares. The payments are made to the Distributor in recognition that the Distributor: o.....pays sales concessions to authorized brokers and dealers at the time of sale and pays service fees as described above, o may finance payment of sales concessions and/or the advance of the service fee payment to recipients under the plans, or may provide such financing from its own resources or from the resources of an affiliate, o employs personnel to support distribution of Class B, Class C and Class N shares, and o bears the costs of sales literature, advertising and prospectuses (other than those furnished to current shareholders) and state "blue sky" registration fees and certain other distribution expenses. o may not be able to adequately compensate dealers that sell Class B, Class C and Class N shares without receiving payment under the plans and therefore may not be able to offer such Classes for sale absent the plans, o receives payments under the plans consistent with the service fees and asset-based sales charges paid by other non-proprietary funds that charge 12b-1 fees, o may use the payments under the plan to include the Fund in various third-party distribution programs that may increase sales of Fund shares, o may experience increased difficulty selling the Fund's shares if payments under the plan are discontinued because most competitor funds have plans that pay dealers for rendering distribution services as much or more than the amounts currently being paid by the Fund, and o may not be able to continue providing, at the same or at a lesser cost, the same quality distribution sales efforts and services, or to obtain such services from brokers and dealers, if the plan payments were to be discontinued. Class B, Class C or Class N shares may not be purchased by an investor directly from the Distributor without the investor designating another broker-dealer of record. If the investor no longer has another broker-dealer of record for an existing account, the Distributor is automatically designated as the broker-dealer of record, but solely for the purpose of acting as the investor's agent to purchase the shares. In those cases, the Distributor retains the asset-based sales charge paid on Class B, Class C and Class N shares, but does not retain any service fees as to the assets represented by that account. The Distributor's actual expenses in selling Class B, Class C and Class N shares may be more than the payments it receives from the contingent deferred sales charges collected on redeemed shares and from the Fund under the plans. If either the Class B, Class C or Class N 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. The amount shown in the following table reflects a decrease in the asset-based sales charge on Class B and Class C shares, from 0.75% to 0.50% of average daily net assets per annum, effective January 1, 2003. The Fund may reinstate the full asset-based sales charge permitted under each plan at any time without advance notice. The Distributor's sales concession rates on Class B, Class C and Class N shares sold prior to January 20, 2003 were higher than the current rates (shown on page 18__ of the prospectus). - --------------------------------------------------------------------------------- Distribution Fees Paid to the Distributor for the Year Ended 7/31/04 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class: Total Amount Distributor's Distributor's Unreimbursed Aggregate Expenses as % Payments Retained by Unreimbursed of Net Assets Under Plan Distributor Expenses Under Plan of Class - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class B Plan $1,242,150 $1,112,077 $0 0% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class C Plan $485,8481 $123,423 $0 0% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class N Plan $279,3662 $208,293 $3,587,557 6.26% - --------------------------------------------------------------------------------- 1. Included $16,132 paid to an affiliate of the Distributor's parent company. 2. Included $4,798 paid to an affiliate of the Distributor's parent company. All payments under the Class B, Class C and Class N plans are subject to the limitations imposed by the Conduct Rules of the National Association of Securities Dealers, Inc. on payments of asset-based sales charges and service fees. Performance of the Fund Explanation of Performance Terminology. The Fund uses a variety of terms to illustrate its performance. These terms include "yield," "compounded effective yield" and "average annual total return." An explanation of how yields and total returns are calculated is set forth below. The charts below show the Fund's performance as of the Fund's most recent fiscal year end. You can obtain current performance information by calling the Fund's Transfer Agent at 1.800.225.5677 or by visiting the OppenheimerFunds Internet web site at www.oppenheimerfunds.com. The Fund's performance would have been lower in the absence of the fee waivers described on page 4 of the Prospectus. Those fee waivers may be withdrawn at any time. The Fund's illustrations of its performance data in advertisements must comply with rules of the SEC. Those rules describe the types of performance data that may be used and how it is to be calculated. If the fund shows total returns in addition to its yields, the returns must be for the 1-, 5- and 10-year periods ending as of the most recent calendar quarter prior to the publication of the advertisement (or its submission for publication). Use of standardized performance calculations 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 the Fund's performance information as a basis for comparisons with other investments: o Yields and total 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. Your account's performance will vary from the model performance data if your dividends are received in cash, or you buy or sell shares during the period, or you bought your shares at a different time than the shares used in the model. o An investment in the Fund is not insured by the FDIC or any other government agency. o The Fund's yield is not fixed or guaranteed and will fluctuate. o Yields and total returns for any given past period represent historical performance information and are not, and should not be considered, a prediction of future yields or returns. |X| Yields. The Fund's current yield is calculated for a seven-day period of time as follows. First, a base period return is calculated for the seven-day period by determining the net change in the value of a hypothetical pre-existing account having one share at the beginning of the seven-day period. The change includes dividends declared on the original share and dividends declared on any shares purchased with dividends on that share, but such dividends are adjusted to exclude any realized or unrealized capital gains or losses affecting the dividends declared. Next, the base period return is multiplied by 365/7 to obtain the current yield to the nearest hundredth of one percent. The compounded effective yield for a seven-day period is calculated by (1) adding 1 to the base period return (obtained as described above), (2) raising the sum to a power equal to 365 divided by 7, and (3) subtracting 1 from the result. The yield as calculated above may vary for accounts less than approximately $100 in value due to the effect of rounding off each daily dividend to the nearest full cent. The calculation of yield under either procedure described above does not take into consideration any realized or unrealized gains or losses on the Fund's portfolio securities which may affect dividends. Therefore, the return on dividends declared during a period may not be the same on an annualized basis as the yield for that period. |X| Total Return Information. There are different types of "total returns" 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 and that the investment is redeemed at the end of the period. 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 actual year-by-year performance. The Fund uses standardized calculations for its total returns as prescribed by the SEC. The methodology is discussed below. In calculating total returns for Class B shares, payment of the applicable contingent deferred sales charge is applied, depending on the period for which the return is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter. For Class C shares, the 1% contingent deferred sales charge is deducted for returns for the one-year period. For Class N shares, the 1% contingent deferred sales charge is deducted for returns for the one-year period. Class N total returns may also be calculated for the periods prior to March 1, 2001 (the inception date for Class N shares), based on the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1 fees. o Average Annual Total Return. The "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" in the formula) to achieve an Ending Redeemable Value ("ERV" in the formula) of that investment, according to the following formula: - ------------------------------------------------------------------------------ ERV l/n - 1 = Average Annual Total - --- Return P - --- - ------------------------------------------------------------------------------ o Cumulative Total Return. 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 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------- The Fund's Total Returns for the Periods Ended 7/31/045 - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Class of Cumulative ------------------------------------------------------------------ Total Returns - --------- (10 years or Shares life-of-class) Average Annual Total Returns - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- 1-Year 5-Year 10-Year (or (or --------------- life-of-class) life-of-class) - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- After Without After Without After Without After Without Com-pounded Effective Yield Yield (7 (7 days days Sales Sales Sales Sales Sales Sales Sales Sales ended ended Charge Charge Charge Charge Charge Charge Charge Charge 07/31/03)07/31/03) - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Class A1 40.17% 40.17% 0.17% 0.17% 2.37% 2.37% 3.43% 3.43% 0.44% 0.44% - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Class B 35.45%2 35.45%2 -4.89%2 0.11% 1.59% 1.96% 3.082 3.08%2 0.20% 0.20% - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Class C 33.62%3 33.62%3 -0.90%3 0.10% 1.96% 1.96% 2.94% 2.94% 0.19% 0.19% - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Class N 3.12%4 3.12%4 -0.90% 0.10% 0.90% 0.90%4 N/A N/A 0.11% 0.11% - ------------------------------------------------------------------------------------------------- 1. Inception of Class A shares: 1/3/89` 2. Inception of Class B shares: 8/17/93. Because Class B convert to Class A shares 72 months after purchase, the "life-of-class" return for Class B uses Class A performance for the period after conversion. 3. Inception of Class C shares: 12/1/93 4. Inception of Class N Shares: 3/1/01. 5. The amount shown in the following table reflects a decrease in the asset-based sales charge on Class B and Class C shares, from 0.75% to 0.5% of average daily net assets per annum, effective January 1, 2003. The Fund may reinstate the full asset-based sales charge permitted under each plan at any time without advance notice. The Distributor's sales concession rates on Class B, Class C and Class N shares sold prior to January 20, 2003 were higher than the current rates (shown on page 18__of the Prospectus). |X| Other Performance Comparisons. Yield information may be useful to investors in reviewing the Fund's performance. The Fund may make comparisons between its yield and that of other investments, by citing various indices such as The Bank Rate Monitor National Index (provided by Bank Rate Monitor) which measures the average rate paid on bank money market accounts, NOW accounts and certificates of deposits by the 100 largest banks and thrifts in the top ten metro areas. When comparing the Fund's yield with that of other investments, investors should understand that certain other investment alternatives such as certificates of deposit, U.S. government securities, money market instruments or bank accounts may provide fixed yields and may be insured or guaranteed. From time to time, the Fund may include in its advertisements and sales literature performance information about the Fund cited in other newspapers and periodicals, such as The New York Times, which may include performance quotations from other sources. From time to time, the Fund's Manager may publish rankings or ratings of the Manager (or the 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 investor/shareholder services by third parties may compare the services of the Oppenheimer funds to those of other mutual fund families selected by the rating or ranking services. They may be based on the opinions of the rating or ranking service itself, based on its research or judgment, or based on surveys of investors, brokers, shareholders or others. From time to time the Fund may include in its advertisements and sales literature the total return performance of a hypothetical investment account that includes shares of the fund and other Oppenheimer funds. The combined account may be part of an illustration of an asset allocation model or similar presentation. The account performance may combine total return performance of the Fund and the total return performance of other Oppenheimer funds included in the account. Additionally, from time to time, the Fund's advertisements and sales literature may include, for illustrative or comparative purposes, statistical data or other information about general or specific market and economic conditions. That may include, for example, o information about the performance of certain securities or commodities markets or segments of those markets, o information about the performance of the economies of particular countries or regions, o the earnings of companies included in segments of particular industries, sectors, securities markets, countries or regions, o the availability of different types of securities or offerings of securities, o information relating to the gross national or gross domestic product of the United States or other countries or regions, o comparisons of various market sectors or indices to demonstrate performance, risk, or other characteristics of the Fund. - ------------------------------------------------------------------------------ A B O U T Y O U R A C C O U N T - ------------------------------------------------------------------------------ How to Buy Shares Additional information is presented below about the methods that can be used to buy shares of the Fund. Appendix C contains more information about the special sales charge arrangements offered by the Fund, and the circumstances in which sales charges may be reduced or waived for certain classes of investors. When you purchase shares of the Fund, your ownership interest in the shares of the Fund will be recorded as a book entry on the records of the Fund. The Fund will not issue or re-register physical share certificates. AccountLink. When shares are purchased through AccountLink, each purchase must be at least $50 and shareholders must invest at least $500 before an --- Asset Builder Plan (described below) can be established on a new account. Accounts established prior to November 1, 2002 will remain at $25 for additional purchases. 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 with 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"). The Exchange normally closes at 4:00 P.M., but may close earlier on certain days. If Federal Funds are received on a business day after the close of the Exchange, the shares will be purchased and dividends will begin to accrue on the next regular business day. The proceeds of ACH transfers are normally received by the Fund three days after the transfers are initiated. If the proceeds of the ACH transfer are not received on a timely basis, the Distributor reserves the right to cancel the purchase order. The Distributor and the Fund are not responsible for any delays in purchasing shares resulting from delays in ACH transmissions. Asset Builder Plans. As explained in the Prospectus, you must initially establish your account with $500. Subsequently, you can establish an Asset Builder Plan to automatically purchase additional Class A shares directly from a bank account for as little as $50. For those accounts established prior to November 1, 2002 and which have previously established Asset Builder Plans, additional purchases will remain at $25. Shares purchased by Asset Builder Plan payments from bank accounts are subject to the redemption restrictions for recent purchases described in the Prospectus. Asset Builder Plans are available only if your bank is an ACH member. Asset Builder Plans may not be used to buy shares for OppenheimerFunds employer-sponsored qualified retirement accounts. Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use their fund account to make 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 debited automatically. Normally the debit will be made two business days prior to the investment dates you selected on your Application. Neither the Distributor, the Transfer Agent nor the Fund shall be responsible for any delays in purchasing shares that result from delays in ACH transmissions. Retirement Plans may purchase Class B shares of the Fund directly by establishing an Asset Builder Plan. The minimum initial investment for Class B Asset Builder Plans is $5,000 and the maximum initial investment is $500,000. Before you establish Asset Builder payments, you should obtain a prospectus of the selected fund(s) from your financial advisor (or the Distributor) and request an application from the Distributor. Complete the application and return it. You may change the amount of your Asset Builder payment or your can terminate these automatic investments at any time by writing to the Transfer Agent. The Transfer Agent requires a reasonable period (approximately 10 days) after receipt of your instructions to implement them. The Fund reserves the right to amend, suspend, or discontinue offering Asset Builder plans at any time without prior notice. The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for which the Distributor acts as the distributor and currently include the following: Oppenheimer AMT-Free Municipals Oppenheimer Limited Term Municipal Fund Oppenheimer AMT-Free New York Municipals Oppenheimer Main Street Fund Oppenheimer Balanced Fund Oppenheimer Main Street Opportunity Fund Oppenheimer Bond Fund Oppenheimer Main Street Small Cap Fund Oppenheimer California Municipal Fund Oppenheimer New Jersey Municipal Fund Oppenheimer Capital Appreciation Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer Principal Protected Main Oppenheimer Capital Preservation Fund Street Fund Oppenheimer Principal Protected Main Oppenheimer Capital Income Fund Street Fund II Oppenheimer Champion Income Fund Oppenheimer Quest Balanced Fund Oppenheimer Quest Capital Value Fund, Oppenheimer Convertible Securities Fund Inc. Oppenheimer Quest International Value Oppenheimer Developing Markets Fund Fund, Inc. Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer Discovery Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Emerging Growth Fund Oppenheimer Real Asset Fund Oppenheimer Emerging Technologies Fund Oppenheimer Real Estate Fund Oppenheimer Rochester National Oppenheimer Enterprise Fund Municipals Oppenheimer Equity Fund, Inc. Oppenheimer Senior Floating Rate Fund Oppenheimer Global Fund Oppenheimer Small Cap Value Fund Oppenheimer Global Opportunities Fund Oppenheimer Strategic Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Total Return Bond Fund Oppenheimer Growth Fund Oppenheimer U.S. Government Trust Oppenheimer High Yield Fund Oppenheimer Value Fund Oppenheimer International Bond Fund Limited-Term New York Municipal Fund Oppenheimer International Growth Fund Rochester Fund Municipals Oppenheimer International Small Company Fund Oppenheimer Limited Term California Municipal Fund Oppenheimer Limited-Term Government Fund Oppenheimer MidCap Fund And the following money market funds: Oppenheimer Cash Reserves Centennial Government Trust Oppenheimer Money Market Fund, Inc. Centennial Money Market Trust Centennial America Fund, L. P. Centennial New York Tax Exempt Trust Centennial California Tax Exempt Trust Centennial Tax Exempt Trust There is an initial sales charge on the purchase of Class A shares of each of the Oppenheimer funds described above except the money market funds. Under certain circumstances described in this Statement of Additional Information, redemption proceeds of certain money market fund shares may be subject to a contingent deferred sales charge. Classes of Shares. Each class of shares of the Fund represents an interest in the same portfolio of investments of the Fund. However, each class has different shareholder privileges and features. The net income attributable to Class B, Class C or Class N shares and the dividends payable on Class B, Class C and Class N shares will be reduced by incremental expenses borne solely by that class. Those expenses include the asset-based sales charges to which Class B, Class C and Class N shares are subject. |X| Alternative Sales Arrangements. As stated in the Prospectus, Class B and Class C shares of the Fund may only be acquired by exchange of Class B and Class C shares, respectively, of other Oppenheimer funds or directly through qualified retirement plans. Investors should understand that the purpose and function of the deferred sales charge and asset-based sales charge with respect to Class B, Class C and Class N shares are the same as those of the initial sales charge with respect to Class A share of Oppenheimer funds other than the money market funds. Any salesperson or other person entitled to receive compensation for selling the Fund shares may receive different compensation with respect to one class of shares than the other. The Distributor will generally not accept any order in the amount of $100,000 or more for Class B shares or $1 million or more for Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts). That is because generally it will be more advantageous for that investor to purchase Class A shares of the Fund. |X| Class A Shares Subject to a Contingent Deferred Sales Charge. For purchases of Class A shares subject to a contingent deferred sales charge as described in the Prospectus, no sales concessions will be paid to the broker-dealer of record, as described in the Prospectus, on sales of Class A shares purchased with the redemption proceeds of shares of another mutual fund 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, if the purchase occurs more than 30 days after the Oppenheimer funds are added as an investment option under that plan. Additionally, that concession will not be paid on purchases of shares by a retirement plan made with the redemption proceeds of Class N shares of Class A one or more Oppenheimer funds held by the plan for more than 18 months. |X| Class B Conversion. Under current interpretations of applicable federal income tax law by the Internal Revenue Service, the conversion of Class B shares to Class A shares 72 months after purchase is not treated as a taxable event for the shareholder. If those laws or the IRS interpretation of those laws should change, the automatic conversion feature may be suspended. In that event, no further conversions of Class B shares would occur while that 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 shareholder, and absent such exchange, Class B shares might continue to be subject to the asset-based sales charge for longer than six years. |X| Availability of Class N Shares. In addition to the description of the types of retirement plans which may purchase Class N shares contained in the prospectus, Class N shares also are offered to the following: o to all rollover IRAs (including SEP IRAs and SIMPLE IRAs), o to all rollover contributions made to Individual 401(k) plans, Profit-Sharing Plans and Money Purchase Pension Plans, o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and Ascender retirement plans, o to all trustee-to-trustee IRA transfers, o to all 90-24 type 403(b) transfers, o to Group Retirement Plans (as defined in Appendix C to this Statement of Additional Information) which have entered into a special agreement with the Distributor for that purpose, o to Retirement Plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, the recordkeeper or the plan sponsor for which has entered into a special agreement with the Distributor, o to Retirement Plans of a plan sponsor where the aggregate assets of all such plans invested in the Oppenheimer funds is $500,000 or more, o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the purchase with the redemption proceeds of Class A shares of one or more Oppenheimer funds, and o to certain customers of broker-dealers and financial advisors that are identified in a special agreement between the broker-dealer or financial advisor and the Distributor for that purpose. The sales concession and the advance of the service fee, as described in the Prospectus, will not be paid to dealers of record on sales of Class N shares on: o purchases of Class N shares in amounts of $500,000 or more by a retirement plan that pays for the purchase with the redemption proceeds of Class A shares of one or more Oppenheimer funds (other than rollovers from an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to any IRA invested in the Oppenheimer funds), o purchases of Class N shares in amounts of $500,000 or more by a retirement plan that pays for the purchase with the redemption proceeds of Class C shares of one or more Oppenheimer funds held by the plan for more than one year (other than rollovers from an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to any IRA invested in the Oppenheimer funds), and o on purchases of Class N shares by an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan made with the redemption proceeds of Class A shares of one or more Oppenheimer funds. No sales concessions will be paid to the broker-dealer of record, as described in the Prospectus, on sales of Class N shares purchased with the redemption proceeds of shares of another mutual fund 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, if the purchase occurs more than 30 days after the Oppenheimer funds are added as an investment option under that plan. |X| Allocation of Expenses. The Fund pays expenses related to its daily operations, such as custodian fees, Trustees' fees, transfer agency fees, legal fees 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. The methodology for calculating the net asset value, dividends and distributions of the Fund's share classes recognizes two types of expenses. General expenses that do not pertain specifically to any one class are allocated pro rata to the shares of all classes. The allocation is based on the percentage of the Fund's total assets that is represented by the assets of each class, and then equally to each outstanding share within a given class. Such general expenses include management fees, legal, bookkeeping and audit fees, printing and mailing costs of shareholder reports, Prospectuses, Statements of Additional Information and other materials for current shareholders, fees to unaffiliated Trustees, custodian expenses, share issuance costs, organization and start-up costs, interest, taxes and brokerage commissions, and non-recurring expenses, such as litigation costs. Other expenses that are directly attributable to a particular class are allocated equally to each outstanding share within that class. Examples of such expenses include distribution and service plan (12b-1) fees, transfer and shareholder servicing agent fees and expenses and shareholder meeting expenses (to the extent that such expenses pertain only to a specific class). Fund Account Fees. As stated in the Prospectus, a $12 annual "Minimum Balance Fee" is assessed on each Fund account with a share balance valued under $500. The Minimum Balance Fee is automatically deducted from each such Fund account on or about the second to last business day of September. Listed below are certain cases in which the Fund has elected, in its discretion, not to assess the Fund Account Fees. These exceptions are subject to change: o A fund account whose shares were acquired after September 30th of the prior year; o A fund account that has a balance below $500 due to the automatic conversion of shares from Class B to Class A shares. However, once all Class B shares held in the account have been converted to Class A shares the new account balance may become subject to the Minimum Balance Fee; o Accounts of shareholders who elect to access their account documents electronically via eDoc Direct; o A fund account that has only certificated shares and, has a balance below $500 and is being escheated; o Accounts of shareholders that are held by broker-dealers under the NSCC Fund/SERV system; o Accounts held under the Oppenheimer Legacy Program and/or holding certain Oppenheimer Variable Account Funds; o Omnibus accounts holding shares pursuant to the Pinnacle, Ascender, Custom Plus, Recordkeeper Pro and Pension Alliance Retirement Plan programs; and o A fund account that falls below the $500 minimum solely due to market fluctuations within the 12-month period preceding the date the fee is deducted. To access account documents electronically via eDocs Direct, please visit the Service Center on our website at www.oppenheimerfunds.com or call ------------------------ 1.888.470.0862 for instructions. The Fund reserves the authority to modify Fund Account Fees in its discretion. Determination of Net Asset Value Per Share. The net asset value per share of each class of shares of the Fund is determined as of the close of business of the Exchange on each day that the Exchange is open. The calculation is done 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 Exchange normally closes at 4:00 P.M., Eastern time, but may close earlier on some days (for example, in case of weather emergencies or on days falling before a U.S. holiday). All references to time in this Statement of Additional Information mean "Eastern time." The Exchange'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's Board of Trustees has adopted the amortized cost method to value the Fund's portfolio securities. Under the amortized cost method, a security is valued initially at its cost and its valuation assumes a constant amortization of any premium or accretion of any discount, regardless of the impact of fluctuating interest rates on the market value of the security. This method does not take into consideration any unrealized capital gains or losses on securities. While this method provides certainty in valuing securities, in certain periods the value of a security determined by amortized cost may be higher or lower than the price the Fund would receive if it sold the security. The Fund's Board of Trustees has established procedures reasonably designed to stabilize the Fund's net asset value at $1.00 per share. Those procedures include a review of the Fund's portfolio holdings by the Board of Trustees, at intervals it deems appropriate, to determine whether the Fund's net asset value calculated by using available market quotations deviates from $1.00 per share based on amortized cost. The Board of Trustees will examine the extent of any deviation between the Fund's net asset value based upon available market quotations and amortized cost. If the Fund's net asset value were to deviate from $1.00 by more than 0.5%, Rule 2a-7 requires the Board of Trustees to consider what action, if any, should be taken. If they find that the extent of the deviation may cause a material dilution or other unfair effects on shareholders, the Board of Trustees will take whatever steps it considers appropriate to eliminate or reduce the dilution, including, among others, withholding or reducing dividends, paying dividends from capital or capital gains, selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten the average maturity of the portfolio, or calculating net asset value per share by using available market quotations. During periods of declining interest rates, the daily yield on shares of the Fund may tend to be lower (and net investment income and dividends higher) than those of a fund holding the identical investments as the Fund but which used a method of portfolio valuation based on market prices or estimates of market prices. During periods of rising interest rates, the daily yield of the Fund would tend to be higher and its aggregate value lower than that of an identical portfolio using market price valuation. How to Sell Shares The information below supplements the terms and conditions for redeeming shares set forth in the Prospectus. Checkwriting. When a check is presented to United Missouri Bank (the "Bank") for clearance, the Bank will ask the Fund to redeem a sufficient number of full and fractional shares in the shareholder's account to cover the amount of the check. This enables the shareholder to continue receiving dividends on those shares until the check is presented to the Fund. Checks may not be presented for payment at the offices of the Bank or the Fund's custodian. This limitation does not affect the use of checks for the payment of bills or to obtain cash at other banks. The Fund reserves the right to amend, suspend or discontinue offering checkwriting privileges at any time. The Fund will provide you notice whenever it is required to do so by applicable law. In choosing to take advantage of the Checkwriting privilege, by signing the account application or by completing a Checkwriting card, each individual who signs: (1) for individual accounts, represents that they are the registered owner(s) of the shares of the Fund in that account; (2) for accounts for corporations, partnerships, trusts and other entities, represents that they are an officer, general partner, trustee or other fiduciary or agent, as applicable, duly authorized to act on behalf of the registered owner(s); (3) authorizes the Fund, its Transfer Agent and any bank through which the Fund's drafts (checks) are payable to pay all checks drawn on the Fund account of such person(s) and to redeem a sufficient amount of shares from that account to cover payment of each check; (4) specifically acknowledges that if they choose to permit checks to be honored if there is a single signature on checks drawn against joint accounts, or accounts for corporations, partnerships, trusts or other entities, the signature of any one signatory on a check will be sufficient to authorize payment of that check and redemption from the account, even if that account is registered in the names of more than one person or more than one authorized signature appears on the Checkwriting card or the application, as applicable; (5) understands that the Checkwriting privilege may be terminated or amended at any time by the Fund and/or the Fund's bank; and (6) acknowledges and agrees that neither the Fund nor its bank shall incur any liability for that amendment or termination of checkwriting privileges or for redeeming shares to pay checks reasonably believed by them to be genuine, or for returning or not paying checks that have not been accepted for any reason. Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of redemption proceeds may be delayed if the Fund's custodian bank is not open for business on a day when the Fund would normally authorize the wire to be made, which is usually the Fund's next regular business day following the redemption. In those circumstances, the wire will not be transmitted until the next bank business day on which the Fund is open for business. No dividends will be paid on the proceeds of redeemed shares awaiting transfer by Federal Funds wire. Reinvestment Privilege. Within six months of a redemption, a shareholder may reinvest all or part of the redemption proceeds of: o Class A shares that were purchased by exchange of Class A shares of another Oppenheimer fund on which an initial sales charge was paid or Class A or o Class B shares on which a contingent deferred sales charge was paid. 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 in "How to Exchange Shares" below. Reinvestment will be at the net asset value next computed after the Transfer Agent receives the reinvestment order. The shareholder must ask the Transfer Agent for that privilege at the time of reinvestment. This privilege does not apply to Class C and Class N shares. 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. 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. Payments "In Kind". The Prospectus states that payment for shares tendered for redemption is ordinarily made in cash. However, under unusual circumstances, 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 liquid securities from the portfolio of the Fund, in lieu of cash. The Fund has elected to be governed by Rule 18f-1 under the Investment Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in kind using the same method the Fund uses to value its portfolio securities described above under "Determination of Net Asset Values Per Share." That valuation will be made as of the time the redemption price is determined. 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 $200 or such lesser amount as the Board may fix. The Board will not cause the involuntary redemption of shares in an account if the aggregate net asset value of such shares has fallen below the stated minimum solely as a result of market fluctuations. If the Board exercises this right, it may also fix the requirements for any notice to be given to the shareholders in question (not less than 30 days). The Board may alternatively set requirements for the shareholder to increase the investment, or set other terms and conditions so that the shares would not be involuntarily redeemed. Transfers of Shares. A transfer of shares to a different registration is not an event that triggers the payment of sales charges. Therefore, shares are not subject to the payment of a contingent deferred sales charge of any class at the time of transfer to the name of another person or entity. It does not matter whether the transfer occurs by absolute assignment, gift or bequest, as long as it does not involve, directly or indirectly, a public sale of the shares. When shares subject to a contingent deferred sales charge are transferred, the transferred shares will remain subject to the contingent deferred sales charge. It will be 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, Class C and Class N 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, SEP-IRAs, SIMPLE 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: (1) state the reason for the distribution; (2) state the owner's awareness of tax penalties if the distribution is premature; and (3) conform to the requirements of the plan and the Fund's other redemption requirements. Participants (other than self-employed persons) in OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the Fund held in the name of the plan or its fiduciary may not directly request redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent 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, 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. Shareholders should contact their 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 the order placed by the dealer or broker. However, if the Distributor receives a repurchase order from a dealer or broker after the close of the 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 customers prior to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but may do so earlier on some days. Additionally, the order must have been 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. The signature(s) of the registered owner(s) on the redemption document must be guaranteed 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 (having a value of at least $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. Payments must also be sent to the address of record for the account and the address must not have 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 account application or signature-guaranteed instructions sent to the Transfer Agent. Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three business days before the payment transmittal 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. The Fund reserves the right to amend, suspend or discontinue offering such plans at any time without prior notice. Class B, Class C and Class N shareholders should not establish withdrawal plans, because of the potential imposition of the contingent deferred sales charge on such withdrawals (except where the Class B, Class C or Class N contingent deferred sales charge is waived as described in Appendix C to this Statement of Additional Information). By requesting an Automatic Withdrawal or Exchange Plan, the shareholder agrees to the terms and conditions applicable to such plans as stated below. These provisions may be amended from time to time by the Fund and/or the Distributor. When adopted, any amendments will automatically apply to existing Plans. |X| Automatic Exchange Plans. Shareholders can authorize the Transfer Agent 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 $50. Instructions should be provided on the account application or signature-guaranteed instructions. 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. 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. The Transfer Agent will administer the investor's Automatic Withdrawal Plan as agent for the shareholder (the "Planholder") who executed the Plan authorization and application submitted to the Transfer Agent. Neither the Transfer Agent nor the Fund shall incur any liability to the Planholder for any action taken or not taken by the Transfer Agent in good faith to administer the Plan. Share 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. Shares will be redeemed to make withdrawal payments at the net asset value per share determined on the redemption date. Checks or AccountLink payments representing the proceeds of Plan withdrawals will normally be transmitted three business days prior to the date selected for receipt of the payments, according to the choice specified in writing by the Planholder. Receipt of payment on the date selected cannot be guaranteed. 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. That notice must be in proper form in accordance with the requirements of the ten-current Prospectus of the Fund. In that case, the Transfer Agent will redeem the number of shares requested at the net asset value per share in effect and will mail a check for the proceeds to the Planholder. The Planholder may terminate a Plan at any time by writing to the Transfer Agent. The Fund may also give directions to the Transfer Agent to terminate a Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence satisfactory to it that the Planholder has died or is legally incapacitated. Upon termination of a Plan by the Transfer Agent or the Fund, shares that have not been redeemed will be held in uncertificated form in the name of the Planholder. The account will continue as a dividend-reinvestment, uncertificated account unless and until proper instructions are received from the Planholder, his or her executor or guardian, or another authorized person. To use shares held under the Plan as collateral for a debt, the Planholder may request issuance of a portion of the shares in certificated form. Upon written request from the Planholder, the Transfer Agent will determine the number of shares for which a certificate may be issued without causing the withdrawal checks to stop. 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. You can obtain a current list showing which funds offer which classes of shares by calling the Distributor. o All of the Oppenheimer funds currently offer Class A, B, C, N and Y shares with the following exceptions: The following funds only offer Class A shares: Centennial America Fund, L.P. Centennial New York Tax Exempt Trust Centennial California Tax Exempt Centennial Tax Exempt Trust Trust Centennial Government Trust Centennial Money Market Trust The following funds do not offer Class N shares: Oppenheimer AMT-Free Municipals Oppenheimer New Jersey Municipal Fund Oppenheimer AMT-Free New York Oppenheimer Pennsylvania Municipal Municipals Fund Oppenheimer International Value Fund Oppenheimer Rochester National Municipals Oppenheimer California Municipal Fund Oppenheimer Senior Floating Rate Fund Oppenheimer Limited Term Municipal Limited Term New York Municipal Fund Fund Oppenheimer Municipal Bond Fund Rochester Fund Municipals Oppenheimer Principal Protected Main Oppenheimer Limited Term California Street Fund II Municipal Fund Oppenheimer Money Market Fund, Inc. The following funds do not offer Class Y shares: Oppenheimer AMT-Free Municipals Oppenheimer Limited Term Municipal Fund Oppenheimer AMT-Free New York Municipals Oppenheimer Balanced Fund Oppenheimer New Jersey Municipal Fund Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer Capital Income Fund Oppenheimer Principal Protected Main Street Fund Oppenheimer Cash Reserves Oppenheimer Principal Protected Main Street Fund II Oppenheimer Champion Income Fund Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Convertible Securities Oppenheimer Quest International Value Fund Fund, Inc. Oppenheimer Disciplined Allocation Oppenheimer Rochester National Fund Municipals Oppenheimer Developing Markets Fund Oppenheimer Senior Floating Rate Fund Oppenheimer Gold & Special Minerals Oppenheimer Small Cap Value Fund Fund Oppenheimer International Bond Fund Oppenheimer Total Return Bond Fund Oppenheimer International Growth Fund Limited Term New York Municipal Fund Oppenheimer International Small Company Fund o Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y shares. o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares of any other fund. o Class B, Class C and Class N 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. o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for Class A shares of other Oppenheimer funds. They may not be acquired by exchange of shares of any class of any other Oppenheimer funds except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves acquired by exchange of Class M shares. o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government Fund. Only participants in certain retirement plans may purchase shares of Oppenheimer Capital Preservation Fund, and only those participants may exchange shares of other Oppenheimer funds for shares of Oppenheimer Capital Preservation Fund. o Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to an early withdrawal charge or contingent deferred sales charge. o 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 sales charge or contingent deferred sales charge. 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. If requested, they must supply proof of entitlement to this privilege. o Shares of the Fund acquired by reinvestment of dividends or distributions from any of the other Oppenheimer funds 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. o Shares of Oppenheimer Principal Protected Main Street Fund may be exchanged at net asset value for shares of any of the Oppenheimer funds. However, shareholders are not permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer Principal Protected Main Street Fund until after the expiration of the warranty period (8/5/2010). o Shares of Oppenheimer Principal Protected Main Street Fund II may be exchanged at net asset value for shares of any of the Oppenheimer funds. However, shareholders are not permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer Principal Protected Main Street Fund II until after the expiration of the warranty period (2/4/2011). The Fund may amend, suspend or terminate the exchange privilege at any time. Although the Fund may impose these changes at any time, it will provide you with notice of those changes whenever it is required to do so by applicable law. It may be required to provide 60 days notice prior to materially amending or terminating the exchange privilege. That 60 day notice is not required in extraordinary circumstances. |X| How Exchanges Affect Contingent Deferred Sales Charges. No contingent deferred sales charge is imposed on exchanges of shares of any class purchased subject to a contingent deferred sales charge, with the following exceptions: o When Class A shares of any Oppenheimer fund (other than Rochester National Municipals and Rochester Fund Municipals) acquired by exchange of Class A shares of any Oppenheimer fund purchased subject to a Class A contingent deferred sales charge are redeemed within 18 months measured from the beginning of the calendar month of the initial purchase of the exchanged Class A shares, the Class A contingent deferred sales charge is imposed on the redeemed shares. o When Class A shares of Rochester National Municipals and Rochester Fund Municipals acquired by exchange of Class A shares of any Oppenheimer fund purchased subject to a Class A contingent deferred sales charge are redeemed within 24 months of the beginning of the calendar month of the initial purchase of the exchanged Class A shares, the Class A contingent deferred sales charge is imposed on the redeemed shares. o If any Class A shares of another Oppenheimer fund that are exchanged for Class A shares of Oppenheimer Senior Floating Rate Fund are subject to the Class A contingent deferred sales charge of the other Oppenheimer fund at the time of exchange, the holding period for that Class A contingent deferred sales charge will carry over to the Class A shares of Oppenheimer Senior Floating Rate Fund acquired in the exchange. The Class A shares of Oppenheimer Senior Floating Rate Fund acquired in that exchange will be subject to the Class A Early Withdrawal Charge of Oppenheimer Senior Floating Rate Fund if they are repurchased before the expiration of the holding period. o When Class A shares of this Fund and Oppenheimer Money Market Fund, Inc. acquired by exchange of Class A shares of any Oppenheimer fund purchased subject to a Class A contingent deferred sales charge are redeemed within the Class A holding period of the fund from which the shares were exchanged, the Class A contingent deferred sales charge of the fund from which the shares were exchanged is imposed on the redeemed shares. o With respect to Class B shares (other than Limited-Term Government Fund, Limited Term Municipal Fund, Limited Term New York Municipal Fund, Oppenheimer Capital Preservation Fund and Oppenheimer Senior Floating Rate Fund), 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. With respect to Class B shares of Limited-Term Government Fund, Limited Term Municipal Fund, Limited Term New York Municipal Fund, Oppenheimer Capital Preservation Fund and Oppenheimer Senior Floating Rate Fund, the Class B contingent deferred sales charge is imposed on Class B shares acquired by exchange if they are redeemed within 5 years of the initial purchase of the exchanged Class B shares. o With respect to Class C 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. o With respect to Class N shares, a 1% contingent deferred sales charge will be imposed if the retirement plan (not including IRAs and 403(b) plans) is terminated or Class N shares of all Oppenheimer funds are terminated as an investment option of the plan and Class N shares are redeemed within 18 months after the plan's first purchase of Class N shares of any Oppenheimer fund or with respect to an individual retirement plan or 403(b) plan, Class N shares are redeemed within 18 months of the plan's first purchase of Class N shares of any Oppenheimer fund. o When Class, Class C or Class N 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, Class C or Class N contingent deferred sales charge will be followed in determining the order in which the shares are exchanged. Before exchanging shares, shareholders should take into account how the exchange may affect 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 which class of shares they wish to exchange. |X| Limits on Multiple Exchange Orders. 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. |X| Telephone Exchange Requests. When exchanging shares by telephone, a shareholder must have an existing account in the fund to which the exchange is to be made. Otherwise, the investor must obtain a prospectus of that fund before the exchange request may be submitted. 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. |X| Processing 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 Fund may refuse the request. When you exchange some or all of your shares from one fund to another, any special account features such as an Asset Builder Plan or an Automatic Withdrawal Plan, will be switched to the new account unless you tell the Transfer Agent not to do so. However, special redemption and exchange features such as Automatic Exchange Plans and Automatic Withdrawal Plans cannot be switched to an account in Oppenheimer Senior Floating Rate Fund, Oppenheimer Principal Protected Main Street Fund I and Oppenheimer Principal Protected Main Street Fund II. 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. The different Oppenheimer funds available for exchange have different investment objectives, policies and risks. 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 and Taxes Dividends and Distributions. The Fund has no fixed dividend rate and there can be no assurance as to the payment of any dividends. The dividends paid by a class of shares will vary from time to time depending on market conditions, the composition of the Fund's portfolio, and expenses borne by the Fund or borne separately by a class. Dividends are calculated in the same manner, at the same time, and on the same day for each class of shares. However, dividends on Class B, Class C and Class N shares are expected to be lower than dividends on Class A. That is because of the effect of the asset-based sales charge on Class B, Class C and Class N shares. Dividends, distributions (if any) and 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 Class A shares of Oppenheimer Money Market Fund, Inc. Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment laws, and the Fund and the Transfer Agent will not be liable to shareholders or their representatives for compliance with those laws in good faith. Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares. The federal tax treatment of the Fund's dividends and capital gains distributions is briefly highlighted in the Prospectus. The following is only a summary of certain additional tax considerations generally affecting the Fund and its shareholders. The tax discussion in the Prospectus and this Statement of Additional Information is based on tax law in effect on the date of the Prospectus and this Statement of Additional Information. Those laws and regulations may be changed by legislative, judicial, or administrative action, sometimes with retroactive effect. State and local tax treatment of ordinary income dividends and capital gain dividends from regulated investment companies may differ from the treatment under the Internal Revenue Code described below. Potential purchasers of shares of the Fund are urged to consult their tax advisers with specific reference to their own tax circumstances as well as the consequences of federal, state and local tax rules affecting an investment in the Fund. |X| Qualification as a Regulated Investment Company. The Fund has elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. As a regulated investment company, the Fund is not subject to federal income tax on the portion of its net investment income (that is, taxable interest, dividends, other taxable ordinary income net of expenses, and net short-term capital gain in excess of net long-term capital loss) and capital gain net income (that is, the excess of net long-term capital gains over net short-term capital losses) that it distributes to shareholders. 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 their Fund shares are held in a retirement account or the shareholder is otherwise exempt from tax). The Internal Revenue Code contains a number of complex tests relating to qualification that the Fund might not meet in a particular year. If it did not qualify as a regulated investment company, the Fund would be treated for tax purposes as an ordinary corporation and would receive no tax deduction for payments made to shareholders. To qualify as a regulated investment company, the Fund must distribute at least 90% of its investment company taxable income (in brief, net investment income and the excess of net short-term capital gain over net long-term capital loss) for the taxable year. The Fund must also satisfy certain other requirements of the Internal Revenue Code, some of which are described below. Distributions by the Fund made during the taxable year or, under specified circumstances, within 12 months after the close of the taxable year, will be considered distributions of income and gains for the taxable year and will therefore count toward satisfaction of the above-mentioned requirement. To qualify as a regulated investment company, the Fund must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies (to the extent such currency gains are directly related to the regulated investment company's principal business of investing in stock or securities) and certain other income. In addition to satisfying the requirements described above, the Fund must satisfy an asset diversification test in order to qualify as a regulated investment company. Under that test, at the close of each quarter of the Fund's taxable year, at least 50% of the value of the Fund's assets must consist of cash and cash items (including receivables), U.S. government securities, securities of other regulated investment companies, and securities of other issuers. As to each of those issuers, the Fund must not have invested more than 5% of the value of the Fund's total assets in securities of each such issuer and the Fund must not hold more than 10% of the outstanding voting securities of each such issuer. No more than 25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. government securities and securities of other regulated investment companies), or in two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses. For purposes of this test, obligations issued or guaranteed by certain agencies or instrumentalities of the U.S. government are treated as U.S. government securities. |X| Excise Tax on Regulated Investment Companies. 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. If it does not, the Fund must pay an excise tax on the amounts not distributed. It is presently anticipated that the Fund will meet those requirements. To meet this requirement, in certain circumstances the Fund might be required to liquidate portfolio investments to make sufficient distributions to avoid excise tax liability. However, the Board of Trustees and the Manager might determine in a particular year that it would be in the best interests 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. |X| Taxation of Fund Distributions. The Fund anticipates distributing substantially all of its investment company taxable income for each taxable year. Those distributions will be taxable to shareholders as ordinary income and treated as dividends for federal income tax purposes. Distributions by the Fund that do not constitute ordinary income dividends or capital gain distributions will be treated as a return of capital to the extent of the shareholder's tax basis in their shares. Any excess will be treated as gain from the sale of those shares, as discussed below. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year. If prior distributions made by the Fund must be re-characterized as a non-taxable return of capital at the end of the fiscal year as a result of the effect of the Fund's investment policies, they will be identified as such in notices sent to shareholders. Distributions by the Fund will be treated in the manner described above regardless of whether the distributions are paid in cash or reinvested in additional shares of the Fund (or of another fund). Shareholders receiving a distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date. The Fund will be required in certain cases to withhold 28% of ordinary income dividends, capital gains distributions and the proceeds of the redemption of shares, paid to any shareholder (1) who has failed to provide a correct taxpayer identification number or to properly certify that number - ------- when required, (2) who is subject to backup withholding for failure to report the receipt of interest or dividend income properly, or (3) who has failed to certify to the Fund that the shareholder is not subject to backup withholding or is an "exempt recipient" (such as a corporation). All income and any tax withheld by the Fund is remitted by the U.S. Treasury and is identified in reports mailed to shareholders in January of each year. 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 above. Reinvestment will be made without sales charge at the net asset value per share in effect at the close of business on the payable date of the dividend or distribution. To elect this option, the shareholder must notify the Transfer Agent in writing and must have an existing account in the fund selected for reinvestment. Otherwise, the shareholder first must obtain a prospectus for that fund and an application from the Distributor to establish an account. Dividends and/or distributions from shares of certain other Oppenheimer funds may be invested in shares of this Fund on the same basis. Additional Information About the Fund 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 shares of the other Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of the Manager. The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a division of the Manager. It is responsible for maintaining the Fund's shareholder registry and shareholder accounting records, and for paying dividends and distributions to shareholders. It also handles shareholder servicing and administrative functions. It serves as the Transfer Agent for an annual per account fee. It also acts as shareholder servicing agent for the other Oppenheimer funds. Shareholders should direct inquiries about their accounts to the Transfer Agent at the address and toll-free numbers shown on the back cover. The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The custodian's responsibilities include safeguarding and controlling the Fund's portfolio securities and handling the delivery of such securities to and from the Fund. It is 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 Registered Public Accounting Firm. Deloitte & Touche llp is the independent registered public account firm of the Fund. They audit the Fund's financial statements and perform other related audit services. They also act as for certain other funds advised by the Manager and its affiliates. Audit and non-audit service provided to the Fund must be pre-approved by the Audit Committee.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CASH RESERVES:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Cash Reserves, including the statement of investments, as of July 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2004, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Cash Reserves as of July 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP Denver, Colorado September 21, 2004 STATEMENT OF INVESTMENTS July 31, 2004 - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT--16.3% - -------------------------------------------------------------------------------- DOMESTIC CERTIFICATES OF DEPOSIT--2.6% Wells Fargo Bank NA, 1.30%, 8/6/04 $ 20,000,000 $ 20,000,000 - -------------------------------------------------------------------------------- YANKEE CERTIFICATES OF DEPOSIT--13.7% BNP Paribas, New York: 1.341%, 6/22/05 1 10,000,000 9,995,967 1.39%, 8/5/04 10,000,000 10,000,297 - -------------------------------------------------------------------------------- Calyon, New York, 1.37%, 9/10/04 10,000,000 10,000,000 - -------------------------------------------------------------------------------- Canadian Imperial Bank of Commerce NY, 1.39%, 6/28/05 1 20,000,000 19,994,524 - -------------------------------------------------------------------------------- HBOS Treasury Services, New York, 1.285%, 9/17/04 4,000,000 4,000,000 - -------------------------------------------------------------------------------- Lloyds TSB Bank plc, New York, 1.39%, 9/24/04 15,000,000 15,000,000 - -------------------------------------------------------------------------------- Nordea Bank Finland plc, New York Branch, 1.395%, 6/29/05 1 7,000,000 6,997,758 - -------------------------------------------------------------------------------- Societe Generale, New York, 1.31%, 6/14/05 1 20,000,000 19,994,753 - -------------------------------------------------------------------------------- UBS AG Stamford CT, 1.26%, 9/16/04 10,000,000 10,000,064 ------------ 105,983,363 ------------ Total Certificates of Deposit (Cost $125,983,363) 125,983,363 - -------------------------------------------------------------------------------- DIRECT BANK OBLIGATIONS--12.1% - -------------------------------------------------------------------------------- AB SPINTAB, 1.26%, 9/9/04 10,000,000 9,986,350 - -------------------------------------------------------------------------------- Calyon North America, Inc., 1.40%, 9/9/04 4,000,000 3,993,933 - -------------------------------------------------------------------------------- Danske Corp., Series A, 1.33%, 9/15/04 4,000,000 3,993,350 - -------------------------------------------------------------------------------- Deutsche Bank Financial LLC, 1.12%, 8/19/04 5,000,000 4,997,200 - -------------------------------------------------------------------------------- DnB NOR Bank ASA, 1.315%, 9/2/04 8,000,000 7,990,649 PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- DIRECT BANK OBLIGATIONS Continued - -------------------------------------------------------------------------------- Fortis Funding LLC, 1.27%, 9/15/04 2 $ 10,000,000 $ 9,984,125 - -------------------------------------------------------------------------------- Governor & Co. of the Bank of Ireland, 1.11%, 8/2/04 2 7,300,000 7,299,775 - -------------------------------------------------------------------------------- HBOS Treasury Services: 1.095%, 8/6/04 5,000,000 4,999,240 1.10%, 8/4/04 5,000,000 4,999,542 1.51%, 10/14/04 3,500,000 3,489,136 - -------------------------------------------------------------------------------- Nationwide Building Society, 1.32%, 8/20/04 5,000,000 4,996,517 - -------------------------------------------------------------------------------- Nordea North America, Inc., 1.60%, 10/14/04 6,000,000 5,980,267 - -------------------------------------------------------------------------------- Toronto Dominion Holdings, Inc., 1.42%, 9/22/04 5,000,000 4,989,744 - -------------------------------------------------------------------------------- UBS Finance (Delaware) LLC, 1.28%, 9/13/04 15,163,000 15,139,455 ------------ Total Direct Bank Obligations (Cost $92,839,283) 92,839,283 - -------------------------------------------------------------------------------- SHORT-TERM NOTES--68.7% - --------------------------------------------------------------------------------ASSET-BACKED--24.6% Eiffel Funding LLC:
1.34%, 8/16/04 2 5,000,000 4,997,208 1.61%, 10/25/04 2 5,750,000 5,728,142 - -------------------------------------------------------------------------------- FCAR Owner Trust I: 1.61%, 10/15/04 13,000,000 12,957,396 1.61%, 10/18/04 5,000,000 4,982,558 - -------------------------------------------------------------------------------- Gotham Funding Corp.: 1.37%, 8/11/04 2 5,000,000 4,998,097 1.45%, 8/26/04 2 5,698,000 5,692,302 - -------------------------------------------------------------------------------- GOVCO Inc.: 1.55%, 10/19/04 2 4,300,000 4,285,374 1.59%, 10/25/04 2 10,000,000 9,962,458 - -------------------------------------------------------------------------------- Legacy Capital LLC: 1.14%, 8/18/04 2 5,000,000 4,997,308 1.36%, 9/2/042 15,000,000 14,981,422 - -------------------------------------------------------------------------------- Lexington Parker Capital Co. LLC, 1.16%, 8/3/04 2 12,000,000 11,999,234 - -------------------------------------------------------------------------------- 11 | OPPENHEIMER CASH RESERVES STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- ASSET-BACKED Continued Neptune Funding Corp.: 1.23%, 8/12/04 2 $ 4,650,000 $ 4,648,068 1.40%, 8/16/04 2 6,000,000 5,996,500 1.40%, 8/19/04 2 2,000,000 1,998,600 1.59%, 10/22/04 2 10,000,000 9,963,783 - -------------------------------------------------------------------------------- New Center Asset Trust, 1.60%, 10/7/04 12,000,000 11,964,267 - -------------------------------------------------------------------------------- Perry Global Funding LLC, Series A: 1.55%, 10/21/04 2 5,000,000 4,982,563 1.56%, 10/19/04 2 12,500,000 12,457,208 - -------------------------------------------------------------------------------- Regency Markets No. 1 LLC, 1.28%, 8/20/04 2 15,000,000 14,989,497 - -------------------------------------------------------------------------------- Solitaire Funding LLC, 1.30%, 8/26/04 2 7,900,000 7,893,033 - -------------------------------------------------------------------------------- Thornburg Mortgage Capital Resources, 1.685%, 11/1/04 2 17,500,000 17,432,834 - -------------------------------------------------------------------------------- Victory Receivables Corp.: 1.35%, 9/2/04 2 2,000,000 1,997,600 1.55%, 10/12/04 2 10,000,000 9,969,000 ------------ 189,874,452 - -------------------------------------------------------------------------------- CAPITAL MARKETS--14.4% Banc of America Securities LLC, 1.40%, 8/2/04 1 15,000,000 15,000,000 - -------------------------------------------------------------------------------- Bear Stearns Cos., Inc., 1.29%, 8/10/04 10,000,000 9,996,775 - -------------------------------------------------------------------------------- Citigroup Global Markets Holdings, Inc.: 1.30%, 8/13/04 6,000,000 5,997,400 1.34%, 8/19/04 10,000,000 9,993,300 1.52%, 10/18/04 10,000,000 9,967,067 - -------------------------------------------------------------------------------- Goldman Sachs Group, Inc.: 1.25%, 10/20/04 3 10,000,000 10,000,000 1.68%, 10/18/04 3 3,000,000 3,000,000 - -------------------------------------------------------------------------------- Lehman Brothers, Inc., 1.38%, 12/15/04 1 18,000,000 18,000,000 - -------------------------------------------------------------------------------- Morgan Stanley, 1.25%, 8/27/04 1 10,000,000 10,000,000 PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- CAPITAL MARKETS Continued Wachovia Securities LLC, 1.47%, 12/22/04 1 $ 19,000,000 $ 19,000,000 ------------ 110,954,542 - -------------------------------------------------------------------------------- COMMERCIAL BANKS--2.5% Bank of America Corp., 1.60%, 10/26/04 10,000,000 9,961,778 - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co., 1.31%, 8/17/04 9,000,000 8,994,760 ------------ 18,956,538 - -------------------------------------------------------------------------------- COMMERCIAL FINANCE--0.2% Countrywide Home Loans, 1.37%, 8/2/04 1,850,000 1,849,928 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--7.7% General Electric Capital Corp.: 1.08%, 8/5/04 9,000,000 8,998,920 1.29%, 9/8/04 10,000,000 9,986,383 1.34%, 9/7/04 5,000,000 4,993,114 - -------------------------------------------------------------------------------- Household Finance Corp.: 1.51%, 10/8/04 7,500,000 7,478,608 1.54%, 10/22/04 5,000,000 4,982,461 1.60%, 10/13/04 10,000,000 9,967,556 - -------------------------------------------------------------------------------- Prudential Funding LLC: 1.12%, 8/4/04 12,000,000 11,998,880 1.62%, 10/28/04 1,000,000 996,040 ------------ 59,401,962 - -------------------------------------------------------------------------------- INSURANCE--7.6% ING America Insurance Holdings, Inc., 1.72%, 11/29/04 10,000,000 9,942,667 - -------------------------------------------------------------------------------- Jackson National Life Global Funding, Series 2004-6, 1.38%, 8/16/04 1,4 5,000,000 5,000,000 - -------------------------------------------------------------------------------- Metropolitan Life Global Funding I, Series 2003-5, 1.39%, 8/15/04 1,3 8,600,000 8,600,000 12 | OPPENHEIMER CASH RESERVES PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- INSURANCE Continued Prudential Insurance Co. of America, 1.65%, 1/31/05 1 $ 10,000,000 $ 10,000,000 - -------------------------------------------------------------------------------- Security Life of Denver Insurance Co.: 1.31%, 8/18/041 10,000,000 10,000,000 1.46%, 10/27/04 1 10,000,000 10,000,000 - -------------------------------------------------------------------------------- United of Omaha Life Insurance Co., 1.46%, 8/2/04 1,3 5,000,000 5,000,000 ------------ 58,542,667 - -------------------------------------------------------------------------------- SPECIAL PURPOSE FINANCIAL--11.7% Blue Spice LLC, 1.54%, 10/12/04 2 6,800,000 6,779,056 - -------------------------------------------------------------------------------- Cooperative Assn of Tractor Dealers, Inc., Series A, 1.35%, 8/13/04 5,100,000 5,097,705 - -------------------------------------------------------------------------------- Cooperative Assn. of Tractor Dealers, Inc., Series B: 1.16%, 8/2/04 3,000,000 2,999,903 1.60%, 10/19/04 2,000,000 1,992,979 - -------------------------------------------------------------------------------- K2 (USA) LLC: 1.30%, 8/25/04 2 4,900,000 4,895,753 1.44%, 6/30/05 1,4 13,000,000 12,997,588 - -------------------------------------------------------------------------------- LINKS Finance LLC: 1.35%, 10/15/04 1,4 5,000,000 5,000,000 1.41%, 8/25/04 1,4 10,000,000 9,999,868 1.41%, 9/30/04 1,4 10,000,000 9,999,672 - -------------------------------------------------------------------------------- Parkland (USA) LLC, 1.36%, 1/14/05 1,4 5,000,000 4,999,773 - -------------------------------------------------------------------------------- RACERS Trust, Series 2004-6-MM, 1.426%, 8/23/04 1,4 2,500,000 2,500,000 - -------------------------------------------------------------------------------- Sigma Finance, Inc.: 1.34%, 9/16/04 2 10,000,000 9,982,878 1.42%, 11/26/04 1,4 10,000,000 9,999,522 1.63%, 10/28/04 2 3,000,000 2,988,047 ------------ 90,232,744 ------------ Total Short-Term Notes (Cost $529,812,833) 529,812,833 PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES--2.6% - -------------------------------------------------------------------------------- Federal Home Loan Bank, 1.50%, 3/1/05 $ 5,000,000 $ 5,000,000 - -------------------------------------------------------------------------------- Federal National Mortgage Assn.: 1.375%, 2/18/05 5,000,000 5,000,000 1.55%, 5/4/05 5,000,000 5,000,000 1.60%, 5/13/05 5,000,000 5,000,000 ------------ Total U.S. Government Agencies (Cost $20,000,000) 20,000,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $768,635,479) 99.7% 768,635,479 - -------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 0.3 2,211,514 ------------------------------- NET ASSETS 100.0% $770,846,993 =============================== FOOTNOTES TO STATEMENT OF INVESTMENTSSHORT-TERM NOTES AND DIRECT BANK OBLIGATIONS ARE GENERALLY TRADED ON A DISCOUNT BASIS; THE INTEREST RATE SHOWN IS THE DISCOUNT RATE RECEIVED BY THE FUND AT THE TIME OF PURCHASE. OTHER SECURITIES NORMALLY BEAR INTEREST AT THE RATES SHOWN.
1. Represents the current interest rate for a variable or increasing rate security. 2. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $201,899,865, or 26.19% of the Fund's net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. 3. Illiquid security. See Note 4 of Notes to Financial Statements. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $60,496,423 or 7.85% of the Fund's net assets as of July 31, 2004. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 13 | OPPENHEIMER CASH RESERVES STATEMENT OF ASSETS AND LIABILITIES July 31, 2004 - --------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------------------------ Investments, at value (cost $768,635,479)--see accompanying statement of investments $768,635,479 - ------------------------------------------------------------------------------------------------------ Cash 2,250,865 - ------------------------------------------------------------------------------------------------------ Receivables and other assets: Shares of beneficial interest sold 5,088,485 Interest 501,411 Other 84,572 ------------ Total assets 776,560,812 - ------------------------------------------------------------------------------------------------------ LIABILITIES - ------------------------------------------------------------------------------------------------------ Payables and other liabilities: Shares of beneficial interest redeemed 5,190,869 Transfer and shareholder servicing agent fees 210,224 Shareholder communications 119,653 Dividends 78,092 Distribution and service plan fees 76,960 Trustees' compensation 3,935 Other 34,086 ------------ Total liabilities 5,713,819 - ------------------------------------------------------------------------------------------------------ NET ASSETS $770,846,993 ============ - ------------------------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS - ------------------------------------------------------------------------------------------------------ Par value of shares of beneficial interest $ 770,801 - ------------------------------------------------------------------------------------------------------ Additional paid-in capital 770,073,020 - ------------------------------------------------------------------------------------------------------ Accumulated net realized gain on investments 3,172 ------------ NET ASSETS $770,846,993 ============14 | OPPENHEIMER CASH RESERVES
- --------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE - --------------------------------------------------------------------------------------------------- Class A Shares: Net asset value and redemption price per share (based on net assets of $385,393,362 and 385,402,285 shares of beneficial interest outstanding) $1.00 - --------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $219,061,447 and 219,019,524 shares of beneficial interest outstanding) $1.00 - --------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $109,083,081 and 109,070,795 shares of beneficial interest outstanding) $1.00 - --------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $57,309,103 and 57,308,109 shares of beneficial interest outstanding) $1.00SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 15 | OPPENHEIMER CASH RESERVES STATEMENT OF OPERATIONS For the Year Ended July 31, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTMENT INCOME Interest $ 9,290,537 - -------------------------------------------------------------------------------- EXPENSES Management fees 3,804,838 - --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 794,910 Class B 1,242,150 Class C 485,848 Class N 279,366 - --------------------------------------------------------------------------------Transfer and shareholder servicing agent fees:
Class A 1,893,652 Class B 772,890 Class C 353,735 Class N 204,775 - -------------------------------------------------------------------------------- Shareholder communications: Class A 170,569 Class B 55,705 Class C 20,478 Class N 5,085 - -------------------------------------------------------------------------------- Custodian fees and expenses 9,817 - -------------------------------------------------------------------------------- Trustees' compensation 7,733 - -------------------------------------------------------------------------------- Other 291,459 ------------- Total expenses 10,393,010 Less reduction to custodian expenses (1,613) Less payments and waivers of expenses (2,198,173) ------------- Net expenses 8,193,224 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 1,097,313 - -------------------------------------------------------------------------------- NET REALIZED GAIN ON INVESTMENTS 3,172 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,100,485 ============= SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 16 | OPPENHEIMER CASH RESERVES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------YEAR ENDED JULY 31, 2004 2003 - ---------------------------------------------------------------------------------------------- OPERATIONS - ---------------------------------------------------------------------------------------------- Net investment income $ 1,097,313 $ 3,924,750 - ---------------------------------------------------------------------------------------------- Net realized gain 3,172 73,568 ----------------------------------- Net increase in net assets resulting from operations 1,100,485 3,998,318 - ---------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income: Class A (685,870) (2,404,957) Class B (257,841) (1,044,894) Class C (98,460) (272,812) Class N (55,142) (202,087) - ---------------------------------------------------------------------------------------------- Distributions from net realized gain: Class A -- (32,551) Class B -- (28,468) Class C -- (8,440) Class N -- (3,523) - ---------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS Net increase (decrease) in net assets resulting from beneficial interest transactions: Class A (80,451,332) 25,949,775 Class B (97,689,917) (101,017,788) Class C 2,433,081 (16,470,114) Class N 4,958,877 9,589,171 - ---------------------------------------------------------------------------------------------- NET ASSETS - ---------------------------------------------------------------------------------------------- Total decrease (170,746,119) (81,948,370) - ---------------------------------------------------------------------------------------------- Beginning of period 941,593,112 1,023,541,482 ------------------------------------ End of period $ 770,846,993 $ 941,593,112 ====================================SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 17 | OPPENHEIMER CASH RESERVES FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
CLASS A YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ----------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 .01 .01 .05 .05 Net realized gain -- 1 --1 -- 1 -- -- ------------------------------------------------------------------------------ Total from investment operations -- 1 .01 .01 .05 .05 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 (.01) (.01) (.05) (.05) Distributions from net realized gain -- -- 1 -- 1 -- -- ------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders -- 1 (.01) (.01) (.05) (.05) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================== - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.17% 0.54% 1.31% 4.84% 5.10% - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 385,393 $ 465,843 $ 439,893 $ 395,898 $ 317,198 - ----------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 405,288 $ 451,634 $ 405,285 $ 351,490 $ 312,440 - ----------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:3 Net investment income 0.17% 0.53% 1.30% 4.67% 5.00% Total expenses 1.22% 1.16% 1.17% 1.15% 1.06% Expenses after payments and waivers and reduction to custodian expenses 0.99% 1.00% 1.16% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 | OPPENHEIMER CASH RESERVES
CLASS B YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ---------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 -- 1 .01 .04 .04 Net realized gain -- 1 -- 1 -- 1 -- -- ----------------------------------------------------------------------------- Total from investment operations -- 1 -- 1 .01 .04 .04 - ---------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 -- 1 (.01) (.04) (.04) Distributions from net realized gain -- -- 1 -- 1 -- -- ----------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 1 -- 1 (.01) (.04) (.04) - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================= - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.11% 0.27% 0.76% 4.25% 4.52% - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 219,061 $ 316,750 $ 417,768 $ 239,201 $ 172,345 - ---------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 247,836 $ 385,078 $ 288,676 $ 208,775 $ 225,824 - ---------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.10% 0.27% 0.75% 4.07% 4.40% Total expenses 1.34% 1.37% 1.71% 1.70% 1.61% Expenses after payments and waivers and reduction to custodian expenses 1.04% 1.27% 1.70% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER CASH RESERVES FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
CLASS C YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 -- 1 .01 .04 .04 Net realized gain -- 1 -- 1 -- 1 -- -- ---------------------------------------------------------------------------- Total from investment operations -- 1 -- 1 .01 .04 .04 - --------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 -- 1 (.01) (.04) (.04) Distributions from net realized gain -- -- 1 -- 1 -- -- ---------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 1 -- 1 (.01) (.04) (.04) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================ - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.10% 0.25% 0.76% 4.26% 4.52% - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 109,083 $ 106,650 $ 123,120 $ 85,076 $ 49,382 - --------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 97,058 $ 113,569 $ 85,893 $ 68,741 $ 59,556 - --------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.10% 0.24% 0.80% 4.07% 4.44% Total expenses 1.39% 1.41% 1.71% 1.70% 1.61% Expenses after payments and waivers and reduction to custodian expenses 1.05% 1.28% 1.70% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 | OPPENHEIMER CASH RESERVES
CLASS N YEAR ENDED JULY 31, 2004 2003 2002 2001 1 - -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 - -------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 2 -- 2 .01 .01 Net realized gain -- 2 -- 2 -- 2 -- ---------------------------------------------------------------- Total from investment operations -- 2 -- 2 .01 .01 - -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 2 -- 2 (.01) (.01) Distributions from net realized gain -- -- 2 -- 2 -- ---------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 2 -- 2 (.01) (.01) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ================================================================ - -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 3 0.10% 0.43% 1.08% 1.49% - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 57,309 $ 52,350 $ 42,761 $ 4,275 - -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 55,961 $ 49,145 $ 21,014 $ 737 - -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 0.10% 0.41% 0.68% 3.03% Total expenses 1.39% 1.24% 1.47% 1.19% Expenses after payments and waivers and reduction to custodian expenses 1.06% 1.11% 1.46% N/A 51. For the period from March 1, 2001 (inception of offering) to July 31, 2001. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 21 | OPPENHEIMER CASH RESERVES NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Cash Reserves (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund’s investment objective is to seek the maximum current income that is consistent with stability of principal. The Fund’s investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A shares are sold at their offering price, which is the net asset value per share without any initial sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. Class B shares will automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently followed by the Fund.
- -------------------------------------------------------------------------------- SECURITIES VALUATION. Portfolio securities are valued on the basis of amortized cost, which approximates market value. - --------------------------------------------------------------------------------JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income to shareholders, therefore, no federal income or excise tax provision is required.
22 | OPPENHEIMER CASH RESERVESThe tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years for federal income tax purposes.
UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED INVESTMENT INCOME LONG-TERM GAIN LOSS CARRYFORWARD 1,2 ------------------------------------------------------------------- $84,664 $-- $-- 1. During the fiscal year ended July 31, 2004, the Fund did not utilize any capital loss carryforward. 2. During the fiscal year ended July 31, 2003, the Fund did not utilize any capital loss carryforward.Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
The tax character of distributions paid during the years ended July 31, 2004 and July 31, 2003 was as follows:
YEAR ENDED YEAR ENDED JULY 31, 2004 JULY 31, 2003 ------------------------------------------------------------------- Distributions paid from: Ordinary income $ 1,097,313 $ 3,924,750 Long-term capital gain -- 72,982 --------------------------------- Total $ 1,097,313 $ 3,997,732 ================================= - --------------------------------------------------------------------------------TRUSTEES’ COMPENSATION. 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 the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of 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 investment income per share. Amounts will be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually.
- -------------------------------------------------------------------------------- EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable, represents earnings on cash balances maintained by the Fund. 23 | OPPENHEIMER CASH RESERVES NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets 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 INTERESTThe Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED JULY 31, 2004 YEAR ENDED JULY 31, 2003 SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------ CLASS A Sold 488,619,859 $ 488,619,859 645,438,961 $ 645,438,961 Dividends and/or distributions reinvested 638,759 638,759 2,267,138 2,267,138 Redeemed (569,709,950) (569,709,950) (621,756,324) (621,756,324) ------------------------------------------------------------------------- Net increase (decrease) (80,451,332) $ (80,451,332) 25,949,775 $ 25,949,775 ========================================================================= - ------------------------------------------------------------------------------------------------------ CLASS B Sold 244,796,543 $ 244,796,543 387,633,392 $ 387,633,392 Dividends and/or distributions reinvested 223,924 223,924 989,218 989,218 Redeemed (342,710,384) (342,710,384) (489,640,398) (489,640,398) ------------------------------------------------------------------------- Net decrease (97,689,917) $ (97,689,917) (101,017,788) $(101,017,788) ========================================================================= - ------------------------------------------------------------------------------------------------------ CLASS C Sold 201,146,784 $ 201,146,784 236,359,515 $ 236,359,515 Dividends and/or distributions reinvested 86,278 86,278 256,705 256,705 Redeemed (198,799,981) (198,799,981) (253,086,334) (253,086,334) ------------------------------------------------------------------------- Net increase (decrease) 2,433,081 $ 2,433,081 (16,470,114) $ (16,470,114) ========================================================================= - ------------------------------------------------------------------------------------------------------ CLASS N Sold 97,262,364 $ 97,262,364 156,184,467 $ 156,184,467 Dividends and/or distributions reinvested 53,182 53,182 204,581 204,581 Redeemed (92,356,669) (92,356,669) (146,799,877) (146,799,877) ------------------------------------------------------------------------- Net increase 4,958,877 $ 4,958,877 9,589,171 $ 9,589,171 =========================================================================24 | OPPENHEIMER CASH RESERVES - -------------------------------------------------------------------------------- 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.50% of the first $250 million of average annual net assets, 0.475% of the next $250 million, 0.45% of the next $250 million, 0.425% of the next $250 million, and 0.40% of net assets in excess of $1 billion.
- -------------------------------------------------------------------------------- ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. - --------------------------------------------------------------------------------TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended July 31, 2004, the Fund paid $2,682,208 to OFS for services to the Fund.
- -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the Fund's classes of shares. - --------------------------------------------------------------------------------SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.20% of the average annual net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions quarterly for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services in connection with the distribution of those shares and servicing accounts. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B and Class C shares and 0.25% per year on Class N shares. Effective January 1, 2003, the Fund decreased the asset-based sales charge on Class B and Class C shares to 0.50% of average daily net assets per annum. The Distributor is entitled to receive a service fee of 0.25% per year under each plan, but the Board of Trustees has not authorized the Fund to pay the service fees on Class B and Class C shares at this time. If either the Class B, Class C or Class N plan is terminated by the Fund or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor’s aggregate uncompensated
25 | OPPENHEIMER CASH RESERVES NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continuedexpenses under the plan at July 31, 2004 for Class N shares were $3,587,557. Fees incurred by the Fund under the plans are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------SALES CHARGES. Contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N CONTINGENT CONTINGENT CONTINGENT CONTINGENT DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES RETAINED BY RETAINED BY RETAINED BY RETAINED BY YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - ---------------------------------------------------------------------------------------------- July 31, 2004 $192,874 $298,926 $94,152 $336,882- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Effective December 6, 2002, the Manager has agreed to limit the Fund’s management fee to 0.40% of the Fund’s average net assets for each class of shares. As a result of this limitation the Fund was reimbursed $574,382 for the year ended July 31, 2004. This expense limitation can be amended or terminated at any time without advance notice.
Prior to April 28, 2003, OFS had voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes, up to an annual rate of 0.35% of average net assets per class. Effective April 28, 2003, transfer agent fees for all classes are limited to the lesser of 0.35% of average daily net assets or to an amount (but not less than zero) necessary to allow each class of the Fund to maintain a 7-day yield of at least approximately 0.10%. During the year ended July 31, 2004, OFS waived $654,720, $562,778, $260,880 and $145,413 for Class A, Class B, Class C and Class N shares, respectively. Each of the above-mentioned voluntary undertakings may be further amended or withdrawn at any time.
- -------------------------------------------------------------------------------- 4. ILLIQUID SECURITIESAs of July 31, 2004, investments in securities included issues that are illiquid. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund will not invest more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. The aggregate value of illiquid securities subject to this limitation as of July 31, 2004 was $26,600,000, which represents 3.45% of the Fund’s net assets.
26 | OPPENHEIMER CASH RESERVES 5. SUBSEQUENT EVENTS - LITIGATIONThree complaints have been filed as putative derivative and class actions against the Manager, OFS and the Distributor (collectively, “OppenheimerFunds”), as well as 51 of the Oppenheimer funds (collectively, the “Funds”) excluding this Fund, and nine directors/trustees of certain of the Funds (collectively, the “Directors/Trustees”). The complaints allege that the Manager charged excessive fees for distribution and other costs, improperly used assets of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the Funds, and failed to properly disclose the use of Fund assets to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. The complaints further allege that by permitting and/or participating in those actions, the Directors/Trustees breached their fiduciary duties to Fund shareholders under the Investment Company Act of 1940 and at common law.
OppenheimerFunds believes that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them, the Funds or the Directors/Trustees and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. However, OppenheimerFunds, the Funds and the Directors/Trustees believe that the allegations contained in the complaints are without merit and intend to defend these lawsuits vigorously.
Appendix A Description of Securities Ratings Below is a description of the two highest rating categories for Short Term Debt and Long Term Debt by the "Nationally-Recognized Statistical Rating Organizations" which the Manager evaluates in purchasing securities on behalf of the Fund. The ratings descriptions are based on information supplied by the ratings organizations to subscribers. SHORT-TERM DEBT RATINGS. Moody's Investors Service, Inc. ("Moody's") The following rating designations for commercial paper (defined by Moody's as promissory obligations not having original maturity in excess of nine months), are judged by Moody's to be investment grade, and indicate the relative repayment capacity of rated issuers: Prime-1: Superior capacity for repayment. Capacity will normally be evidenced by the following characteristics: (a) leading market positions in well-established industries; (b) high rates of return on funds employed; (c) conservative capitalization structure with moderate reliance on debt and ample asset protection; (d) broad margins in earning coverage of fixed financial charges and high internal cash generation; and (e) well-established access to a range of financial markets and assured sources of alternate liquidity. Prime-2: Strong capacity for repayment. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Moody's ratings for state and municipal short-term obligations are designated "Moody's Investment Grade" ("MIG"). Short-term notes which have demand features may also be designated as "VMIG". These rating categories are as follows: MIG 1/VMIG 1: Denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing. MIG 2/VMIG 2: Denotes strong credit quality. Margins of protection are ample although not as large as in the preceding group. Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard and Poor's") The following ratings by Standard and Poor's for commercial paper (defined by Standard and Poor's as debt having an original maturity of no more than 365 days) assess the likelihood of payment: A-1: Obligation is rated in the highest category. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, a plus (+) sign designation indicates the obligor's capacity to meet its financial obligation is extremely strong. A-2: Obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. Standard and Poor's ratings for Municipal Notes due in three years or less: - ---------------------------------------------------------------------------- SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a (+) designation. SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. Standard and Poor's assigns "dual ratings" to all municipal debt issues that have a demand or double feature as part of their provisions. The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. With short-term demand debt, Standard and Poor's note rating symbols are used with the commercial paper symbols (for example, "SP-1+/A-1+"). Fitch, Inc. ("Fitch") Fitch assigns the following short-term ratings to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes: F1: Highest credit quality. Strongest capacity for timely payment of financial commitments. May have an added "+" to denote any exceptionally strong credit feature. F2: Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of higher ratings. Dominion Bond Rating Service Limited ("DBRS") R-1: Short term debt rated "R-1 (high)" is of the highest credit quality, and indicates an entity which possesses unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels and profitability which is both stable and above average. Companies achieving an "R-1 (high)" rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results and no substantial qualifying negative factors. Given the extremely tough definition which DBRS has established for an "R-1 (high)", few entities are strong enough to achieve this rating. Short term debt rated "R-1 (middle)" is of superior credit quality and, in most cases, ratings in this category differ from "R-1 (high)" credits to only a small degree. Given the extremely tough definition which DBRS has for the "R-1 (high)" category (which few companies are able to achieve), entities rated "R-1 (middle)" are also considered strong credits which typically exemplify above average strength in key areas of consideration for debt protection. Short term debt rated "R-1 (low)" is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt and profitability ratios is not normally as favorable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors which exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry. R-2: Short term debt rated "R-2" is of adequate credit quality and within the three subset grades (high, middle, low), debt protection ranges from having reasonable ability for timely repayment to a level which is considered only just adequate. The liquidity and debt ratios of entities in the "R-2" classification are not as strong as those in the "R-1" category, and the past and future trend may suggest some risk of maintaining the strength of key ratios in these areas. Alternative sources of liquidity support are considered satisfactory; however, even the strongest liquidity support will not improve the commercial paper rating of the issuer. The size of the entity may restrict its flexibility, and its relative position in the industry is not typically as strong as the "R-1 credit". Profitability trends, past and future, may be less favorable, earnings not as stable, and there are often negative qualifying factors present which could also make the entity more vulnerable to adverse changes in financial and economic conditions. LONG TERM DEBT RATINGS. These ratings are relevant for securities purchased by the Fund with a remaining maturity of 397 days or less, or for rating issuers of short-term obligations. Moody's Bonds (including municipal bonds) are rated as follows: Aaa: Judged to be the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, the changes that can be expected are most unlikely to impair the fundamentally strong position of such issues. Aa: Judged to be of high quality by all standards. Together with the "Aaa" group, they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as with "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than that of "Aaa" securities. Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating classification. The modifier "1" indicates that the obligation ranks in the higher end of its generic rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a ranking in the lower end of that generic rating category. Standard and Poor's Bonds (including municipal bonds maturing beyond three years) are rated as follows: AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA: Bonds rated "AA" differ from the highest rated obligations only in small degree. A strong capacity to meet its financial commitment on the obligation is very strong. Fitch AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of credit risk. They are assigned only in the case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA: Very High Credit Quality. "AA" ratings denote a very low expectation of credit risk. They indicate a very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. Because bonds rated in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated "F-1+". B-12 Appendix B Industry Classifications Aerospace & Defense Industrial Conglomerates Air Freight & Couriers Insurance Airlines Internet & Catalog Retail Asset Backed Securities Internet Software & Services Auto Components IT Services Automobiles Leasing & Factoring Beverages Leisure Equipment & Products Biotechnology Machinery Broker-Dealer Marine Building Products Media Capital Markets Metals & Mining Chemicals Multiline Retail Commercial Banks Multi-Utilities Commercial Finance Municipal Commercial Services & Supplies Office Electronics Communications Equipment Oil & Gas Computers & Peripherals Paper & Forest Products Construction & Engineering Personal Products Construction Materials Pharmaceuticals Consulting & Services Real Estate Consumer Finance Repurchase Agreements Containers & Packaging Road & Rail Distributors Semiconductor and Semiconductor Equipment Diversified Financial Services Software Diversified Telecommunication Special Purpose Financial Services Electric Utilities Specialty Retail Electrical Equipment Textiles, Apparel & Luxury Goods Electronic Equipment & Instruments Thrifts & Mortgage Finance Energy Equipment & Services Tobacco Food & Staples Retailing Trading Companies & Distributors Food Products Transportation Infrastructure Foreign Government U.S. Government Agencies-Full Faith and Credit Agencies Gas Utilities U.S. Government Agencies-Government Sponsored Enterprises Health Care Equipment & Supplies U.S. Government Instrumentalities Health Care Providers & Services U.S. Government Obligations Hotels Restaurants & Leisure Water Utilities Household Durables Wireless Telecommunication Services Household Products [OBJECT OMITTED] - -------- 1. In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent Trustees" in this Statement of Additional Information refers to those Trustees who are not "interested persons" of the Fund and who do not have any direct or indirect financial interest in the operation of the distribution plan or any agreement under the plan.
Oppenheimer Capital Preservation Fund Prospectus dated December 23, 2003 Oppenheimer Capital Preservation Fund is a mutual fund. It seeks high current income while seeking to maintain stable prices for its shares. The Fund invests mainly in the shares of other Oppenheimer mutual funds and buys special investment contracts from financial institutions such as banks that are intended to stabilize the Fund's share prices. The Fund's shares are offered only to retirement plans and 403(b)(7) custodial plans. The Fund is not a money market fund, and there is no guarantee that it will be able to maintain stable share prices. This Prospectus contains important information about the Fund's objective, its investment policies, strategies and risks. It also contains important information about how to buy or sell shares of the Fund and other account features. Please read this Prospectus carefully before you invest and keep it for future reference about As with all mutual funds, the your account. Securities and Exchange Commission has not approved or disapproved the Fund's securities nor has it determined that this Prospectus is accurate or complete. It is a criminal offense to represent otherwise. [logo] OppenheimerFunds The Right Way to Invest CONTENTS A B O U T T H E F U N D The Fund's Investment Objective and Principal Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance Fees and Expenses of the Fund About the Fund's Investments How the Fund is Managed A B O U T YOUR A C C O U N T How to Buy Shares Class A Shares Class B Shares Class C Shares Class N Shares Class Y Shares Special Investor Services AccountLink PhoneLink OppenheimerFunds Internet Website Retirement Plans How to Sell Shares By Mail By Telephone Redemption Fees How to Exchange Shares Shareholder Account Rules and Policies Dividends, Capital Gains and Taxes Financial Highlights 10 ABOUT THE FUND The Fund's Investment Objective and Principal Investment Strategies WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks high current income while seeking to maintain a stable value per share. WHAT DOES THE FUND MAINLY INVEST IN? The Fund is a special type of mutual fund known as a "fund of funds" because it invests in other mutual funds. The Fund normally invests at least 85% of its total assets in shares of other Oppenheimer funds, listed in the chart below, that seek current income. The Fund buys shares of the underlying Oppenheimer funds within the parameters listed below in normal market conditions. "Normal market conditions" are when securities markets and economic conditions are not unstable or adverse, in the judgment of the Fund's investment Manager, OppenheimerFunds, Inc. Oppenheimer Fund Normal Allocation of the Fund's Net Assets - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Oppenheimer Limited-Term Government Fund At least 65% but not more than 95% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Oppenheimer Bond Fund Not more than 20% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Oppenheimer Strategic Income Fund Not more than 20% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Oppenheimer U.S. Government Trust Not more than 15% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Oppenheimer Money Market Fund, Inc. At least 5% To try to maintain the prices of its shares at $10.00, the Fund also invests up to 15% of its net assets in specialized investment contracts, referred to as "wrapper agreements," that are issued by banks, insurance companies or other financial institutions. A wrapper agreement is a contract that obligates the wrapper provider to maintain the book value (the adjusted cost basis) of some or all of the assets in the Fund's portfolio. Under the terms of the Fund's current wrapper agreement, the Manager can vary the Fund's investment allocation in the other Oppenheimer funds within the parameters stated in the chart above. However, the Fund is required to invest at least the minimum amount of its assets stated in the chart in Oppenheimer Limited-Term Government Fund and Oppenheimer Money Market Fund. Those allocations can change under the wrapper agreement and might also change if the Fund buys other wrapper agreements. The Fund normally attempts to maintain an average effective portfolio duration of not more than three years (measured on a dollar-weighted basis). This is done to try to reduce the volatility of the values of its portfolio investments. In implementing this strategy, the Fund looks to the average effective portfolio duration of each of the underlying funds in which it invests. In return for the stable net asset value protection provided by a wrapper agreement, in most cases the shareholder foregoes any gains realized by the Fund from its portfolio investments. Those gains are paid in most cases to the provider of the wrapper agreement as part of the consideration for the risks it assumes. - -------------------------------------- What is "Duration"? Duration is a measure of the expected price volatility of a debt security or portfolio. "Effective portfolio duration" means the expected percentage change in the value of a bond resulting from a change in general interest rates (measured by a 1% change in U.S. Treasury security rates). Duration and interest rates are inversely related. For example, if a bond has an effective duration of three years, a 1% increase in general interest rates would be expected to cause the bond's value to decline about 3%. - -------------------------------------- HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? The Fund's portfolio manager allocates the Fund's assets mainly among shares of other Oppenheimer funds that seek current income, normally according to the allocation parameters described above, and within the investment restrictions contained in its wrapper agreement. Those restrictions typically impose credit quality, duration and percentage allocation standards that correspond to or may be stricter than the Fund's own investment policies. For example, the Fund's current wrapper agreement limits the Fund's investments in other Oppenheimer funds to the percentages in the chart above, along with U.S. Treasury obligations, money market instruments and derivative investments on U.S. Treasury securities, such as futures and options. Additionally, the Fund must maintain an average credit quality of at least "AA-" (as rated by Standard & Poor's Rating Services ("S&P")) and "Aa3" (as rated by Moody's Investors Service, Inc. ("Moody's")). The relatively greater emphasis on investments in Oppenheimer Limited-Term Government Fund is intended to help limit volatility in the Fund's share prices, because Oppenheimer Limited-Term Government Fund also seeks to maintain an effective average portfolio duration of not more than three years. If the Fund's other mutual fund investments become more volatile, the portfolio manager can increase the relative allocation of the Fund's assets in Oppenheimer Money Market Fund to up to 100%, because that fund seeks to maintain a stable share price of $1.00. The portfolio manager may also use U.S. government securities and money market investments that offer current income while helping reduce overall portfolio volatility. In selecting a wrapper agreement provider to seek to maintain share price stability, the Fund looks at the universe of financial institutions that offer such agreements and attempts to select the providers that have acceptable credit ratings and offer contract terms that are as favorable as the Fund can negotiate. The Fund can enter into multiple wrapper agreements to cover the assets of the Fund. WHO IS THE FUND DESIGNED FOR? Shares of the Fund are offered only to certain types of retirement plans. These include participant-directed qualified retirement plans and 403(b)(7) custodial plans that have special agreements with the Fund's Distributor. The Fund is designed for Plan participants who may wish to allocate a portion of their retirement plan portfolio to a fund seeking current income while seeking to maintain a stable share price. The Fund is not a money market fund. Because it does not seek capital appreciation in the value of its shares nor does it seek to distribute capital gains, it is not appropriate for investors whose main goal is growth in the value of their investment. While it may be appropriate for a portion of a retirement plan investment, the Fund is not a complete investment program. Main Risks of Investing in the Fund All investments have risks to some degree. The Fund's investments are subject to changes in their value from a number of factors, described below. Overall, there is the risk that security selection and asset allocation by the Manager might not be successful in seeking the Fund's investment objective, or could cause the Fund to underperform other funds having a similar objective. RISKS UNDER THE FUND'S WRAPPER AGREEMENTS. While a wrapper agreement is intended to offset changes in the book value of the Fund's investments and help the Fund maintain stable share prices at $10.00 per share, there can be no guarantee that the Fund's wrapper agreements will enable the Fund to meet those goals. Because there is no active trading market for wrapper agreements, they are illiquid investments, which means that the Fund cannot quickly sell or assign its position at an acceptable price. There is the risk that the provider of a wrapper agreement might default on its obligations to the Fund. If the Fund defaults in its obligations under a wrapper agreement, for example, by violating any investment limitations imposed under the agreement, the issuer might terminate the agreement. The universe of financial institutions offering wrapper agreements is limited, and there is the risk that the Fund might not be able to purchase wrapper agreements or might not be able to buy them at a competitive cost. It is also possible that the Fund might not be able to buy wrapper agreements to cover all of its portfolio investments. If a wrapper agreement were terminated, the Fund might not be able to secure a replacement agreement as to the assets covered by the terminated agreement. The Fund pays fees to the wrapper provider, increasing the Fund's expenses and reducing the Fund's overall returns. If any of those events were to occur, there is a risk that the price of the Fund's shares could fall below $10.00 per share. That could occur if market or economic conditions or political events affect the value of the Fund's investments, if prevailing interest rates rise causing the values of the Fund's investments in debt securities to fall, if the Fund's attempts to limit its effective average portfolio duration are unsuccessful, or if the issuer of a debt security the Fund buys defaults on its obligation to pay interest or repay principal. The Fund's Board of Trustees has valued the wrapper agreement pursuant to its fair valuation procedures at "contract value," that is, the difference between book value of the wrapper agreement and the current market value of the Fund's assets that are covered by the wrapper agreement. If the Board were to determine in good faith to assign a value to the wrapper agreement other than contract value, then the Fund may not be able to maintain a stable net asset value per share. RISKS OF INVESTING IN THE UNDERLYING FUNDS. Each of the underlying Oppenheimer funds in which the Fund invests has its own investment risks, and those risks can affect the value of each fund's shares and therefore the value of the Fund's investment. Because each of the underlying funds invests principally in debt securities, those funds are subject to interest rate risks and credit risks. Interest Rate Risks. The values of debt securities, including U.S. government securities, are subject to change when prevailing interest rates change. When interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally fall and they may sell at a discount from their face amount. The magnitude of those fluctuations will often be greater for debt securities having longer maturities than for shorter-term debt securities. Some of the underlying funds in which the Fund invests, such as Oppenheimer Bond Fund and Oppenheimer Strategic Income Fund, typically invest in debt securities that have longer maturities, and changes in values of the shares of those funds when interest rates change could make the value of the Fund's share prices fall unless the Fund's wrapper agreements are sufficient to enable the Fund to maintain stable share prices. Additionally, when interest rates fall, the underlying funds' investments in new securities will have lower yields, possibly reducing the Fund's income from those investments. Credit Risks. Debt securities are subject to credit risk. Credit risk is the risk that the issuer of a debt security might not make interest and principal payments on the security as they become due. If the issuer of a debt security held by an underlying fund fails to pay interest, that fund's income paid to its shareholders, including the Fund, might be reduced. If the issuer fails to repay principal, the value of that security and the underlying fund's shares might fall. A downgrade in an issuer's credit rating or other adverse news about an issuer can reduce the market value of that issuer's securities. Some of the underlying funds, such as Oppenheimer Bond Fund and Oppenheimer Strategic Income Fund, invest in securities that are below investment grade in credit quality, which have greater risks than U.S. government securities or other investment grade debt securities. Risks of Foreign Securities. Oppenheimer Strategic Income Fund typically invests substantial portions of its assets in foreign securities. While foreign securities may offer special investment opportunities, they also have special risks that can reduce the share prices and income of that underlying fund. 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. Currency rate changes can also affect the distributions the underlying funds make from the income they receive from foreign securities if foreign currency values change against the U.S. dollar. Foreign investing can result in higher transaction and operating costs for the underlying funds, reducing the income they pay to shareholders such as the Fund. HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the overall risk profile of the Fund and can affect the value of the Fund's investments, its investment performance and the prices of its shares. Particular investments and investment strategies also have risks. These risks mean that you can lose money by investing in the Fund. While under most circumstances, the net asset value of your shares should be the same upon redemption as when they were purchased, there is the risk that when you redeem your shares, they may be worth more or less than what you paid for them. There is no assurance that the Fund will achieve its objective. While the Fund's goal of maintaining stable share prices may reduce the volatility of investing in the Fund while seeking current income, because the Fund will not seek capital gains or growth in the value of its shares, the costs of its wrapper agreements will reduce its returns and there is the risk that its total return may be less than an investment in funds that focus on stocks or higher-yielding bonds. - ------------------------------------------------------------------------------ An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. - ------------------------------------------------------------------------------ The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance (for its Class A shares) from year to year for the full calendar years since the Fund's inception and by showing how the average annual total returns of the Fund's shares compare to those of a broad-based market index. The after-tax returns for the other classes of shares will vary. The Fund's past investment performance is not necessarily an indication of how the Fund will perform in the future. Annual Total Returns (Class A) (as of 12/31 each year) [See appendix to prospectus for data in bar chart showing annual total returns] Sales charges and taxes are not included in the calculations of return in this bar chart, and if those charges and taxes were included, the returns would be less than those shown. For the period 1/1/03 to 9/30/03, the cumulative return (not annualized) before taxes for Class A shares was 1.60%. During the periods shown in the bar chart, the highest return (not annualized) before taxes for a calendar quarter was 1.56% (1st Qtr'00) and (1st Qtr'01) and the lowest return (not annualized) before taxes for a calendar quarter was 0.83% (4th Qtr'02). Average Annual Total Returns 1 Year 5 Years (or life of class, if for the periods ended December 31, 2002 less) - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Class A Shares (inception 9/27/99) Return Before Taxes 1.09% 4.52% - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Lehman Brothers 1-3 year Government 6.01% 7.15% Bond Index (reflects no deduction for fees, expenses or taxes) - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Class B Shares (inception 9/27/99) 0.11% 4.42% - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Class C Shares (inception 9/27/99) 3.08% 4.96% - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Class N Shares (inception 3/1/01) 3.86% 5.32% - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Class Y Shares (inception 9/27/99) 4.88% 5.88% 1. From 9/30/99 The Fund's average annual total returns include the applicable sales charges: for Class A, the current maximum initial sales charge of 3.50%; for Class B, the contingent deferred sales charges of 4% (1-year) and 2% (life of class); and for Class C and Class N, the 1% contingent deferred sales charge for the 1-year period. There is no sales charge for Class Y shares. The returns measure the performance of a hypothetical account and assume that all dividends and capital gains distributions have been reinvested in additional shares. The performance of the Fund's Class A shares is compared to the Lehman Brothers 1-3 year Government Bond Index, an unmanaged index of U.S. government securities with maturities of 1 to 3 years. The index performance includes the reinvestment of income but does not reflect transaction costs, fees, expenses or taxes. The Fund's investments will vary from the securities in the index. Fees and Expenses of the Fund The Fund pays a variety of expenses directly for management of its assets, administration, distribution of its shares and other services. Those expenses are subtracted from the Fund's assets to calculate the Fund's net asset values per share. All shareholders therefore pay those expenses indirectly. In addition, the Fund will indirectly bear its pro-rata share of the expenses of the underlying mutual funds in which it invests. Shareholders pay other expenses directly, such as sales charges and account transaction charges. The following tables are meant to help you understand the fees and expenses you may pay if you buy and hold shares of the Fund through a retirement plan. The numbers below are based on the Fund's expenses during its fiscal year ended October 31, 2003. Shareholder Fees (charges paid directly from your investment): Class A Class B Class C Class N Class Y Shares Shares Shares Shares Shares - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Maximum Sales Charge (Load) on purchases (as % of offering 3.50% None None None None price) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Maximum Deferred Sales Charge Load) None1 4%2 1%3 1%5 None (as % of the lower of the original offering price or redemption proceeds) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Redemption Fee 2.0%4 2.0%4 2.0%4 2.0%4 2.0%4 1. A contingent deferred sales charge may apply to redemptions of investments of $500,000 or more of Class A shares. See "How to Buy Shares" for details. 2. Applies to redemptions in first year after purchase. The contingent deferred sales charge declines to 1% in the fifth year and is eliminated after that. 3. Applies to shares redeemed within 12 months of purchase. 4. Certain redemptions of shares that are made on less than 12 months' prior written notice to the Fund are subject to a redemption fee of 2% of the proceeds of the redemption. Please refer to "Redemption Fees" in "How to Sell Shares," below for details. 5. Applies to shares redeemed within 18 months of a retirement plan's first purchase of Class N shares. Combined Annual Fund Operating Expenses: (% of average daily net assets) Class A Class B Class C Class N Class Y Shares Shares Shares Shares Shares - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Management Fees 0.74% 0.74% 0.74% 0.74% 0.74% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Distribution and/or Service 0.25% 1.00% 1.00% 0.25% N/A (12b-1) Fees - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other Expenses 0.82% 1.14% 1.04% 0.57% 0.33% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total Annual Operating Expenses 1.81% 2.88% 2.78% 1.56% 1.07% The Combined Annual Fund Operating Expenses table includes the Direct Annual Fund Operating Expenses (as shown in the table below) and the fees and expenses indirectly incurred by the Fund through its investments in shares of the underlying Oppenheimer funds. The expenses of the underlying funds are based on their respective most recent fiscal year-end. The allocation of the Fund's net assets among the underlying Oppenheimer funds was as follows at October 31, 2003: 68% in Class Y shares of Limited Term Government Fund, 10% in Class Y shares of Bond Fund, 5% in shares of Money Market Fund, Inc. and 17% in Class Y shares of Strategic Income Fund. While the Manager does not anticipate changing that allocation often, if the allocation is changed, the Combined Annual Fund Operating Expenses of the Fund in future years could be more than those shown above. Direct Annual Fund Operating Expenses (deducted from Fund assets): (% of average daily net assets) Class A Class B Class C Class N Class Y Shares Shares Shares Shares Shares - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Management Fees 0.30% 0.30% 0.30% 0.30% 0.30% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Distribution and/or Service 0.25% 1.00% 1.00% 0.25% N/A (12b-1) Fees - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other Expenses 0.71% 1.03% 0.93% 0.46% 0.22% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total Annual Operating Expenses 1.26% 2.33% 2.23% 1.01% 0.52% The Direct Annual Fund Operating Expenses table includes those expenses paid directly by the Fund. The "Management Fees" in the table above are the fees paid directly by the Fund as reduced by the management fees paid to the Manager by the underlying funds on assets representing investments by the Fund in shares of those underlying funds. That is done so that shareholders of the Fund do not pay direct and indirect management fees in excess of 0.75%. "Other Expenses" include transfer agent fees, custodial fees, and accounting and legal expenses that the Fund pays. The "Other Expenses" in the tables are based on, among other things, the fees the Fund would have paid if the transfer agent had not waived a portion of its fee under a voluntary undertaking to the Fund to limit transfer agent fees to 0.35% of average daily net assets for all classes. That undertaking may be amended or withdrawn at any time. After the waiver, the actual "Other Expenses" and "Total Annual Operating Expenses" under the Direct Annual Fund Operating Expenses table as percentages of average daily net assets were 0.54% and 1.09% for Class A, 0.57% and 1.87% for Class B and 0.57% and 1.87% for Class C. Class N and Class Y expenses were the same as shown above. EXAMPLES. The following examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The examples, which are based on the Combined Annual Fund Operating Expenses, assume that you invest $10,000 in a class of shares of the Fund for the time periods indicated and reinvest your dividends and distributions. The first example assumes that you redeem all of your shares at the end of those periods and that the redemption fee does not apply. The second example assumes that you keep your shares and that the redemption fee does not apply. The third example assumes that you redeem all of your shares at the end of those periods and that the redemption fee applies. All three examples also assume that your investment has a 5% return each year and that the class's operating expenses remain the same. Your actual costs may be higher or lower because expenses will vary over time. Based on these expense assumptions your expenses would be as follows: If shares are redeemed 1 Year 3 Years 5 Years 10 Years (no redemption fee): - -------------------------------------------------------------- - -------------------------------------------------------------- Class A Shares $474 $736 $1,017 $1,819 - -------------------------------------------------------------- - -------------------------------------------------------------- Class B Shares $636 $927 $1,345 $2,1511 - -------------------------------------------------------------- - -------------------------------------------------------------- Class C Shares $326 $697 $1,195 $2,565 - -------------------------------------------------------------- - -------------------------------------------------------------- Class N Shares $203 $322 $558 $1,236 - -------------------------------------------------------------- - -------------------------------------------------------------- Class Y Shares $53 $167 $291 $653 If shares are not redeemed: (no redemption fee) 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------- - -------------------------------------------------------------- Class A Shares $474 $736 $1,017 $1,819 - -------------------------------------------------------------- - -------------------------------------------------------------- Class B Shares $236 $727 $1,245 $2,1511 - -------------------------------------------------------------- - -------------------------------------------------------------- Class C Shares $226 $697 $1,195 $2,565 - -------------------------------------------------------------- - -------------------------------------------------------------- Class N Shares $103 $322 $558 $1,236 - -------------------------------------------------------------- - -------------------------------------------------------------- Class Y Shares $53 $167 $291 $653 If shares are redeemed 1 Year 3 Years 5 Years 10 Years (with redemption fee): - -------------------------------------------------------------- - -------------------------------------------------------------- Class A Shares $527 $900 $1,296 $2,402 - -------------------------------------------------------------- - -------------------------------------------------------------- Class B Shares $691 $1,092 $1,618 $2,7171 - -------------------------------------------------------------- - -------------------------------------------------------------- Class C Shares $381 $862 $1,469 $3,109 - -------------------------------------------------------------- - -------------------------------------------------------------- Class N Shares $259 $493 $850 $1856 - -------------------------------------------------------------- - -------------------------------------------------------------- Class Y Shares $109 $340 $590 $1,306 In the first example, expenses include the initial sales charge for Class A and the applicable Class B, Class C and Class N contingent deferred sales charges but do not include the redemption fee. In the second example, Class A expenses include the sales charge, but Class B, Class C and Class N expenses do not include contingent deferred sales charges and do not include the redemption fee. In the third example, expenses include the initial sales charge for Class A and the applicable Class B, Class C and Class N contingent deferred sales charge and the 2% redemption fee. There are no sales charges on Class Y shares. 1. Class B expenses for years 7 through 10 are based on Class A expenses, since Class B shares automatically convert to Class A shares 72 months after purchase. About the Fund's Investments THE FUND'S PRINCIPAL INVESTMENT POLICIES AND RISKS. The allocation of the Fund's portfolio among different types of investments will vary over time based upon the Manager's evaluation of economic and market trends. The Fund's portfolio might not always include all of the different types of investments described in this Prospectus. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce risks by allocating the Fund's investments in underlying mutual funds to seek to keep effective average portfolio duration to not more than three years and to help reduce overall share price volatility, and by purchasing wrapper agreements. However, changes in the overall market prices of debt securities and the income they pay can occur at any time, and the Fund's share prices and income could fluctuate. Investments in Other Mutual Funds. Under normal circumstances, the Fund invests mainly in shares of Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund, and Oppenheimer Money Market Fund, Inc. (those funds are referred to as the "underlying funds"). These underlying funds were chosen based on the Manager's determination that they could provide a high current return while being acceptable investments under wrapper agreements. Following are brief descriptions of the investment objectives and policies of the underlying funds. Those objectives and policies may change from time to time without the need for approval by the Fund's shareholders. Additional information about the underlying funds is contained in the Statement of Additional Information and in the respective prospectus for each underlying fund. To obtain a prospectus of any of the underlying funds, simply call the toll-free number listed on the back cover of this Prospectus. o Oppenheimer Limited-Term Government Fund. This fund seeks high current return and safety of principal. The fund invests at least 80% of its net assets in debt securities issued by the U.S. government, its agencies or instrumentalities, repurchase agreements on those securities and hedging instruments. The fund may invest up to 20% of its assets in mortgage-backed securities that are not issued or guaranteed by the U.S. government, its agencies or instrumentalities, asset-backed securities, investment grade corporate debt obligations and certain other high quality debt obligations. It also seeks to maintain an average effective portfolio duration of not more than three years, to help reduce overall share price volatility. This fund can also write covered calls and use certain types of securities called "derivative investments" and hedging instruments to try to manage duration, enhance income and manage investment risks. o Oppenheimer Bond Fund. This fund seeks a high level of current income by investing mainly in debt instruments. Under normal market conditions, this fund invests at least 80% of its net assets in debt securities and at least 65% of its total assets in investment grade securities. These include investment-grade debt securities rated BBB or above by S&P or Baa or above by Moody's or another nationally recognized statistical rating organization, or unrated securities that are of comparable quality in the opinion of the Manager. The Fund also buys securities issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities or obligations secured by such securities. The fund can invest up to 35% of its total assets in high yield instruments that are below investment grade (commonly referred to as "junk bonds") issued by foreign or domestic issuers. Although non-investment grade securities generally offer the potential for higher income than investment grade securities, they may be subject to greater market fluctuations and a greater risk of default because of the issuer's low creditworthiness. o Oppenheimer U.S. Government Trust. This fund seeks high current income consistent with preservation of capital. This fund invests mainly in debt instruments issued or guaranteed by the U.S. government or its agencies or instrumentalities, including mortgage-backed securities, and repurchase agreements on U.S. government securities. This fund may also invest in "stripped" mortgage-related securities. Stripped mortgage-related securities usually have two classes that receive different proportions of the interest and principal payments. In certain cases, one class will receive all of the interest payments, while the other class will receive all of the principal value on maturity. These investments are subject to greater volatility in price when prevailing interest rates change. Under normal market conditions, the fund invests at least 80% of its net assets in U.S. government securities. o Oppenheimer Strategic Income Fund. This fund seeks high current income by investing mainly in debt securities in three market sectors: (1) debt securities of foreign governments and companies, (2) U.S. government securities, and (3) lower-rated, high yield debt securities of U.S. and foreign companies. Under normal market conditions, the fund will invest some of its assets in each of those three sectors, but the fund is not required to invest any fixed amount of its assets in any sector. The fund can invest up to 100% of its assets in any one sector if the Manager believes that in doing so the Strategic Income Fund can achieve its objective without undue risk. o Oppenheimer Money Market Fund. This fund seeks the maximum current income that is consistent with stability of principal. It invests in short-term high-quality money market instruments. They include short-term U.S. government securities, repurchase agreements, certificates of deposit and commercial paper. The fund attempts to maintain a stable share price of $1.00 per share, but there is no guarantee it will do so. The Fund can invest up to 100% of its net assets in shares of Oppenheimer Money Market Fund for temporary defensive purposes. Wrapper Agreements. The Fund intends to purchase wrapper agreements from insurance companies, banks or other financial institutions that are rated, at the time of the Fund's purchase of the wrapper, in one of the top three long-term rating categories of Moody's or S&P. Each wrapper agreement the Fund enters into will obligate the issuer of the wrapper to maintain the "book value" of a portion of the Fund's investments if certain events occur. The Fund may elect not to cover some of its assets with wrapper agreements, such as debt securities that have a remaining maturity of 60 days or less and any cash or other short-term investments. Under the terms of a typical wrapper agreement, if the assets covered by the agreement plus accrued income are insufficient to provide proceeds for redemption of Fund shares by a retirement plan investing in the Fund, the wrapper provider becomes obligated to pay to the Fund its share of the amount required to redeem the shares at their book value (which will normally be $10.00 per share). Under a wrapper agreement, the issuer may be called upon to make payments to the Fund to enable the Fund to pay redemption proceeds for its shares based on the purchase price (the "book value") of the Fund's assets covered by the agreement, rather than the market value of those covered assets. The book value of the covered assets is the price the Fund paid for them plus interest on those assets accrued at a rate calculated pursuant to a formula specified in the wrapper agreement. That rate is referred to as the "crediting rate." There may be an adjustment to the crediting rate if the Fund owns any defaulted securities that are covered assets under the wrapper agreement. The crediting rate normally is reset monthly. However, if there is a material change in interest rates or purchases or redemptions of Fund shares, the crediting rate may be reset more frequently than monthly. The crediting rate can change as the difference between market value and book value of the covered assets changes. As a result, the crediting rate will generally reflect movements in prevailing interest rates. However, at times it may be more or less than the prevailing interest rate or the actual income earned on the covered assets. The degree of any increase or decrease in the crediting rate will also depend on the duration of the Fund's portfolio. Since any differences between the market value and book value of a covered asset are amortized over a period equal to the duration of the Fund, any differences between book value and market value will be amortized faster as duration decreases and more slowly as the Fund's portfolio duration increases. The crediting rate may also be affected by increases and decreases of the amount of covered assets under the wrapper agreement as a result of the purchase and redemption of Fund shares resulting from contributions to the retirement plans that invest in the Fund and distributions from those plans. In no event will the crediting rate under a wrapper agreement the Fund enters into fall below zero. The terms of the wrapper agreements may vary as to exactly when payments must actually be made between the Fund and the wrapper provider. In most cases, payments will be due under a wrapper agreement only upon termination of the agreement, upon total liquidation of the assets covered by the agreement, or when the market value of the covered assets falls below a certain percentage of their book value. Certain terminations of a wrapper agreement, for example when a new wrapper provider is substituted for the original wrapper provider, might not trigger a payment obligation. Additionally, a wrapper provider's obligation to make payments for Plan withdrawals (as opposed to those directed by Plan participants) may require adjustments to the crediting rate and increases in the Fund's holdings of short term investments, which might adversely affect the return of the Fund. If the Fund had to liquidate all of its portfolio assets covered under a wrapper agreement to raise cash to pay redemption proceeds for Fund shares, the wrapper provider may be obligated to pay the Fund all or some of the difference between the market value and book value of the covered assets, if market value is less than the book value. If, on the other hand, the market value of the liquidated covered assets is greater than the corresponding book value, the Fund may be obligated to pay all or some of the difference to the wrapper provider. CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of Trustees can change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Other investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the investment techniques and strategies described below. The Manager might not always use all of them. These investments and techniques have risks, although some are designed to help reduce overall investment or market risks. Some investments and investment techniques may be limited from time to time under the terms of a wrapper agreement. U.S. Treasury Obligations. The Fund can invest in securities issued or guaranteed by the U.S. Treasury. These include Treasury bills (which have maturities of one year or less when issued), Treasury notes (which have maturities of from one to 10 years), and Treasury bonds (which have maturities of more than 10 years). U.S. Treasury securities are backed by the full faith and credit of the United States as to timely payments of interest and repayments of principal. The Fund can also buy U. S. Treasury securities that have been "stripped" of their coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury securities described below and Treasury Inflation-Protection Securities ("TIPS"). Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments based on U.S. Treasury securities. In general terms, a "derivative" investment is an investment contract whose value depends on or is derived from the value of an underlying asset, interest rate or index. In the broadest sense, options, futures contracts, and other hedging instruments the Fund can use may be considered "derivative investments." In addition to using hedging instruments, the Fund can use other derivative investments because they offer the potential for increased income. Derivatives have special risks. If the issuer of a derivative does not pay the amount due, the Fund can lose money on the investment. Also, the underlying security or investment on which the derivative is based, and the derivative itself, might not perform the way the Manager expected it to. If that happens, the Fund's share prices could fall, and the Fund could get less income than expected or its hedge might be unsuccessful. Certain derivative investments held by the Fund may be illiquid, making it difficulty for the Fund to sell them quickly at an acceptable price. o Hedging. The Fund can buy and sell futures contracts, put and call options, forward contracts and options on futures and broadly-based securities indices. These are all referred to as "hedging instruments." The Fund does not use hedging instruments for speculative purposes, and has limits on its use of them under its investment policies and wrapper agreement. The Fund is not required to use hedging instruments in seeking its objective. The Fund could buy and sell options and futures to try to manage interest rate risks and its portfolio duration. To the extent hedging instruments reduce fluctuations in the market value of the assets cover by a wrapper agreement, they will also reduce the risk exposure to the wrapper provider under that agreement. Options trading involves the payment of premiums and has special tax effects on the Fund. There are also special risks in particular hedging strategies. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. In writing a put, there is a risk that the Fund may be required to buy the underlying security at a disadvantageous price. If the Manager used a hedging instrument at the wrong time or judged market conditions incorrectly, the hedge might fail and the strategy could reduce the income the Fund receives. 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. How the Fund is Managed THE MANAGER. The Manager chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Fund's Board of Trustees, under an investment advisory agreement that states the Manager's responsibilities. The agreement sets the fees the Fund pays to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment advisor since January 1960. The Manager and its subsidiaries and controlled affiliates managed more than $135 billion in assets as of September 30, 2003, including other Oppenheimer funds with more than 7 million shareholder accounts. The Manager is located at Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Portfolio Manager. Since April 23, 2002, the Fund is managed by a portfolio management team comprised of Angelo Manioudakis and other investment professionals selected from the Manager's high-grade bond team in its fixed-income department. This portfolio management team is primarily responsible for the day-to-day management of the Fund's portfolio. Mr. Manioudakis is a Senior Vice President of the Manager. Prior to joining the Manager in April 2002, he was Executive Director and portfolio manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment Management (from August 1993 to April 2002). Advisory Fees. Under the investment advisory agreement, the Fund is required to pay the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. That fee is reduced by the management fees received by the Manager from the underlying funds attributable to the Fund's investments in shares of those underlying funds. This assures that the Manager is not paid twice for managing the same assets, and the management fee paid directly and indirectly by the Fund to the Manager shall not exceed the fee rates listed above. The Fund's management fee for its last fiscal year ended October 31, 2003 was 0.30% of average annual net assets for each class of shares. ABOUT YOUR ACCOUNT How to Buy Shares You can buy shares several ways, as described below. The Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing agents to accept purchase (and redemption) orders. The Distributor, in its sole discretion, may reject any purchase order for the Fund's shares. Shares of the Fund are offered only to retirement plans that meet criteria set by the Distributor. Purchases of Fund shares on behalf of participants in retirement plans that invest in the Fund are handled in accordance with the respective Plan's provisions. Plan participants should contact their Plan administrator to find out how to instruct the Plan Administrator to buy shares of the Fund for their account. It is the responsibility of the Plan administrator or other Plan service provider to forward purchase instructions to the Fund's Distributor. The following explanation of how to purchase Fund shares is intended for Plan administrators and Plan service providers. Buying Shares Through A Dealer. Retirement plans can buy shares through any dealer, broker or financial institution that has a sales agreement with the Distributor. The dealer will place the purchase order with the Distributor on behalf of the Plan. Buying Shares Through the Distributor. The Plan administrator or trustee should complete the appropriate OppenheimerFunds retirement plan 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 the Plan's agent in buying the shares. However, we recommend that you discuss your investment with a financial advisor before you make a purchase to be sure that the Fund is appropriate for your retirement plan. o Paying by Federal Funds Wire. Shares purchased through the Distributor may be paid for by Federal Funds wire. The minimum investment is $2,500. Before sending a wire, call the Distributor's Wire Department at 1.800.225.5677 to notify the Distributor of the wire and to receive further instructions. o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you pay for shares by electronic payments through the Automated Clearing House (ACH) system. You can provide those instructions automatically by telephone instructions using OppenheimerFunds PhoneLink described below. Please refer to "AccountLink," below for more details. How Much Must You Invest? A retirement plan can buy Fund shares with a minimum initial investment of $500 and make subsequent investments with as little as $50. The minimum investment requirement does not apply to reinvesting dividends from the Fund or other Oppenheimer funds (a list of them appears in the Statement of Additional Information, or a Plan can ask its dealer or call the Transfer Agent), or reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. At What Price Are Shares Sold? Shares are sold at their offering price which is the net asset value per share plus any initial sales charge that applies. The offering price that applies to a purchase order is based on the next calculation of the net asset value per share that is made after the Distributor receives the purchase order at its offices in Colorado, or after any agent appointed by the Distributor receives the order and timely sends it to the Distributor. Net Asset Value. The Fund calculates the net asset value of each class of shares as of the close of The New York Stock Exchange (the "Exchange"), on each day the Exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern time, but may close earlier on some days. All references to time in this Prospectus mean "Eastern time." The net asset value per share is determined 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. To determine net asset value, the Fund's Board of Trustees has established procedures to value the Fund's securities in general, based on market value. The Board has adopted special procedures for valuing illiquid and restricted securities and obligations for which market values cannot be readily obtained including the wrapper agreement purchased by the Fund The staff of the Securities and Exchange Commission has inquired of registered "stable value" mutual funds, including this Fund, as to the valuation methodology used by such funds to value their wrapper agreements. At the present time, the Fund has not received any indication whether or when the Securities and Exchange Commission will take any action as a result of their review of this matter. If the Securities and Exchange Commission determines that the valuation method currently used by "stable value" mutual funds is no longer acceptable, the Fund may be required to use a different accounting methodology under which the fair value of the Fund's wrapper agreements could fluctuate daily, and if that were to occur, the Fund would probably not be able to maintain a stable net asset value per share. As a result, the Fund's net asset value could be greater or less than $10 per share on a daily basis. The Offering Price. To receive the offering price for a particular day, the Distributor or its designated agent must receive your order by the time the Exchange closes that day. If your order is received on a day when the Exchange is closed or after it has closed, the order will receive the next offering price that is determined after your order is received. Buying Through a Dealer. If you buy shares through a dealer, your dealer must receive the order by the close of the Exchange and transmit it to the Distributor so that it is received before the Distributor's close of business on a regular business day (normally 5:00 P.M.) to receive that day's offering price. Otherwise, the order will receive the next offering price that is determined. - ------------------------------------------------------------------------------ What Classes of Shares Does the Fund Offer? The Fund offers Plans five different classes of shares. The different classes of shares represent investments in the same portfolio of securities, but the classes are subject to different expenses and will likely have different share prices. When you buy shares, be sure to specify the class of shares. If you do not choose a class, your investment will be made in Class A shares. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class A Shares. If you buy Class A shares, you pay an initial sales charge. The amount of that sales charge will vary depending on the amount you invest. The sales charge rates are listed in "How Can You Buy Class A Shares?" below. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class B Shares. If you buy Class B shares, you pay no sales charge at the time of purchase, but you will pay an annual asset-based sales charge. If you sell your shares within five years of buying them, you will normally pay a contingent deferred sales charge. That contingent deferred sales charge varies depending on how long you own your shares, as described in "How Can You Buy Class B Shares?" below. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class C Shares. If you buy Class C shares, you pay no sales charge at the time of purchase. If you sell your shares within 12 months of buying them, you will normally pay a contingent deferred sales charge of 1%, as described in "How Can You Buy Class C Shares?" below. - ------------------------------------------------------------------------------ Class N Shares. If you buy Class N shares (available only through certain retirement plans), you pay no sales charge at the time of purchase, but you will pay an annual asset-based sales charge. If you sell your shares within 18 months of the retirement plan's first purchase of Class N shares, you may pay a contingent deferred sales charge of 1%, as described in "How Can You Buy Class N Shares?" below. Class Y Shares. Class Y shares are offered only to retirement plans that have special agreements with the Distributor. WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an appropriate investment for your Plan, the decision as to which class of shares is best suited to your Plan depends on a number of factors that you should discuss with your financial advisor. Some factors to consider are how much your Plan intends to invest and how long the Plan intends to hold the investment. 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 discussion below is not intended to be investment advice or a recommendation, because each investor's financial considerations are different. The discussion below assumes that you will purchase only one class of shares and not a combination of shares of different classes. Of course, these examples are based on approximations of the effect of current sales charges and expenses projected over time, and do not detail all of the considerations in selecting a class of shares. You should analyze your options carefully with your financial advisor before making that choice. How Long Do You Expect to Hold Your Investment? While future financial needs cannot be predicted with certainty, knowing how long the Plan expects to hold its 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 the Plan will 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, compared to the effect over time of higher class-based expenses on shares of Class B, Class C or Class N. For retirement plans that qualify to purchase Class N shares, Class N shares will generally be more advantageous than Class B and Class C shares. o Investing for the Shorter Term. While the Fund is meant to be a long-term investment, if the Plan has a relatively short-term investment horizon (that is, it will hold shares for not more than five years), you should probably consider purchasing Class A or Class C shares on behalf of the Plan rather than Class B shares. That is because of the effect of the Class B contingent deferred sales charge if shares are redeemed within five 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 the Plan sells after holding them one year. However, if the Plan intends to invest more than $100,000 for the shorter term, then as the Plan's investment horizon increases toward five 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 the Plan's account over the longer term than the reduced front-end sales charge available for larger purchases of Class A shares. The Distributor normally will not accept purchase orders of $250,000 or more of Class B shares or $1 million or more of Class C shares from a single Plan. o Investing for the Longer Term. If the Plan is investing less than $100,000 for the longer-term, and does not expect to need access to its money for seven years or more, Class B shares may be appropriate. Of course, these examples are based on approximations of the effect of current sales charges and expenses projected over time, and do not detail all of the considerations in selecting a class of shares. You should analyze your options carefully with your financial advisor before making that choice. Are There Differences in Account Features That Matter to You? Some account features may not be available to Class B, Class C and Class N shareholders. Other features may not be advisable because of the effect of the contingent deferred sales charge for Class B, Class C and Class N shareholders. Therefore, you should carefully review how the Plan will use its investment account before deciding which class of shares to buy. Additionally, the dividends payable to Class B, Class C and Class N shareholders will be reduced by the additional expenses borne by those classes that are not borne by Class A or Class Y shares, such as the Class B, Class C and Class N asset-based sales charges described below and in the Statement of Additional Information. Share certificates are only available for Class A shares. How Do Share Classes Affect Payments to Your Broker? A financial advisor may receive different compensation for selling one class of shares than for selling another class. It is important to remember that Class B, Class C and Class N contingent deferred sales charges and asset-based sales charges have the same purpose as the front-end sales charge on sales of Class A shares: to compensate the Distributor for concessions and expenses it pays to dealers and financial institutions for selling shares. The Distributor may pay additional 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. SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix B to the Statement of Additional Information details the conditions for the waiver of sales charges that apply in certain cases, and the special sales charge rates that apply to purchases of shares of the Fund by certain groups, or in special types of transactions. To receive a waiver or special sales charge rate, you must advise the Distributor when purchasing shares or the Transfer Agent when redeeming shares that a special condition applies. HOW CAN YOU BUY 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 other cases, reduced sales charges may be available, as described below or in the Statement of Additional Information. 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 or allocated to your dealer as a concession. The Distributor reserves the right to re-allow the entire concession to dealers. The current sales charge rates and concessions paid to dealers and brokers are as follows: - --------------------------------------------------------------------------------- Front-End Sales Front-End Sales Charge As a Charge As a Concession Percentage of Percentage of Net As Percentage of Amount of Purchase Offering Price Amount Invested Offering Price - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Less than $100,000 3.50% 3.63% 3.00% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- $100,000 or more 3.00% 3.09% 2.50% but less than $250,000 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- $250,000 or more but less than 2.50% 2.56% 2.00% $500,000 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- $500,000 or more but 2.00% 2.04% 1.50% less than $1 million - --------------------------------------------------------------------------------- Can You Reduce Class A Sales Charges? A Plan may be eligible to buy Class A shares at reduced sales charge rates under the Fund's "Right of Accumulation" or a Letter of Intent, as described in "Reduced Sales Charges" in the Statement of Additional Information. 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 aggregating $1 million or more or on purchases by particular types of retirement plans that were permitted to purchase such shares prior to March 1, 2001 ("grandfathered retirement accounts"). The Distributor pays dealers of record a concession of 0.25% on such purchases. The concession will not be paid on purchases of shares by exchange or that were previously subject to a front-end sales charge and dealer concession. If you redeem any of those shares within an 18 month holding period measured from the beginning 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. The contingent deferred sales charge will be equal to 1.0% of the lesser of: o the aggregate net asset value of the redeemed shares at the time of redemption (excluding shares purchased by reinvestment of dividends or capital gain distributions) or o the original net asset value of the redeemed shares. The Class A contingent deferred sales charge will not exceed the aggregate amount of the concessions the Distributor paid to your dealer on all purchases of Class A shares of all Oppenheimer funds you made that were subject to the Class A contingent deferred sales charge. Purchases by Certain Retirement Plans. There is no initial sales charge on purchases of Class A shares of any one or more Oppenheimer funds by retirement plans that have $10 million or more in plan assets and that have entered into a special agreement with the Distributor and by retirement plans which are part of a retirement plan product or platform offered by certain banks, broker-dealers, financial advisors, insurance companies or recordkeepers which have entered into a special agreement with the Distributor. On such purchases the Distributor currently pays dealers of record concessions in an amount equal to 0.25% of the purchase price of Class A shares by those retirement plans from its own resources at the time of sale, subject to certain exceptions as described in the Statement of Additional Information. There is no contingent deferred sales charge upon the redemption of such shares. HOW CAN YOU BUY 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 five years from the beginning of the calendar month of their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. 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. The amount of the contingent deferred sales charge will depend on the number of years since the Plan invested and the dollar amount being redeemed, according to the following schedule for the Class B contingent deferred sales charge holding period: - ------------------------------------------------------------------------------- Contingent Deferred Sales Charge on Years Since Beginning of Month in Redemptions in That Year Which Purchase Order was Accepted (As % of Amount Subject to Charge) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 0 - 1 4.0% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1 - 2 3.0% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 2 - 3 2.0% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 3 - 4 2.0% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 4 - 5 1.0% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- More than 5 None - ------------------------------------------------------------------------------- In the table, a "year" is a 12-month period. In applying the contingent deferred sales charge, all purchases are considered to have been made on the first regular business day of the month in which the purchase was made. Automatic Conversion of Class B Shares. Class B shares automatically convert to Class A shares 72 months after a Plan purchases them. This conversion feature relieves Class B shareholders 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 any Class B shares a Plan holds convert, a prorated portion of Class B shares that were acquired by the reinvestment of dividends and distributions on the converted share will also convert to Class A shares. For further information on the conversion feature and its tax implications, see "Class B Conversion" in the Statement of Additional Information. HOW CAN YOU BUY 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 a holding period of 12 months from the beginning of the calendar month of their purchase, a contingent deferred sales charge of 1.0% will be deducted from the redemption proceeds. 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. How Can You Buy Class N Shares? Class N shares are offered only to retirement plans (including 403(b) plans) that purchase $500,000 or more of Class N shares of one or more Oppenheimer funds or through group retirement plans (which do not include 403(b) plans) that have assets of $500,000 or more or 100 or more eligible participants. See "Availability of Class N shares" in the Statement of Additional Information for other circumstances where Class N shares are available for purchase. A contingent deferred sales charge of 1.0% will be imposed upon the redemption of Class N shares, if: o The group retirement plan is terminated or Class N shares of all Oppenheimer funds are terminated as an investment option of the plan and Class N shares are redeemed within 18 months after the plan's first purchase of Class N shares of any Oppenheimer fund, or o With respect to a 403(b) plan, Class N shares are redeemed within 18 months of the plan's first purchase of Class N shares of any Oppenheimer fund. Retirement plans that offer Class N shares may impose charges on Plan participant accounts. The procedures for buying, selling, exchanging and transferring the Fund's other classes of shares (other than the time those orders must be received by the Distributor or Transfer Agent in Colorado) and the special account features applicable to purchasers of those other classes of shares described elsewhere in this prospectus do not apply to Class N shares offered through a group retirement plan. Instructions for buying, selling, exchanging or transferring Class N shares offered through a group retirement plan must be submitted by the Plan, not by Plan participants for whose benefit the shares are held. WHO CAN BUY CLASS Y SHARES? Class Y shares are sold at net asset value per share without sales charge directly to certain employee benefit plans that have special agreements with the Distributor for this purpose. While Class Y shares are not subject to initial or contingent deferred sales charges or asset-based sales charges, a broker-dealer arranging purchases of Class Y shares for Plan accounts may impose charges on those purchases. The procedures for buying, selling, exchanging, or transferring the Fund's other classes of shares (other than the time those orders must be received by the Distributor or Transfer Agent in Colorado), and the special account features available to purchasers of those other classes of shares described elsewhere in this Prospectus may not apply to Class Y shares. Instructions for buying, selling, exchanging or transferring Class Y shares must be submitted by the Plan, not by Plan participants for whose benefit the shares are held. DISTRIBUTION AND SERVICE (12b-1) PLANS. Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions quarterly for providing personal service and maintenance of accounts of their customers that hold Class A shares. Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares to pay the Distributor for its services and costs in distributing Class B, Class C and Class N shares and servicing accounts. Under the Class B and Class C plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75%. The Distributor also receives a service fee of 0.25% per year under the Class B, Class C and Class N plans. The asset-based sales charge and service fees increase Class B and Class C expenses by 1.0% and the service fee increases Class N expenses by 0.25% of the net assets per year of the respective class. Because these fees are paid out of the Fund's assets on an on-going basis, over time these fees will increase the cost of a Plan's investment and may cost the Plan more than other types of sales charges. The Distributor uses the service fees to compensate dealers for providing personal services for accounts that hold Class B, Class C or Class N shares. The Distributor pays the 0.25% service fees to dealers in advance for the first year after the Class B or Class C shares are sold by the dealer. After the Class B or Class C shares have been held for a year, the Distributor pays the service fees to dealers on a quarterly basis. The Distributor pays the 0.25% service fee on Class N shares to dealers on a quarterly basis beginning in the first quarter after the Class N shares have been sold. The Distributor retains the service fees for accounts for which it renders the required personal services. The Distributor currently pays a sales concession of 2.75% of the purchase price of Class B shares to dealers from its own resources at the time of the 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 3.00% of the purchase price. The Distributor retains the Class B asset-based sales charge. See the Statement of Additional Information for exceptions. The Distributor currently pays a sales concession 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 1.0% of the purchase price. The Distributor pays the asset-based sales charge as an ongoing concession to the dealer on Class C shares that have been outstanding for a year or more. See the Statement of Additional Information for exceptions. The Distributor currently pays a sales concession of 0.25% of the purchase price of Class N shares to dealers from its own resources at the time of sale. Special Investor Services ACCOUNTLINK. You can use our AccountLink feature to link a Plan's Fund account with an account at a U.S. bank or other financial institution. It must be an Automated Clearing House (ACH) member. AccountLink lets you: o transmit funds electronically to purchase shares by telephone (through a service representative or by PhoneLink), or o have the Transfer Agent send redemption proceeds or transmit dividends and distributions directly to a bank account. Please call the Transfer Agent for more information. You may purchase shares by telephone on behalf of a Plan only after the Plan's account has been established. To purchase shares in amounts up to $250,000 through a telephone representative, call the Distributor at 1.800.225.5677. The purchase payment will be debited from the stated bank account. AccountLink privileges should be requested on your application or your dealer's settlement instructions if you buy your shares through a dealer. After your account is established, you can request AccountLink privileges by sending signature-guaranteed instructions and proper documentation to the Transfer Agent. AccountLink privileges will apply to each fiduciary listed in the registration on the Plan's account as well as to the 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 fiduciaries who own the account. 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, 1.800.225.5677. If a Plan's participant accounts are maintained by the Plan's recordkeeper, then Plan participants will not be able to access their account information through PhoneLink. Those participants should contact the Plan's recordkeeper for information about accessing their Plan accounts via telephone. Plan participants in an OppenheimerFunds-sponsored plan account, including a Pinnacle 401(k) Plan, may call 1.800.411.6971 to access their Plan account information via telephone. Purchasing Shares. You may purchase shares on behalf of a Plan in amounts up to $100,000 by phone, by calling 1.800.225.5677. You must have established AccountLink privileges to link a 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 the Plan's Fund account to another OppenheimerFunds account you have already established on behalf of the Plan by calling the special PhoneLink number. Selling Shares. Plan sponsors of Plans other than OppenheimerFunds-sponsored plans can redeem shares by telephone automatically by calling the PhoneLink number and the Fund will send the proceeds directly to the stated AccountLink bank account. Please refer to "How to Sell Shares" below for details. CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? Requests for certain types of account transactions may be sent to the Transfer Agent by fax (telecopier). Please call 1.800.225.5677 for information about which transactions may be handled this way. Transaction requests submitted by fax are subject to the same rules and restrictions as written and telephone requests described in this Prospectus. OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund, as well as Plan account balances, on the OppenheimerFunds Internet website, at www.oppenheimerfunds.com. Additionally, fiduciaries listed in the account registration (and the dealer of record) may request certain account transactions through a special section of that website. To perform account transactions or to obtain account information online, you must first obtain a user I.D. and password on that website. If you do not want to have Internet account transaction capability for the Plan's account, please call the Transfer Agent at 1.800.225.5677. At times, the website may be inaccessible or its transaction features may be unavailable. This website is not available for Plan participant accounts maintained by the Plan's record-keeper. Those participants should contact their Plan's record-keeper for information about accessing their Plan account information via the Internet. Plan participants in the OppenheimerFunds-sponsored Pinnacle 401(k) Plan may access their Plan account information by visiting the OppenheimerFunds Internet website listed above and then following the prompts for Pinnacle Online. AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable a plan to sell shares automatically or exchange them to another OppenheimerFunds account on a regular basis. Please call the Transfer Agent or consult the Statement of Additional Information for details. REINVESTMENT PRIVILEGE. If a Plan redeems some or all of its Class A or Class B shares of the Fund, the Plan has up to six months to reinvest all or part of the redemption proceeds in Class A shares of the Fund or other Oppenheimer funds without paying a sales charge. This privilege applies only to Class A shares that the Plan purchased subject to an initial sales charge and to Class A or Class B shares on which the Plan paid a contingent deferred sales charge when it redeemed them. This privilege does not apply to Class C, Class N and Class Y shares. The individual authorized to negotiate the account on behalf of the Plan must be sure to ask the Distributor for this privilege when sending payment. RETIREMENT PLANS. Fund shares are available as an investment solely to participant-directed qualified retirement plans and 403(b) custodial plans that meet certain criteria. The Distributor offers a number of different retirement plans that individuals and employers can use to invest in the Fund: 403(b)(7) Custodial Plans. These are tax-deferred plans for employees of eligible tax-exempt organizations, such as schools, hospitals and charitable organizations. 401(k) Plans. These are special retirement plans for businesses. Pension and Profit-Sharing Plans. These plans are designed for businesses and self-employed individuals. Please call the Distributor for OppenheimerFunds retirement plan documents, which include applications and important information. How to Sell Shares HOW CAN PLAN PARTICIPANTS ARRANGE TO SELL SHARES? The redemption of Fund shares held in accounts for Plan participants are handled in accordance with the Plan's specific provisions. Plans may have different provisions with respect to the timing and method of redemptions by Plan participants. Plan participants should contact their Plan administrator to find out how they can arrange to redeem shares of the Fund. It is the responsibility of the individual authorized to buy and sell shares on behalf of a Plan to forward instructions for redemption transactions to the Fund's transfer agent. The information below about selling shares generally applies to Plan sponsors or Plan administrators, and not to individual participants. HOW CAN PLAN SPONSORS AND ADMINISTRATORS SELL SHARES? A Plan sponsor or administrator can arrange to take money out of the Plan's account in the Fund by selling (redeeming) some or all of its shares on any regular business day. A Plan's shares will be sold at the next net asset value calculated after an order is received and accepted by the Transfer Agent or a duly appointed agent of the Fund's Distributor. The Fund offers Plans a number of ways to sell Fund shares: in writing or by telephone. A Plan can also set up Automatic Withdrawal Plans to redeem shares on a regular basis, as described above. A Plan administrator who has questions about any of these procedures should please call the Transfer Agent first, at 1.800.225.5677, for assistance. Redemptions In-Kind. The Fund reserves the right to honor any requests for redemptions by making payment in whole or in part in portfolio securities and in wrapper agreements, selected solely in the discretion of the Manager. To the extent that a redemption in-kind includes wrapper agreements, the Fund will assign to the redeeming Plan one or more wrapper agreements issued by the wrapper providers covering the portfolio securities distributed in-kind. The terms and conditions of wrapper agreements provided to a redeeming Plan will be the same or substantially similar to the terms and conditions of the wrapper agreements held by the Fund. If the redeeming Plan does not meet the wrapper provider's underwriting requirements, the wrapper provider may reserve the right to terminate the wrapper agreement issued in an in-kind redemption at market value. Please refer to "Redemptions In-Kind" in the Statement of Additional Information for further details. Certain Requests Require a Signature Guarantee. To protect the Plan and the Fund from fraud, the following redemption requests must be in writing and must include a guarantee of the signature of the individual authorized to negotiate the Fund account on behalf of the Plan (although there may be other situations also requiring a signature guarantee): o The Plan wishes to redeem more than $100,000 and receive a check o The redemption check is not payable to the Plan listed on the account statement o The redemption check is not sent to the Plan's address of record on the account statement o Shares are being transferred to a Fund account with a different owner or name o Shares are redeemed by someone other than the owners Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a guarantee of your signature by a number of financial institutions, including: o a U.S. bank, trust company, credit union or savings association, o a foreign bank that has a U.S. correspondent bank, o a U.S. registered dealer or broker in securities, municipal securities or government securities, o a U.S. national securities exchange, a registered securities association or a clearing agency. If you are signing on behalf of a corporation, partnership or other business or as a fiduciary, you must also include your title in the signature. HOW DO YOU SELL SHARES BY MAIL? Write a letter of instructions that includes: o The Plan's name o The Fund's name o The Plan's Fund account number (from the account statement) o The dollar amount or number of shares to be redeemed o Any special payment instructions o The signatures of all persons authorized to negotiate the account on behalf of the Plan, and o Any special documents requested by the Transfer Agent to assure proper authorization of the person asking to sell the shares. Use the following address for Send courier or express mail requests by mail: requests to: OppenheimerFunds Services OppenheimerFunds Services P.O. Box 5270 10200 E. Girard Avenue, Building D Denver, Colorado 80217-5270 Denver, Colorado 80231 HOW DO YOU SELL SHARES BY TELEPHONE? Plan sponsors and Plan administrators may also sell Plan shares by telephone. To receive the redemption price calculated on a particular regular business day, all calls 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. Plan sponsors and administrators may not redeem shares held in an OppenheimerFunds-sponsored retirement plan or under a share certificate by telephone. o To redeem shares through a service representative, call 1.800.225.5677 o To redeem shares automatically on PhoneLink, call 1.800.225.5677 A Plan may have a check sent to the address on the account statement, or, if the Plan has linked its Fund account to a bank account on AccountLink, the Plan may have the proceeds sent to that bank account. Are There Limits on Amounts Redeemed by Telephone? Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone in any seven 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. Telephone Redemptions Through AccountLink. There are no dollar limits on telephone redemption proceeds sent to a bank account designated when establishing AccountLink. Normally the ACH transfer to a bank is initiated on the business day after the redemption. A Plan does not receive dividends on the proceeds of the shares it redeemed while they are waiting to be transferred. CAN YOU SELL 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. If the Plan's shares are held in the name of your dealer, you must redeem them through your dealer. HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase shares subject to a Class A, Class B, Class C or Class N contingent deferred sales charge and redeem any of those shares during the applicable holding period for the class of shares, the contingent deferred sales charge will be deducted from the redemption proceeds (unless you are eligible for a waiver of that sales charge based on the categories listed in Appendix B to the Statement of Additional Information and you advise the Transfer Agent of your eligibility for the waiver when you place your redemption request.) A 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 net asset value. A contingent deferred sales charge is not imposed on: o the amount of the Plan's account value represented by an increase in net asset value over the initial purchase price, o shares purchased by the reinvestment of dividends or capital gains distributions, or o shares redeemed in the special circumstances described in Appendix B to the Statement of Additional Information. To determine whether a 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 the holding period that applies to the class, and 3. shares held the longest during the holding period. Contingent deferred sales charges are not charged when you exchange shares of the Fund for shares of other Oppenheimer funds. However, if you exchange them within the applicable contingent deferred sales charge holding period, the holding period will carry over to the fund whose shares you acquire. Similarly, if you acquire shares of this Fund by exchanging shares of another Oppenheimer fund that are still subject to a contingent deferred sales charge holding period, that holding period will carry over to this Fund. WHEN ARE REDEMPTION FEES APPLIED? A redemption fee of 2% is applied to redemptions of Fund shares that are: o redeemed for reasons other than to fund a "benefit sensitive withdrawal, and o made on less than 12 months' prior written notice to the Fund. The redemption fee will not apply to any redemptions of the Fund shares for the purpose of exchanging the redemption proceeds to another Plan investment option provided that Plan investment option does not have a duration of 3 years or less. A "benefit sensitive withdrawal" is a withdrawal that occurs: o due to the Plan participant's death, retirement, disability, separation from service, o to fund Plan participant loans, or o as another type of "in service" withdrawal made under terms of the Plan. The Fund reserves the right to deduct the redemption fee from the redemption proceeds if 15% or more of Plan assets invested in the Fund are redeemed within five business days, pending a determination by the Fund of whether the redemption fee is applicable. See the Statement of Additional Information for information about how the redemption fee applies to withdrawals caused by certain events affecting the employer. 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. Shares of the Fund can be purchased by exchange of shares of other Oppenheimer funds on the same basis. To exchange shares, you must meet several conditions: o Shares of the fund selected for exchange must be available for sale in the Plan sponsor's state of organization. o The prospectuses of both funds must offer the exchange privilege. o The Plan must hold the shares for at least seven days before it can exchange them. After the account is open seven days, the Plan can exchange shares every regular business day. o The Plan must meet the minimum purchase requirements for the fund whose shares it purchases by exchange. o To be eligible to purchase shares of the Fund, the Plan must (i) restrict Plan participants from exchanging shares of the Fund for any Plan investment option which has a duration of three years or less, or (ii) if a Plan offers an investment option which has a duration of three years or less as an option for purchase by an exchange of this Fund's shares, Plan participants must be required to exchange the Fund shares to other Plan investment options which have a duration in excess of three years for at least 90 days before those shares may be exchanged for shares of any Plan investment option which has a duration of three years or less. o Before exchanging into a fund, you must 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, a Plan can exchange Class A shares of this Fund only for Class A shares of another fund. 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. 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 1.800.225.5677. That list can change from time to time. How Do You Submit Exchange Requests? Exchanges may be requested in writing or by telephone: Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form, signed by the Plan sponsor or Plan administrator. Send it to the Transfer Agent at the address on the back cover. Telephone Exchange Requests. Telephone exchange requests may be made either by calling a service representative at 1.800.225.567, or by using PhoneLink for automated exchanges by calling 1.800.225.5677. Telephone exchanges may be made only between accounts that are registered with the same name(s) and address. Are There Limitations on Exchanges? There are certain exchange policies you should be aware of: o Shares are redeemed from one fund and purchased from the other fund in the exchange transaction on the same regular business day on which the Transfer Agent receives an exchange request that conforms to the policies described above. It must be received 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. o The interests of the Fund's shareholders and its ability to manage its investments may be adversely affected when its shares are repeatedly bought and sold in response to short-term market fluctuations--also known as "market timing." When large dollar amounts are involved, the Fund may have difficulty implementing long-term investment strategies, because it cannot predict how much cash it will have to invest. Market timing also may force the Fund to sell portfolio securities at disadvantageous times to raise the cash needed to buy a market timer's Fund shares. These factors may hurt the Fund's performance and its shareholders. When the Manager believes frequent trading would have a disruptive effect on the Fund's ability to manage its investments, the Manager and the Fund may reject purchase orders and exchanges into the Fund by any person, group or account that the Manager believes to be a market timer. o The Fund may amend, suspend or terminate the exchange privilege at any time. The Fund will provide the Plan sponsor or Plan administrator notice whenever it is required to do so by applicable law, but it may impose changes at any time for emergency purposes. o If the Transfer Agent cannot exchange all the shares requested because of a restriction cited above, only the shares eligible for exchange will be exchanged. Shareholder Account Rules and Policies More information about the Fund's policies and procedures for buying, selling and exchanging shares is contained in the Statement of Additional Information. 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. Telephone transaction privileges for purchases, redemptions or exchanges may be modified, suspended or terminated by the Fund at any time. The Fund will provide you notice whenever it is required to do so by applicable law. If an account has more than one person authorized to negotiate the account, the Fund and the Transfer Agent may rely on the instructions of any one such person. Telephone privileges apply to each person authorized to negotiate the account and the dealer representative of record for the account unless the Transfer Agent receives cancellation instructions from such person. 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. The Transfer Agent and the Fund will not be liable for losses or expenses arising out of telephone instructions where reasonably believed to be genuine. 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. 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. Payment for redeemed shares ordinarily is made in cash. It is forwarded by check, or through AccountLink or by Federal Funds wire (as elected by the Plan sponsor or administrator) within seven days after the Transfer Agent receives redemption instructions in proper form. However, under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. For accounts registered in the name of a broker-dealer, payment will normally be forwarded within three business days after redemption. The Transfer Agent may delay processing any type of redemption payment as described under "How to Sell Shares" 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 the Plan purchases shares by Federal Funds wire or certified check, or arranges with its bank to provide telephone or written assurance to the Transfer Agent that the purchase payment has cleared. Federal regulations may require the Fund to obtain your name, your date of birth (for a natural person), your residential street address or principal place of business and your Social Security Number, Employer Identification Number or other government issued identification when you open an account. Additional information may be required in certain circumstances or to open corporate accounts. The Fund or the Transfer Agent may use this information to attempt to verify your identity. The Fund may not be able to establish an account if the necessary information is not received. The Fund may also place limits on account transactions while it is in the process of attempting to verify your identity. Additionally, if the Fund is unable to verify your identity after your account is established, the Fund may be required to redeem your shares and close your account. Involuntary redemptions of small accounts may be made by the Fund if the account value has fallen below $1,000 for reasons other than the fact that the market value of shares has dropped. In some cases involuntary redemptions may be made to repay the Distributor for losses from the cancellation of share purchase orders. To avoid sending duplicate copies of materials to households, the Fund will mail only one copy of each prospectus, annual and semi-annual report and annual notice of the Fund's privacy policy to shareholders having the same last name and address on the Fund's records. The consolidation of these mailings, called householding, benefits the Fund through reduced mailing expense. If you want to receive multiple copies of these materials, you may call the Transfer Agent at 1.800.225.5677. You may notify the Transfer Agent in writing. Individual copies of prospectuses, reports and privacy notices will be sent to you commencing within 30 days after the Transfer Agent receives your request to stop householding. Dividends, Capital Gains and Taxes DIVIDENDS. The Fund intends to declare dividends separately for each class of shares from net investment income each regular business day and pays those dividends to shareholders monthly on a date selected by the Board of Trustees. Daily dividends will not be declared or paid on newly purchased shares until Federal Funds are available to the Fund from the purchase payment for the shares. The amount of those dividends may vary over time, depending on market conditions, the composition of the Fund's portfolio, and expenses borne by the particular class of shares. Dividends and distributions paid on Class A shares and Class Y shares will generally be higher than dividends for Class B, Class C and Class N shares, which normally have higher expenses than Class A and Class Y shares. The Fund has no fixed dividend rate and cannot guarantee that it will pay any dividends or distributions. The Fund may declare and pay dividends in amounts that are not equal to the amount of the net investment income it earns. If the amount of distributions paid exceeds the income earned by the Fund, the excess may be considered a return of capital. If the income earned by the Fund exceeds the amount of the dividends paid, the Fund may make an additional distribution of that excess amount. In an effort to maintain stable net asset values per share if there is an additional distribution made by the Fund, the Board of Trustees may declare a reverse split of the shares of the Fund, effective on the ex-distribution date of the additional distribution. It will be in an amount that will cause the total number of shares held by each shareholder, including shares acquired by reinvesting that distribution, to remain the same as before that distribution was paid. CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in December of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. TAXES. For retirement plan participants using the Fund as an investment option under their Plan, dividends and capital gain distributions from the Fund generally will not be subject to current federal personal income tax, but if they are reinvested in the Fund under the Plan, those dividends and distributions will accumulate on a tax-deferred basis. In general, retirement plans and, in particular, distributions from retirement plans, are governed by complex federal and state tax rules. Plan participants should contact their Plan administrator, refer to their Plan's Summary Plan Description, and/or speak to a professional tax advisor regarding the tax consequences of participating in the Plan and making withdrawals from their Plan account. Returns of Capital Can Occur. 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. This information is only a summary of certain federal income tax information about your investment. You should consult with your tax advisor about the effect of an investment in the Fund on your particular tax situation. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance since inception. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, the Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request.FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
Class A Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss)from investment operations: Net investment income .22 .42 .56 .57 .05 Net realized and unrealized gain -- .09 .02 .03 -- -------------------------------------------- Total from investment operations .22 .51 .58 .60 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.22) (.41) (.55) (.60) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.22) (.51) (.58) (.60) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 2.22% 5.25% 6.00% 6.18% 0.55% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $94,727 $78,552 $50,179 $10,431 $100 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $92,035 $62,359 $33,976 $ 7,171 $100 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 2.11% 3.90% 5.39% 5.55% 5.75% Total expenses 1.70% 1.71% 1.58% 1.96% 1.55% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.09% 1.18% 1.14% 1.51% 1.12% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 16 OPPENHEIMER CAPITAL PRESERVATION FUND
Class B Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .14 .37 .50 .51 .05 Net realized and unrealized gain -- .08 .02 .02 -- -------------------------------------------- Total from investment operations .14 .45 .52 .53 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.35) (.49) (.53) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.14) (.45) (.52) (.53) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 1.45% 4.59% 5.31% 5.43% 0.48% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $9,987 $5,205 $1,777 $331 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $8,055 $3,337 $ 676 $ 82 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.31% 3.15% 4.61% 4.55% 5.10% Total expenses 2.77% 2.37% 2.34% 2.71% 2.25% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.87% 1.84% 1.90% 2.26% 1.81% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 17 OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
Class C Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .14 .38 .51 .50 .05 Net realized and unrealized gain -- .07 .01 .03 -- -------------------------------------------- Total from investment operations .14 .45 .52 .53 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.35) (.49) (.53) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.14) (.45) (.52) (.53) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 1.43% 4.58% 5.31% 5.43% 0.48% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $24,405 $12,437 $1,845 $48 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $19,334 $6,790 $ 652 $25 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.31% 3.07% 4.54% 4.65% 5.10% Total expenses 2.67% 2.35% 2.36% 2.71% 2.25% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.87% 1.82% 1.92% 2.26% 1.81% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 18 OPPENHEIMER CAPITAL PRESERVATION FUND
Class N Year Ended October 31, 2003 2002 2001 1 -------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .23 .45 .38 Net realized and unrealized gain -- .07 -- 2 ----------------------------- Total from investment operations .23 .52 .38 -------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.23) (.42) (.36) Tax return of capital distribution -- (.10) (.02) ----------------------------- Total dividends and/or distributions to shareholders (.23) (.52) (.38) -------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 ============================= -------------------------------------------------------------------------------------- Total Return, at Net Asset Value 3 2.37% 5.29% 3.88% -------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $219,590 $118,829 $7,311 -------------------------------------------------------------------------------------- Average net assets (in thousands) $180,665 $ 63,485 $3,002 -------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 2.16% 3.86% 5.18% Total expenses 1.45% 1.52% 1.64% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.01% 0.99% 1.20% -------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 1. For the period from March 1, 2001 (inception of offering) to October 31, 2001 2. Less than $0.005 per share. 3. Assumes an 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 19 OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
Class Y Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .39 .41 .58 .59 .06 Net realized and unrealized gain (loss) (.08) .11 .03 .03 -- -------------------------------------------- Total from investment operations .31 .52 .61 .62 .06 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.31) (.42) (.58) (.62) (.06) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.31) (.52) (.61) (.62) (.06) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 3.15% 5.35% 6.25% 6.43% 0.57% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $725 $2 $2 $1 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $368 $2 $2 $1 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 2.53% 4.13% 5.73% 5.88% 6.19% Total expenses 0.96% 67.64% 43.02% 1.71% 1.15% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 0.52% 1.09% 0.82% 1.26% 0.72% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.For More Information on Oppenheimer Capital Preservation Fund The following additional information about the Fund is available without charge upon request: Statement of Additional Information. This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). Annual and Semi-Annual Reports. Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. How to Get More Information You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, the notice explaining the Fund's privacy policy and other information about the Fund or your account: - --------------------------------------------------------------------------------- By Telephone: Call OppenheimerFunds Services toll-free: 1.800.CALL OPP (225.5677) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- By Mail: Write to: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- On the Internet: You can send us a request by e-mail or read or download documents on the OppenheimerFunds website: www.oppenheimerfunds.com - --------------------------------------------------------------------------------- Information about the Fund including the Statement of Additional Information can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1.202.942.8090. Reports and other information about the Fund are available on the EDGAR database on the SEC's Internet website at www.sec.gov. Copies may be obtained after payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. The Fund's SEC File No.: 811-08799 [logo] The Fund's shares are distributed by PR0755.001.1203 OppenheimerFunds Distributors, Inc. Printed on recycled paper. Appendix to Prospectus of Oppenheimer Capital Preservation Fund Graphic Material included in the Prospectus of Oppenheimer Capital Preservation Fund: "Annual Total Return (Class A) (as of 12/31 each year)": A bar chart will be included in the Prospectus of Oppenheimer Capital Preservation Fund (the "Fund") depicting the annual total return of a hypothetical investment in Class A shares of the Fund for the end of the most recent calendar years , without deducting sales charges or taxes. Set forth below are the relevant data points that will appear on the bar chart.
Calendar Oppenheimer Year Capital Preservation Fund Ended Class A Shares - ----- -------------- 12/31/00 6.21% 12/31/01 5.94% 12/31/02 4.76%
Oppenheimer CAPITAL PRESERVATION FuND Supplement dated December 29, 2003 to the Prospectus dated December 23, 2003 The Prospectus is changed as follows: The third paragraph of the bullet point entitled "Investing for the Shorter Term" under the section entitled "WHICH CLASS OF SHARES SHOULD YOU CHOOSE?" on page 22 is deleted in its entirety and replaced with the following: "The Distributor normally will not accept purchase orders of $500,000 or more of Class B shares (and effective February 2, 2004, the Distributor normally will not accept purchase orders of $250,000 or more of Class B shares) or $1 million or more of Class C shares from a single Plan." December 29, 2003 PS0755.017
OPPENHEIMER CAPITAL PRESERVATION FUND Supplement dated September 30, 2004 to the Prospectus dated December 23, 2003 1. This supplement is in addition to the supplement dated July 6, 2004. The supplements dated September 24, 2004 and December 29, 2003 are withdrawn. 2. The following new section should be added after the section titled "HOW THE FUND IS MANAGED - Advisory Fees" on page 15: PENDING LITIGATION. Six law suits have been filed as putative derivative and class actions against the Fund's investment Manager, Distributor and Transfer Agent of the Fund, some of the Oppenheimer funds, including the Fund, and Directors or Trustees of some of those funds. The complaints allege that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of Oppenheimer funds, and failed to properly disclose the use of fund assets to make those payments in violation of the Investment Company Act and the Investment Advisers Act of 1940. The complaints further allege that by permitting and/or participating in those actions, the defendant Directors breached their fiduciary duties to fund shareholders under the Investment Company Act and at common law. Those law suits were filed on August 31, 2004, September 3, 2004, September 14, 2004, September 14, 2004, September 21, 2004 and September 22, 2004, respectively, in the U. S. District Court for the Southern District of New York. The complaints seek unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The Manager and the Distributor believe the claims asserted in these law suits to be without merit, and intend to defend the suits vigorously. The Manager and the Distributor do not believe that the pending actions are likely to have a material adverse effect on the Fund or on their ability to perform their respective investment advisory or distribution agreements with the Fund. 3. The first paragraph of the Section entitled "How to Buy Shares - Which Class of Shares Should You Choose" is modified by adding the following sentence at the beginning of the paragraph: Effective September 27, 2004, sales of shares of the Fund to new accounts have been suspended by the Distributor. Current shareholders are permitted to purchase additional shares of the Fund for existing accounts but may not establish new accounts in the Fund. September 30, 2004 PS0755.019
OPPENHEIMER CAPITAL PRESERVATION FUND Supplement dated October 11, 2004 to the Prospectus dated December 23, 2003 The supplement amends the Prospectus of Oppenheimer Capital Preservation Fund (the "Fund") dated December 23, 2003, and is in addition to the supplements dated July 6, 2004 and September 30, 2004. The Supplement dated September 24, 2004 is withdrawn: 1. The following paragraph is added to the end of the section captioned "How the Fund is Managed" on page 18: At a meeting held October 6, 2004, the Board of Trustees of the Fund determined that it is in the best interest of the Fund's shareholders that the Fund reorganize with and into Oppenheimer Cash Reserves Fund. The Board unanimously voted that the Fund should enter into an Agreement and Plan of Reorganization with Oppenheimer Cash Reserves covering the reorganization transaction (the "Reorganization"). The Board further determined that the Reorganization should be submitted to the Fund's shareholders for approval and recommended that shareholders approve the Reorganization. Shareholders of record as of November 15, 2004 will be entitled to vote on the Reorganization and will receive the proxy statement describing the Reorganization. The anticipated date for the shareholder meeting is on or about January 21, 2005, with the Reorganization to be effected on or about January 28, 2005. Subject to approval by the Fund's shareholders, upon the Reorganization of the Fund into Oppenheimer Cash Reserves, the Fund will no longer exist. Oppenheimer Cash Reserves is a money market fund which seeks, as its investment objective, the maximum current income that is consistent with stability of principal. Consistent with its investment objective and investment policies, Oppenheimer Capital Preservation Fund will increase the amount of its investment assets that are money market securities, and expects to have 100% of its assets invested in money market securities prior to the Reorganization. The Board has taken these actions in light of current regulatory uncertainty regarding the valuation methodology of wrapper agreements by mutual fund, the potential future lack of availability to mutual funds of wrapper agreements on economically viable terms necessary for the Fund's investment strategy and the current rising interest rate environment. The Board believes these actions are in the best interests of shareholders and will help better ensure that shareholders will be invested in a Fund that seeks to maintain a stable net asset value. As disclosed in the Fund's most recent annual report, the staff of the U.S. Securities and Exchange Commission has inquired of registered "stable value" mutual funds, including the Fund, as to the methodology used by such mutual funds to value their wrapper agreements. The SEC and its staff have not issued any public statement regarding the results of its inquiry or any conclusions that it may have reached, nor indicated when, if at all, such a statement may be issued. It is possible that the SEC staff's or SEC's conclusions could require stable value mutual funds to cease using the types of wrapper agreements commonly used today by such funds and purchase substantially restructured wrapper agreements the terms of which cannot be assessed at this time and may not be available in the market place. Interest rates have risen over the last several months and that general trend is expected to continue for the next several months. The Board considered the fact that the Fund's potential inability to continue valuing its wrapper agreements under the current methodology or to obtain substantially restructured wrapper agreements in such an environment could have potentially adverse consequences to shareholders. Accordingly, the Board has taken the actions described at this time to prevent the possibility of such an occurrence. More details about the proposed change in investment goal will be contained in a proxy statement which will be sent to shareholder of record. 2. The first paragraph of the Section entitled "How to Buy Shares - Which Class of Shares Should You Choose" on page 21 is modified by adding the following sentence at the beginning of the paragraph: Effective September 27, 2004, sales of shares of the Fund to new accounts have been suspended by the Distributor. Current shareholders are permitted to purchase additional shares of the Fund for existing accounts but may not establish new accounts in the Fund. October 11, 2004 PS0755.020
Limited Term New York Municipal Fund Oppenheimer AMT-Free Municipals Oppenheimer AMT-Free New York Municipals Oppenheimer Balanced Fund Oppenheimer Bond Fund Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation Fund Oppenheimer Capital Income Fund Oppenheimer Capital Preservation Fund Oppenheimer Cash Reserves Oppenheimer Champion Income Fund Oppenheimer Convertible Securities Fund Oppenheimer Developing Markets Fund Oppenheimer Disciplined Allocation Fund Oppenheimer Discovery Fund Oppenheimer Emerging Growth Fund Oppenheimer Emerging Technologies Fund Oppenheimer Enterprise Fund Oppenheimer Equity Fund, Inc. Oppenheimer Global Fund Oppenheimer Global Opportunities Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer High Yield Fund Oppenheimer International Bond Fund Oppenheimer International Growth Fund Oppenheimer International Large-Cap Core Fund Oppenheimer International Small Company Fund Oppenheimer International Value Fund Oppenheimer Limited Term California Municipal Fund Oppenheimer Limited Term Municipal Fund Oppenheimer Limited-Term Government Fund Oppenheimer Main Street Fund Oppenheimer Main Street Opportunity Fund Oppenheimer Main Street Small Cap Fund Oppenheimer MidCap Fund Oppenheimer Money Market Fund, Inc. Oppenheimer New Jersey Municipal Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer Principal Protected Main Street Fund Oppenheimer Principal Protected Main Street Fund II Oppenheimer Quest Balanced Fund Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Quest International Value Fund, Inc. Oppenheimer Quest Opportunity Value Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Real Asset Fund Oppenheimer Real Estate Fund Oppenheimer Rochester National Municipals Oppenheimer Select Value Fund Oppenheimer Senior Floating Rate Fund Oppenheimer Small Cap Value Fund Oppenheimer Strategic Income Fund Oppenheimer Total Return Bond Fund Oppenheimer U.S. Government Trust Oppenheimer Value Fund Rochester Fund Municipals This supplement amends the Prospectus of each of the Oppenheimer Funds referenced above as described below and is in addition to any existing supplements of the Funds. 1. The section of each Prospectus, with the exceptions of Capital Preservation Fund and Senior Floating Rate Fund, entitled "At What Price Are Shares Sold? - Net Asset Value." is amended by replacing the second and third paragraphs with the following: The net asset value per share for a class of shares on a "regular business day" is determined by dividing the value of the Fund's net assets attributable to that class by the number of shares of that class outstanding on that day. To determine net asset values, the Fund assets are valued primarily on the basis of current market quotations. If market quotations are not readily available or do not accurately reflect fair value for a security (in the Manager's judgment) or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Directors/Trustees believes accurately reflects the fair value. The Board has adopted valuation procedures for the Fund and has delegated the day-to-day responsibility for fair value determinations to the Manager's Valuation Committee. Fair value determinations by the Manager are subject to review, approval and ratification by the Board at its next scheduled meeting after the fair valuations are determined. In determining whether current market prices are readily available and reliable, the Manager monitors the information it receives in the ordinary course of its investment management responsibilities for significant events that it believes in good faith will affect the market prices of the securities of issuers held by the Fund. Those may include events affecting specific issuers (for example, a halt in trading of the securities of an issuer on an exchange during the trading day) or events affecting securities markets (for example, a foreign securities market closes early because of a natural disaster). If, after the close of the principal market on which a security held by the Fund is traded and before the time as of which the Fund's net asset values are calculated that day, a significant event occurs that the Manager learns of and believes in the exercise of its judgment will cause a material change in the value of that security from the closing price of the security on the principal market on which it is traded, the Manager will use its best judgment to determine a fair value for that security. The Manager believes that foreign securities values may be affected by volatility that occurs in U.S. markets on a trading day after the close of foreign securities markets. The Manager's fair valuation procedures therefore include a procedure whereby foreign securities prices may be "fair valued" to take those factors into account. 2. The section of the Capital Preservation Fund Prospectus entitled "At What Price Are Shares Sold? - Net Asset Value." is amended by replacing the second paragraph with the following: The net asset value per share for a class of shares on a "regular business day" is determined by dividing the value of the Fund's net assets attributable to that class by the number of shares of that class outstanding on that day. To determine net asset values, the Fund assets are valued primarily on the basis of current market quotations. If market quotations are not readily available or do not accurately reflect fair value for a security (in the Manager's judgment) or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Directors believes accurately reflects the fair value. The Board has adopted valuation procedures for the Fund and has delegated the day-to-day responsibility for fair value determinations to the Manager's Valuation Committee. Fair value determinations by the Manager are subject to review, approval and ratification by the Board at its next scheduled meeting after the fair valuations are determined. In determining whether current market prices are readily available and reliable, the Manager monitors the information it receives in the ordinary course of its investment management responsibilities for significant events that it believes in good faith will affect the market prices of the securities of issuers held by the Fund. Those may include events affecting specific issuers (for example, a halt in trading of the securities of an issuer on an exchange during the trading day) or events affecting securities markets (for example, a foreign securities market closes early because of a natural disaster). If, after the close of the principal market on which a security held by the Fund is traded and before the time as of which the Fund's net asset values are calculated that day, a significant event occurs that the Manager learns of and believes in the exercise of its judgment will cause a material change in the value of that security from the closing price of the security on the principal market on which it is traded, the Manager will use its best judgment to determine a fair value for that security. The Manager believes that foreign securities values may be affected by volatility that occurs in U.S. markets on a trading day after the close of foreign securities markets. The Manager's fair valuation procedures therefore include a procedure whereby foreign securities prices may be "fair valued" to take those factors into account. 3. The section of each Prospectus, with the exceptions of Cash Reserves Fund, Money Market Fund, Inc., Principal Protected Main Street Fund and Principal Protected Main Street Fund II, entitled "Which Class of Shares Should You Choose? - Investing for the Shorter Term" is amended by replacing the third paragraph of that section with the following: If you 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. The Distributor normally will not accept purchase orders of $250,000 or more for Class B shares or $1 million or more for Class C shares from a single investor. Effective July 15, 2004, the limit on Class B share purchase orders on behalf of a single investor shall be reduced so that the Distributor will not accept purchase orders of $100,000 or more for Class B shares from a single investor. Dealers or other financial intermediaries purchasing shares for their customers in omnibus accounts are responsible for compliance with those limits. 4. The section of the Cash Reserves entitled "Which Class of Shares Should You Choose?" is amended by adding the following paragraph to the end of that section: Investing for the Shorter Term. If you 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. The Distributor normally will not accept purchase orders of $250,000 or more for Class B shares or $1 million or more for Class C shares from a single investor. Effective July 15, 2004, the limit on Class B share purchase orders on behalf of a single investor shall be reduced so that the Distributor will not accept purchase orders of $100,000 or more for Class B shares from a single investor. Dealers or other financial intermediaries purchasing shares for their customers in omnibus accounts are responsible for compliance with those limits. 5. The section of each Prospectus, with the exceptions of Bond Fund, Cash Reserves, Convertible Securities Fund, Equity Fund, Inc., Limited Term New York Municipal Fund, Money Market Fund, Inc., Principal Protected Main Street Fund, Principal Protected Main Street Fund II and Rochester Fund Municipals, entitled "Which Class of Shares Should You Choose? - Are There Differences in Account Features That Matter to You?" is amended by deleting the second and third sentences (for those Funds which have a third sentence)in the second paragraph. Share certificates will no longer be issued for Class A shares. 6. The section of each Prospectus, with the exceptions of Cash Reserves, Money Market Fund, Inc., Principal Protected Main Street Fund, and Principal Protected Main Street Fund II, entitled "How Can You Buy Class A Shares? - Can You Reduce Class A Sales Charges?" is amended by adding the following to the end of that section: To receive the reduced sales charge, at the time you purchase shares of the Fund or any other Oppenheimer fund, you must inform your broker-dealer or financial intermediary of any other Oppenheimer funds that you and your spouse own. This includes, for example, shares of an Oppenheimer fund held in a retirement account, an employee benefit plan, or at a broker-dealer or financial intermediary other than the one handling your current purchase. For more complete information about ways to reduce your sales charges, please visit the OppenheimerFunds website: www.oppenheimerfunds.com. ------------------------ 7. The section of each Prospectus, with the exceptions of AMT-Free Municipals, AMT-Free New York Municipals, Cash Reserves, California Municipal Fund, Limited Term California Municipal Fund, Limited Term Municipal Fund, Limited Term New York Municipal Fund, Money Market Fund, Inc., New Jersey Municipal Fund, Pennsylvania Municipal Fund, Principal Protected Main Street Fund, Principal Protected Main Street Fund II, Rochester Fund Municipals, Rochester National Municipals and Senior Floating Rate Fund, entitled "How Can You Buy Class A Shares? - Class A Contingent Deferred Sales Charge." is amended by deleting the first paragraph and replacing it with the following paragraphs: There is no initial sales charge on purchases of Class A shares of any one or more of the Oppenheimer funds aggregating $1 million or more, or on purchases of Class A shares by certain retirement plans that satisfied certain requirements prior to March 1, 2001 ("grandfathered retirement accounts"). However, those Class A shares may be subject to a Class A contingent deferred sales charge, as described below. Retirement plans holding shares of Oppenheimer funds in an omnibus account(s) for the benefit of plan participants in the name of a fiduciary or financial intermediary (other than OppenheimerFunds-sponsored Single DB Plus plans) are not permitted to make initial purchases of Class A shares subject to a contingent deferred sales charge. The Distributor pays dealers of record concessions in an amount equal to 1.0% of purchases of $1 million or more other than purchases by grandfathered retirement accounts. For grandfathered retirement accounts, the concession is 0.75% of the first $2.5 million of purchases plus 0.25% of purchases in excess of $2.5 million. In either case, the concession will not be paid on purchases of shares by exchange or that were previously subject to a front-end sales charge and dealer concession. 8. For the Senior Floating Rate Fund, the section entitled "How Can You Buy Class A Share? - Class A Early Withdrawal Charge." is amended by deleting the first paragraph and replacing it the following paragraphs: There is no initial sales charge on purchases of Class A shares of any one or more of the Oppenheimer funds aggregating $1 million or more, or on purchases of Class A shares by certain retirement plans that satisfied certain requirements prior to March 1, 2001 ("grandfathered retirement accounts"). However, those Class A shares may be subject to a Class A contingent deferred sales charge, as described below. Retirement plans holding shares of Oppenheimer funds in an omnibus account(s) for the benefit of plan participants in the name of a fiduciary or financial intermediary (other than OppenheimerFunds-sponsored Single DB Plus plans) are not permitted to make initial purchases of Class A shares subject to a contingent deferred sales charge. The Distributor pays dealers of record concessions in an amount equal to 1.0% of purchases of $1 million or more other than purchases by grandfathered retirement accounts. For grandfathered retirement accounts, the concession is 0.75% of the first $2.5 million of purchases plus 0.25% of purchases in excess of $2.5 million. In either case, the concession will not be paid on purchases of shares by exchange or that were previously subject to a front-end sales charge and dealer concession. 9. The first paragraph of the section entitled "Who Can Buy Class Y Shares?" for the following Prospectuses: Bond Fund, Capital Appreciation Fund, Capital Preservation Fund, Discovery Fund, Emerging Growth Fund, Emerging Technologies Fund, Enterprise Fund, Equity Fund, Inc., Global Fund, Global Opportunities Fund, Growth Fund, High Yield Fund, Limited Term Government Fund, Main Street Fund, Main Street Opportunity Fund, Main Street Small Cap Fund, MidCap Fund, Quest Balanced Fund, Quest Opportunity Value Fund, Quest Value Fund, Inc., Real Asset Fund, Real Estate Fund, Rochester Fund Municipals, Select Value Fund, Strategic Income Fund, U.S. Government Trust, and Value Fund is amended by deleting the next to last sentence in that paragraph and substituting the following in its place: "They may include insurance companies, registered investment companies, employee benefit plans and Section 529 plans, among others." 10. The section of the Prospectuses for Bond Fund, Limited Term Government Fund, Main Street Fund, Inc., Strategic Income Fund and U.S. Government Trust entitled "Who Can Buy Class Y Shares?" is amended by adding the following paragraph after the final paragraph in that section: Investments By "Funds of Funds." Class Y shares of the Fund are offered as an investment to other Oppenheimer funds that act as "funds of funds." The Fund's Board of Directors/Trustees has approved making the Fund's shares available as an investment to those funds. Those funds of funds may invest significant portions of their assets in shares of the Fund, as described in their respective prospectuses. Those other funds, individually and/or collectively, may own significant amounts of the Fund's shares from time to time. Those funds of funds typically use asset allocation strategies under which they may increase or reduce the amount of their investment in the Fund frequently, which may occur on a daily basis under volatile market conditions. Depending on a number of factors, such as the flows of cash into and from the Fund as a result of the activity of other investors and the Fund's then-current liquidity, those purchases and redemptions of the Fund's shares by funds of funds could require the Fund to purchase or sell portfolio securities, increasing its transaction costs and possibly reducing its performance, if the size of those purchases and redemptions were significant relative to the size of the Fund. For a further discussion of the possible effects of frequent trading in the Fund's shares, please refer to "Are There Limitations On Exchanges?". 11. The section of each Prospectus, with the exceptions of the following Funds: AMT-Free Municipals, AMT-Free New York Municipals, California Municipal Fund, Capital Preservation Fund, Cash Reserves, High Yield, International Value Fund, Limited Term California Municipal Fund, Limited Term Municipal Fund, Limited Term New York Municipal Fund, Main Street Opportunity Fund, Main Street Small Cap Fund, Money Market Fund, Inc., New Jersey Municipal Fund, Pennsylvania Municipal Fund, Principal Protected Main Street Fund, Principal Protected Main Street Fund II, Rochester Fund Municipals, Rochester National Municipals and Senior Floating Rate Fund, entitled "Distribution and Service (12b-1) Plans - Distribution and Service Plans for Class B, Class C (add "Class M" for Convertible Securities Fund only) and Class N Shares." is amended by deleting the seventh paragraph and replacing it with the following paragraphs: Under certain circumstances, the Distributor will pay the full Class B, Class C or Class N asset-based sales charge and the service fee to the dealer beginning in the first year after purchase of such shares in lieu of paying the dealer the sales concession and the advance of the first year's service fee at the time of purchase, if there is a special agreement between the dealer and the Distributor. In those circumstances, the sales concession will not be paid to the dealer. For Class C shares purchased through the OppenheimerFunds Recordkeeper Pro program, the Distributor will pay the Class C asset-based sales charge to the dealer of record in the first year after the purchase of such shares in lieu of paying the dealer a sales concession at the time of purchase. The Distributor will use the service fee it receives from the Fund on those shares to reimburse FASCorp for providing personal services to the Class C accounts holding those shares. In addition, the Manager and the Distributor may make substantial payments to dealers or other financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Manager receives from the Fund. Some of these distribution-related payments may be made to dealers or financial intermediaries for marketing, promotional or related expenses; these payments are often referred to as "revenue sharing." In some circumstances, those types of payments may create an incentive for a dealer or financial intermediary or its representatives to recommend or offer shares of the Fund or other Oppenheimer funds to its customers. You should ask your dealer or financial intermediary for more details about any such payments it receives. 12. The section of each Prospectus for Cash Reserves, High Yield Fund, Main Street Opportunity Fund and Main Street Small Cap Fund entitled "Distributions and Service (12b-1) Plans - Distribution and Service Plans for Class B, Class C and Class N Shares." is amended by adding the following paragraphs at the end of the section: Under certain circumstances, the Distributor will pay the full Class B, Class C or Class N asset-based sales charge and the service fee to the dealer beginning in the first year after purchase of such shares in lieu of paying the dealer the sales concession and the advance of the first year's service fee at the time of purchase, if there is a special agreement between the dealer and the Distributor. In those circumstances, the contingent deferred sales charge will not be paid to the dealer. For Class C shares purchased through the OppenheimerFunds Recordkeeper Pro program, the Distributor will pay the Class C asset-based sales charge to the dealer of record in the first year after the purchase of such shares in lieu of paying the dealer a sales concession at the time of purchase. The Distributor will use the service fee it receives from the Fund on those shares to reimburse FASCorp for providing personal services to the Class C accounts holding those shares. In addition, the Manager and the Distributor may make substantial payments to dealers or other financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Manager receives from the Fund. Some of these distribution-related payments may be made to dealers or financial intermediaries for marketing, promotional or related expenses; these payments are often referred to as "revenue sharing." In some circumstances, those types of payments may create an incentive for a dealer or financial intermediary or its representatives to recommend or offer shares of the Fund or other Oppenheimer funds to its customers. You should ask your dealer or financial intermediary for more details about any such payments it receives. 13. The section of the Prospectus for the Capital Preservation Fund entitled "Distribution and Service (12b-) Plans - Distribution and Service Plans for Class B, Class C and Class N Shares." is amended by deleting the last paragraph of the section and replacing it with the following paragraphs: Under certain circumstances, the Distributor will pay the full Class B, Class C or Class N asset-based sales charge and the service fee to the dealer beginning in the first year after purchase of such shares in lieu of paying the dealer the sales concession and the advance of the first year's service fee at the time of purchase, if there is a special agreement between the dealer and the Distributor. In those circumstances, the contingent deferred sales charge will not be paid to the dealer. Furthermore, the Distributor pays a sales concession of 0.25% of the purchase price of Class N shares to dealers from its own resources at the time of sale, except for Class N shares purchased through the OppenheimerFunds Recordkeeper Pro program, for which the Distributor does not pay a sales concession. For Class C shares purchased through the OppenheimerFunds Recordkeeper Pro program, the Distributor will pay the Class C asset-based sales charge to the dealer of record in the first year after the purchase of such shares in lieu of paying the dealer a sales concession at the time of purchase. The Distributor will use the service fee it receives from the Fund on those shares to reimburse FASCorp for providing personal services to the Class C accounts holding those shares. In addition, the Manager and the Distributor may make substantial payments to dealers or other financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Manager receives from the Fund. Some of these distribution-related payments may be made to dealers or financial intermediaries for marketing, promotional or related expenses; these payments are often referred to as "revenue sharing." In some circumstances, those types of payments may create an incentive for a dealer or financial intermediary or its representatives to recommend or offer shares of the Fund or other Oppenheimer funds to its customers. You should ask your dealer or financial intermediary for more details about any such payments it receives. 14. The section of the Prospectuses for AMT-Free Municipals, AMT-Free New York Municipals, California Municipal Fund, International Value Fund, Limited Term California Municipal Fund, Limited Term Municipal Fund, Limited Term New York Municipal Fund, New Jersey Municipal Fund, Pennsylvania Municipal Fund, Rochester Fund Municipals, Rochester National Municipals and Senior Floating Rate Fund entitled "Distribution and Service (12b-1) Plans - Distribution and Service Plans for Class B and Class C Shares." is amended by adding (for the Senior Floating Rate Fund only, please delete the last paragraph then add) the following paragraphs at the end of the section: Under certain circumstances, the Distributor will pay the full Class B or Class C asset-based sales charge and the service fee to the dealer beginning in the first year after purchase of such shares in lieu of paying the dealer the sales concession and the advance of the first year's service fee at the time of purchase, if there is a special agreement between the dealer and the Distributor. In those circumstances, the contingent deferred sales charge will not be paid to the dealer. In addition, the Manager and the Distributor may make substantial payments to dealers or other financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Manager receives from the Fund. Some of these distribution-related payments may be made to dealers or financial intermediaries for marketing, promotional or related expenses; these payments are often referred to as "revenue sharing." In some circumstances, those types of payments may create an incentive for a dealer or financial intermediary or its representatives to recommend or offer shares of the Fund or other Oppenheimer funds to its customers. You should ask your dealer or financial intermediary for more details about any such payments it receives. 15. The section of each Prospectus, with the exception of Principal Protected Main Street Fund, Principal Protected Main Street Fund II and Senior Floating Rate Fund, entitled "How to Exchange Shares - Are There Limitations on Exchanges?" is amended as follows: The first bullet point is amended to read as follows: o Shares are redeemed from one fund and are normally purchased from the other fund in the same transaction on the same regular business day on which the Transfer Agent or its agent (such as a financial intermediary holding the investor's shares in an omnibus account) receives an exchange request that conforms to the policies described above. It must be received 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. The Transfer Agent may delay the reinvestment of the proceeds of an exchange up to five business days if it determines in its discretion that an earlier transmittal of the redemption proceeds to the receiving fund would be detrimental to the Fund from which the exchange is made or to the receiving fund. The second bullet point is amended to read as follows: o The interests of the Fund's shareholders and the Fund's ability to manage its investments may be adversely affected when its shares are repeatedly exchanged over the short term. When large dollar amounts are involved, the Fund's implementation of its investment strategies may be negatively affected or the Fund might have to raise or retain more cash than the portfolio manager would normally retain, to meet unanticipated redemptions. Frequent exchange activity also may force the Fund to sell portfolio securities at disadvantageous times to raise the cash needed to meet those exchange requests. These factors might hurt the Fund's performance. When the Transfer Agent in its discretion believes frequent trading activity by any person, group or account would have a disruptive effect on the Fund's ability to manage its investments, the Fund and the Transfer Agent may reject purchase orders and/or exchanges into the Fund. The history of exchange activity in all accounts known by the Transfer Agent to be under common ownership or control within the Oppenheimer funds complex may be considered by the Transfer Agent, with respect to the review of exchanges involving this Fund as part of the Transfer Agent's procedures to detect and deter excessive exchange activity. The Transfer Agent may permit exchanges that it believes in the exercise of its judgment are not disruptive. The Transfer Agent might not be able to detect frequent exchange activity conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent exchange activity in those accounts. There is no guarantee that the Transfer Agent's controls and procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity. As stated above, the Fund permits dealers or financial intermediaries to submit exchange requests on behalf of their customers (unless the customer has revoked that authority). The Manager, the Distributor and/or the Transfer Agent have agreements with a limited number of broker-dealers and investment advisers permitting them to submit exchange orders in bulk on behalf of their clients, provided that those broker-dealers or advisers agree to restrictions on their exchange activity (which are more stringent than the restrictions that apply to other shareholders). Those restrictions include limitations on the funds available for exchanges, the requirement to give advance notice of exchanges to the Transfer Agent, and limits on the amount of client assets that may be invested in a particular fund. The Fund and its Transfer Agent may restrict or refuse bulk exchange requests submitted by a financial intermediary on behalf of a large number of accounts (including pursuant to the arrangements described above) if, in the Transfer Agent's judgment exercised in its discretion, those exchanges would be disruptive to either fund in the exchange transaction. 16. For the Senior Floating Rate Fund the second bullet point under the section entitled "How to Exchange Shares - Are There Limitations on Exchanges?" is deleted in its entirety and replaced with the following: o The interests of the Fund's shareholders and the Fund's ability to manage its investments may be adversely affected when its shares are repeatedly exchanged over the short term. When large dollar amounts are involved, the Fund's implementation of its investment strategies may be negatively affected or the Fund might have to raise or retain more cash than the portfolio manager would normally retain, to meet unanticipated redemptions. Frequent exchange activity also may force the Fund to sell portfolio securities at disadvantageous times to raise the cash needed to meet those exchange requests. These factors might hurt the Fund's performance. When the Transfer Agent in its discretion believes frequent trading activity by any person, group or account would have a disruptive effect on the Fund's ability to manage its investments, the Fund and the Transfer Agent may reject purchase orders and/or exchanges into the Fund. The history of exchange activity in all accounts known by the Transfer Agent to be under common ownership or control within the Oppenheimer funds complex may be considered by the Transfer Agent, with respect to the review of exchanges involving this Fund as part of the Transfer Agent's procedures to detect and deter excessive exchange activity. The Transfer Agent may permit exchanges that it believes in the exercise of its judgment are not disruptive. The Transfer Agent might not be able to detect frequent exchange activity conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent exchange activity in those accounts. There is no guarantee that the Transfer Agent's controls and procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity. As stated above, the Fund permits dealers or financial intermediaries to submit exchange requests on behalf of their customers (unless the customer has revoked that authority). The Manager, the Distributor and/or the Transfer Agent have agreements with a limited number of broker-dealers and investment advisers permitting them to submit exchange orders in bulk on behalf of their clients, provided that those broker-dealers or advisers agree to restrictions on their exchange activity (which are more stringent than the restrictions that apply to other shareholders). Those restrictions include limitations on the funds available for exchanges, the requirement to give advance notice of exchanges to the Transfer Agent, and limits on the amount of client assets that may be invested in a particular fund. The Fund and its Transfer Agent may restrict or refuse bulk exchange requests submitted by a financial intermediary on behalf of a large number of accounts (including pursuant to the arrangements described above) if, in the Transfer Agent's judgment exercised in its discretion, those exchanges would be disruptive to either fund in the exchange transaction. 17. The section entitled "How to Exchange Shares - Are There Limitations On Exchanges?" for the Bond Fund, Limited Term Government Fund, Main Street Fund, Inc., Strategic Income Fund and U.S. Government Trust is amended by adding the following "bullet point": o Frequent purchases and redemptions of the Fund's shares by funds of funds that invest in the Fund and periodically re-adjust the amount of their investment pursuant to asset reallocation programs (described in their prospectuses) may also increase the Fund's portfolio turnover and resulting transaction costs. The Board of Directors/Trustees of the Fund considered the possible effects of those transactions when it permitted these asset reallocation arrangements. Please refer to "How To Buy Shares - Investing Through Funds of Funds" for more information. 18. The section of the Prospectuses for Champion Income Fund, Developing Markets Fund, Discovery Fund, Emerging Growth Fund, Emerging Technologies Fund, Global Fund, Global Opportunities Fund, Gold & Special Minerals Fund, High Yield Fund, International Growth Fund, International Small Company Fund, Quest International Value Fund, Real Asset Fund and Small Cap Value Fund entitled "How to Sell Shares" is amended by deleting the second and third paragraphs and replacing them with the following: Redemption Fee. The Fund imposes a 2% redemption fee on the proceeds of Fund shares that are redeemed within 30 days of their purchase. The fee applies in the case of shares redeemed in exchange transactions. The redemption fee is collected by the Transfer Agent and paid to the Fund. It is intended to help offset the trading, market impact, and administrative costs associated with short-term money movements into and out of the Fund, and to help deter excessive short term trading. The fee is imposed to the extent that Fund shares redeemed exceed Fund shares that have been held more than 30 days. For shares of the Fund that were acquired by exchange, the holding period is measured from the date the shares were acquired in the exchange transaction. Shares held the longest will be redeemed first. The redemption fee is not imposed on shares: o held in omnibus accounts of a financial intermediary, such as a broker-dealer or a retirement plan fiduciary (however, shares held in retirement plans that are not in omnibus accounts, Oppenheimer-sponsored retirement plans such as IRAs, and 403(b)(7) plans are subject to the fee), if those institutions have not implemented the system changes necessary to be capable of processing the redemption fee; o held by investors in certain asset allocation programs that offer automatic re-balancing or wrap-fee or similar fee-based programs and that have been identified to the Distributor and the Transfer Agent; o redeemed for rebalancing transactions under the OppenheimerFunds Portfolio Builder program; o redeemed pursuant to an OppenheimerFunds automatic withdrawal plan; o redeemed due to the death or disability of the shareholder; o redeemed as part of an automatic dividend exchange election established in advance of the exchange; o redeemed to pay fees assessed by the Fund or the Transfer Agent against the account; o redeemed from accounts for which the dealer, broker or financial institution of record has entered into an agreement with the Distributor that permits such redemptions without the imposition of these fees, such as asset allocation programs; o redeemed for conversion of Class B shares to Class A shares or pursuant to fund mergers; and o involuntary redemptions resulting from failure to meet account minimums. 19. The section of each Prospectus entitled "Shareholder Account Rules and Policies - A $12 annual fee" is amended by deleting the section in its entirety and replacing it with the following: A $12 annual "Minimum Balance Fee" is assessed on each Fund account with a value of less than $500. The fee is automatically deducted from each applicable Fund account annually on or about the second to last "regular business day" of September. See the Statement of Additional Information (shareholders may visit the OppenheimerFunds website) to learn how you can avoid this fee and for circumstances under which this fee will not be assessed. July 6, 2004 PS0000.011
Oppenheimer Capital Preservation Fund 6803 South Tucson Way, Centennial, Colorado 80112 1.800.225.5677 Statement of Additional Information dated December 23, 2003 This Statement of Additional Information is not a Prospectus. This document contains additional information about the Fund and supplements information in the Prospectus dated December 23, 2003. It should be read together with the Prospectus. You can obtain the Prospectus 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 or by downloading it from the OppenheimerFunds Internet website at www.oppenheimerfunds.com. Contents Page About the Fund Additional Information About the Fund's Investment Policies and Risks............................................................... 2 The Fund's Investment Policies.......................................... 2 Other Investment Techniques and Strategies.......................... 16 Investment Restrictions............................................. 35 How the Fund is Managed................................................. 37 Organization and History............................................ 37 Board of Trustees and Oversight Committees.......................... 38 Trustees and Officers of the Fund................................... 39 The Manager......................................................... 47 Brokerage Policies of the Fund.......................................... 50 Distribution and Service Plans.......................................... 52 Performance of the Fund................................................. 56 About Your Account How to Buy Shares....................................................... 61 How to Sell Shares...................................................... 71 How to Exchange Shares.................................................. 76 Dividends, Capital Gains and Taxes...................................... 79 Additional Information about the Fund................................... 82 Financial Information About the Fund Independent Auditors' Report............................................ 83 Financial Statements.................................................... 84 Appendix A: Industry Classifications.................................... A-1 Appendix B: Special Sales Charge Arrangements and Waivers............... B-1 60 ABOUT THE FUND Additional Information About the Fund's Investment Policies and Risks The investment objective, the principal investment policies and the main risks of the Fund are described in the Prospectus. This Statement of Additional Information contains supplemental information about those policies and risks and the types of securities that the Fund's investment Manager, OppenheimerFunds, Inc. (the "Manager"), can select for the Fund. Additional information is also provided about the strategies that the Fund may use to try to achieve its objective. The Fund's Investment Policies. The composition of the Fund's portfolio and the techniques and strategies that the Manager may use in selecting portfolio securities will vary over time. The Fund is not required to use all of the investment techniques and strategies described below at all times in seeking its goals. It may use some of the special investment techniques and strategies at some times or not at all. |X| Debt Securities. The Fund can invest in a variety of debt securities to seek its objective. In general, debt securities are also subject to two additional types of risk: credit risk and interest rate risk. |_| Credit Risks. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent that lower-yield, higher-quality bonds. The Fund's debt investments can include high yield, non-investment-grade bonds (commonly referred to as "junk bonds"). Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors Service, Inc. ("Moody's"), or at least "BBB" by Standard & Poor's Rating Services ("S&P") or Fitch, Inc. ("Fitch, Inc.") or that have comparable ratings by another nationally-recognized rating organization. In making investments in debt securities, the Manager may rely to some extent on the ratings of ratings organizations or it may use its own research to evaluate a security's credit-worthiness. If securities the Fund buys are unrated, they are assigned a rating by the Manager of comparable quality to bonds having similar yield and risk characteristics within a rating category of a rating organization. The Fund does not have investment policies establishing specific maturity ranges for the Fund's investments, and they may be within any maturity range (short, medium or long) depending on the Manager's evaluation of investment opportunities available within the debt securities markets. The Fund may shift its investment focus to securities of longer maturity as interest rates decline and to securities of shorter maturity as interest rates rise. |_| ?Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already-issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities. |_| Special Risks of Lower-Grade Securities. The Fund can invest directly up to 10% of its net assets in lower-grade debt securities, if the Manager believes it is consistent with the Fund's objective. Because lower-rated securities tend to offer higher yields than investment grade securities, the Fund may invest in lower-grade securities to try to achieve higher income. "Lower-grade" debt securities are those rated below "investment grade" which means they have a rating lower than "Baa" by Moody's or lower than "BBB" by S&P or Fitch, Inc. or similar ratings by other nationally-recognized rating organizations. If they are unrated, and are determined by the Manager to be of comparable quality to debt securities rated below investment grade, they are considered part of the Fund's portfolio of lower-grade securities. The Fund can invest in securities rated as low as "C" or "D" or which may be in default at the time the Fund buys them. Some of the special credit risks of lower-grade securities are discussed below. There is a greater risk that the issuer may default on its obligation to pay interest or to repay principal than in the case of investment grade securities. The issuer's low creditworthiness may increase the potential for its insolvency. An overall decline in values in the high yield bond market is also more likely during a period of a general economic downturn. An economic downturn or an increase in interest rates could severely disrupt the market for high yield bonds, adversely affecting the values of outstanding bonds as well as the ability of issuers to pay interest or repay principal. In the case of foreign high yield bonds, these risks are in addition to the special risk of foreign investing discussed in the Prospectus and in this Statement of Additional Information. To the extent they can be converted into stock, convertible securities may be less subject to some of these risks than non-convertible high yield bonds, since stock may be more liquid and less affected by some of these risk factors. While securities rated "Baa" by Moody's or "BBB" by S&P are investment grade and are not regarded as junk bonds, those securities may be subject to special risks, and have some speculative characteristics. Shares of Underlying Oppenheimer Funds. The Fund can invest in various Oppenheimer funds. The Prospectus contains a brief description of Oppenheimer Limited-Term Government Fund ("Limited-Term Government Fund"), Oppenheimer Bond Fund ("Bond Fund"), Oppenheimer U.S. Government Trust ("U.S. Government Trust"), Oppenheimer Strategic Income Fund ("Strategic Income Fund"), and Oppenheimer Money Market Fund, Inc. ("Money Market Fund") (collectively referred to as the "underlying funds"), including each underlying funds investment objective. Set forth below is supplemental information about the types of securities each underlying fund may invest in, as well as strategies each underlying fund may use to try to achieve its objective. For more complete information about each underlying fund's investment policies and strategies, please refer to each underlying fund's prospectus. You may obtain a copy of each underlying fund's prospectus by calling 1.800.225.5677. |X| U.S. Government Securities. Each of the underlying Funds may purchase U.S. government securities. These include obligations issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. These may include direct obligations of the U.S. Treasury, such as Treasury bills, notes and bonds. Other U.S. government securities are supported by the full faith and credit of the United States, such as pass-through certificates issued by the Government National Mortgage Association. Others may be supported by the right of the issuer to borrow from the U.S. Treasury, such as securities of Federal Home Loan Banks. Others may be supported only by the credit of the instrumentality, such as obligations of the Federal National Mortgage Association. |X| Mortgage-Backed Securities. Limited-Term Government Fund, Bond Fund, U.S. Government Trust and Strategic Income Fund may purchase mortgage-backed securities and collateralized mortgage obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. Bond Fund may also purchase mortgage-backed securities and collateralized mortgage obligations issued by private issuers. Limited-Term Government Fund, Bond Fund, U.S. Government Trust and Strategic Income Fund may also invest in "stripped" mortgage-backed securities, CMOs or other securities issued by agencies or instrumentalities of the U.S. Government, and Bond Fund may invest in private-issuer stripped securities. Limited-Term Government Fund, Bond Fund, U.S. Government Trust and Strategic Income Fund may also enter into "forward roll" transactions with mortgage backed securities. In a forward roll transaction, the fund sells mortgage-backed securities it holds to banks or other buyers and simultaneously agrees to repurchase a similar security from that party at a later date at an agreed-upon price. |X| Asset-Backed Securities. Bond Fund, Strategic Income Fund and Money Market Fund may invest in asset-backed securities (securities that represent interests in pools of consumer loans and other trade receivables, similar to mortgage-backed securities). |X| Zero Coupon Securities. Bond Fund and Strategic Income Fund may invest in zero coupon securities (securities which may be issued by the U.S. government, its agencies or instrumentalities or by private issuers, that are offered at a substantial discount from their face value and do not pay interest but mature at face value), and Strategic Income Fund and Bond Fund may invest in zero coupon corporate securities (which are similar to U.S. government zero coupon Treasury securities but are issued by companies). |X| Debt Securities of Domestic Companies. Bond Fund and Strategic Income Fund may invest in debt securities of U.S. companies. Those corporate debt securities may be rated as low as "D" by S&P or Fitch, Inc. or "C" by Moody's. Bond Fund may invest up to 35% of its assets in lower-grade securities (often called junk bonds) and Strategic Income Fund may invest up to 100% of its assets in junk bonds. |X| Debt Securities of Foreign Governments and Companies. Bond Fund and Strategic Income Fund may invest in debt securities issued or guaranteed by foreign companies, "supranational" entities such as the World Bank, and foreign governments or their agencies. These foreign securities may include debt obligations such as government bonds, debentures issued by companies and notes. Some of these debt securities may have variable interest rates or "floating" interest rates that change in different market conditions. |X| Preferred Stocks. Bond Fund and Strategic Income Fund may invest in preferred stocks. Preferred stocks, unlike common stocks, generally offers a stated dividend rate payable from the corporation's earnings. |X| Participation Interests. Strategic Income Fund may acquire participation interests in loans that are made to U.S. or foreign companies. They may be interests in, or assignments of, the loan and are acquired from banks or brokers that have made the loan or are members of the lending syndicate. |X| Short-term Debt Securities. In addition to U.S. government securities, the Money Market Fund will invest in the following types of money market securities: (i) bank obligations, such as time deposits, certificates of deposit and bankers' acceptances, of a domestic bank or foreign bank with total assets of at least $1 billion, (ii) commercial paper, (iii) corporate obligations, (iv) other money market obligations other than those listed above if they are subject to repurchase agreements or guaranteed as to their principal and interest by a domestic bank having total assets in excess of $500 million or by a corporation whose commercial paper may be purchased by the fund, and (v) U.S. dollar-denominated short-term investments that the Money Market Fund's Board of Directors determines present minimal credit risk and which are of "high quality" as determined by a nationally-recognized statistical rating organization. Money Market Fund is required to purchase only those securities that the fund's manager, under Board-approved procedures, has determined have minimal credit risks and have a high credit rating. The investment techniques and strategies used by the underlying funds include the following: Each underlying fund may invest in illiquid and restricted securities, and repurchase agreements. Limited-Term Government Fund, U.S. Government Trust, Strategic Income Fund and Bond Fund may purchase securities on a "when-issued" and delayed delivery basis (securities that have been created and for which a market exists, but which are not available for immediate delivery), and hedging instruments, including certain kinds of futures contracts and put and call options, and options on futures, or enter into interest rate swap agreements. Bond Fund and Strategic Income Fund may enter into foreign currency exchange contracts. None of the underlying funds use hedging instruments for speculative purposes. Limited-Term Government Fund, U.S. Government Trust, Strategic Income Fund and Bond Fund may also invest in derivative investments (a specially-designed investment whose performance is linked to the performance of another investment or security, such as an option, future or index). Limited-Term Government Fund and U.S. Government Trust may enter into reverse repurchase agreements and Bond Fund and U.S. Government Trust may lend their portfolio securities, subject to certain limitations, to brokers, dealers and other financial institutions. Wrap Agreements. Wrap Agreements are structured with a number of different features. Wrap Agreements purchased by the Fund are of three basic types: (1) non-participating, (2) participating and (3) "hybrid". In addition, the Wrap Agreements will either be of fixed-maturity or open-end maturity ("evergreen"). The Fund enters into particular types of Wrap Agreements depending upon their respective cost to the Fund and the Wrap Provider's creditworthiness, as well as upon other factors. Under most circumstances, it is anticipated that the Fund will enter into participating or hybrid Wrap Agreements of open-end maturity. Under a non-participating Wrap Agreement, the Wrap Provider becomes obligated to make a payment to the Fund whenever the Fund sells Covered Assets at a price below Book Value to meet withdrawals of a type covered by the Wrap Agreement (a "Benefit Event"). Conversely, the Fund becomes obligated to make a payment to the Wrap Provider whenever the Fund sells Covered Assets at a price above their Book Value in response to a Benefit Event. In neither case is the Crediting Rate adjusted at the time of the Benefit Event. Accordingly, under this type of Wrap Agreement, while the Fund is protected against decreases in the market value of the Covered Assets below Book Value, it does not realize increases in the market value of the Covered Assets above Book Value; those increases are realized by the Wrap Providers. Under a participating Wrap Agreement, the obligation of the Wrap Provider or the Fund to make payments to each other typically does not arise until all of the Covered Assets have been liquidated. Instead of payments being made on the occurrence of each Benefit Event, the obligation to pay is a factor in the periodic adjustment of the Crediting Rate. A participating Wrap Agreement may require that any accrued gains left in the Fund that are not distributed through the Crediting Rate prior to the liquidation of all Covered Assets will be paid to the Wrap Provider. Under a hybrid Wrap Agreement, the obligation of the Wrap Provider or the Fund to make payments does not arise until withdrawals exceed a specified percentage of the Covered Assets, after which time payment covering the difference between market value and Book Value will occur. A fixed-maturity Wrap Agreement terminates at a specified date, at which time settlement of any difference between Book Value and market value of the Covered Assets occurs. A fixed-maturity Wrap Agreement tends to ensure that the Covered Assets provide a relatively fixed rate of return over a specified period of time through bond immunization, which targets the duration of the Covered Assets to the remaining life of the Wrap Agreement. An evergreen Wrap Agreement has no fixed maturity date on which payment must be made, and the rate of return on the Covered Assets accordingly tends to vary. Unlike the rate of return under a fixed-maturity Wrap Agreement, the rate of return on assets covered by an evergreen Wrap Agreement tends to more closely track prevailing market interest rates and thus tends to rise when interest rates rise and fall when interest rates fall. An evergreen Wrap Agreement may be converted into a fixed-maturity Wrap Agreement that will mature in the number of years equal to the duration of the Covered Assets. Wrap Providers are banks, insurance companies and other financial institutions. The number of Wrap Providers have been increased in recent years. There are currently approximately 19 Wrap Providers rated in the top two long-term rating categories by Moody's, S&P or another nationally recognized statistical rating organization. The cost of Wrap Agreements is typically 0.10% to 0.25% per dollar of Covered Asset per annum. The Fund will expense the cost of the Wrap Agreements. As described in the Prospectus, the Wrap Agreements are considered illiquid securities. Therefore, the value of all Wrap Agreements and other illiquid securities will not exceed 15% of the Fund's net assets. If the value of all Wrap Agreements and other illiquid securities exceeds 15% of the Fund's net assets at any time, the Fund's net asset value may decrease and the Fund's investment Manager, OppenheimerFunds, Inc., will take steps to reduce the value of the Wrap Agreements to 15% or less of net assets. If a Wrap Agreement is terminated by the Wrap Provider, normally, the Wrap Provider will be required to make a single sum payment equal to the positive value of the terminating Wrap Provider's share of the Covered Assets on a mutually agreed to maturity date that will not be earlier than the effective date of termination, plus a number of years equal to the duration of the Fund on the date of termination. If the value of the Wrap Agreement on the maturity date is zero or less, no payment will be required by the Wrap Provider. However, the Wrap Agreements may provide the Wrap Providers with the ability to terminate the Wrap Agreements with no further obligation to the Fund if the Manager allows distributions from the Fund other than for benefit sensitive payments to plan participants, if the Fund's Manager or the Fund's objective or investment policies are changed without the consent of the Wrap Provider, the Fund's assets are invested in securities other than as set forth in the Prospectus, someone other than the Manager exercises investment discretion over the Fund, the Wrap fees remain unpaid for a stated period of time, the Fund is terminated or amended or its administrative practices or applicable law are changed in a manner that may materially alter the Wrap Provider's duties, rights, obligations or liabilities or materially alter deposits to or withdrawals from the Fund, the Manager permits plans to invest in the Fund that do not meet the Wrap Agreement's stated underwriting standards, or the Fund's Investment Company Act of 1940 (the "Investment Company Act") registration lapses or is suspended. If, to effectuate a redemption payment, the Fund is required to liquidate all Covered Assets, the Wrap Provider may be obligated to pay to the Fund all or some of the difference between the market value and corresponding Book Value of such Covered Assets (if market value is less than Book Value). If, on the other hand, the market value of the liquidated Covered Assets is greater than the corresponding Book Value, the Fund may be obligated to pay all or some of the difference to the Wrap Provider. Because it is anticipated that each Wrap Agreement will cover all Covered Assets up to a specified dollar amount, if more than one Wrap Provider becomes obligated to pay to the Fund the difference between Book Value and the market value of the Covered Assets, each Wrap Provider will be obligated to pay a pro-rata amount in proportion to the maximum dollar amount of coverage provided. Thus, the Fund will not have the option of choosing which Wrap Agreement to draw upon in any such payment situation. However, if a portion of a Wrap Agreement is to be assigned as a payment-in-kind to a Plan, the Fund will have the discretion to choose to allocate the payment to a single Wrap Agreement. In that circumstance, the Fund expects to address subsequent requests for such assignments to a different Wrap Provider until each Wrap Provider has made roughly its pro rata share of such assignments. The terms of a Wrap Agreement may require that the Covered Assets have a specified duration or maturity, consist of specified types of securities or be of a specified credit quality. The Fund will purchase Wrap Agreements whose criteria in this regard are consistent with the Fund's investment objectives and policies as set forth in the Prospectus, although in some cases the Wrap Agreement may require more restrictive investment objectives and policies than otherwise permitted by the Prospectus and Statement of Additional Information. o Risks of Investing in Wrap Agreements. In the event of the default of a Wrap Provider, the Fund could potentially lose the Book Value protections provided by the Wrap Agreements with that Wrap Provider. However, the impact of such a default on the Fund as a whole may be minimal or non-existent if the market value of the Covered Assets thereunder is greater than their Book Value at the time of the default, because the Wrap Provider would have no obligation to make payments to the Fund under those circumstances. In addition, the Fund may be able to obtain another Wrap Agreement from another Wrap Provider to provide Book Value protections with respect to those Covered Assets. The cost of the replacement Wrap Agreement might be higher than the initial Wrap Agreement due to market conditions or if the market value of those Covered Assets is less than their Book Value at the time of entering into the replacement agreement. Such cost would also be in addition to any premiums previously paid to the defaulting Wrap Provider. If the Fund were unable to obtain a replacement Wrap Agreement, participants redeeming Shares might experience losses if the market value of the Fund's assets no longer covered by the Wrap Agreement is below Book Value. The combination of the default of a Wrap Provider and an inability to obtain a replacement agreement could render the Fund unable to achieve its investment objective of seeking to maintain a stable value per Share. The Fund may not be able to maintain a consistent net asset value should it be determined that it is not appropriate to value Wrap Agreements as the difference between the Book Value and the market value of the Covered Assets. See "About Your Account - Securities Valuation" for more information. With respect to payments made under the Wrap Agreements between the Fund and the Wrap Provider, some Wrap Agreements, as noted in the Fund's prospectus, provide that payments may be due upon disposition of the Covered Assets or upon termination of the Wrap Agreement. In none of these cases, however, would the terms of the Wrap Agreements specify which Covered Assets are to be disposed of or liquidated. Moreover, because it is anticipated that each Wrap Agreement will cover all Covered Assets up to a specified dollar amount, if more than one Wrap Provider becomes obligated to pay to the Fund the difference between Book Value and market value, each Wrap Provider will pay a pro-rata amount in proportion to the maximum dollar amount of coverage provided. Thus, the Fund will not have the option of choosing which Wrap Agreement to draw upon in any such payment situation. In the event of termination of a Wrap Agreement or conversion of an evergreen Wrap Agreement to a fixed maturity, some Wrap Agreements may require that the duration of some portion of the Fund's portfolio securities be reduced to correspond to the fixed maturity or termination date. That may adversely effect the yield of the Fund. The Wrap Agreements typically provide that either the Wrap Provider or the Fund may terminate the Wrap Agreement upon specified notice to the other party. If a Wrap Agreement is terminated the Fund intends to purchase a new Wrap Agreement from another financial institution on terms substantially similar to those of the terminated Wrap Agreement. However, there may be certain circumstances in which substitute Wrap Agreements are unavailable or are available only on terms the Fund considers disadvantageous. In such circumstances, the Wrap Agreements permit the Fund to convert the terminating Wrap Agreement into a maturing Wrap Agreement. The maturity period for a terminating Wrap Agreement will approximate the investment duration of the Fund at that time. During that maturity period the terminating Wrap Agreement will apply to a distinct investment portfolio within the Fund. That distinct portfolio will be managed to a declining investment duration, as required by the Wrap Agreement. The terminating Wrap Provider will continue to be responsible for paying its proportionate share of any payments required to satisfy redemption requests. The terminating Wrap Agreement will have a distinct Crediting Rate, reflecting its distinct investment portfolio. The Fund's overall Crediting Rate will reflect a blending of the Crediting Rate on the terminating Wrap Agreement and the Crediting Rate on the remaining Wrap Agreements. Other Securities the Fund May Purchase. From time to time, when the Manager determines that it would be advantageous to the Fund, the Fund may invest in any of the securities described below either exclusively or in addition to its investment in the underlying funds. The Wrap Agreements the Fund purchases may contain certain investment restrictions which limit the Fund's ability to invest in some or all of the following: |X| High-Yield, Lower-Grade Debt Securities of U.S. Issuers. The Fund can purchase a variety of lower-grade, high-yield debt securities of U.S. issuers, including bonds, debentures, notes, preferred stocks, loan participation interests, structured notes, asset-backed securities, among others, to seek high current income. These securities are sometimes called "junk bonds." The Fund has no requirements as to the maturity of the debt securities it can buy, or as to the market capitalization range of the issuers of those securities. The Fund will not invest more than 10% of its net assets in high yield, lower-grade debt securities. Lower-grade debt securities are those rated below "Baa" by Moody's or lower than "BBB" by S&P or Fitch, Inc. or similar ratings by other nationally-recognized rating organizations. The Fund can invest in securities rated as low as "C" or "D" or which are in default at the time the Fund buys them. While securities rated "Baa" by Moody's or "BBB" by S&P or Fitch, Inc. are considered "investment grade," they have some speculative characteristics. The Manager does not rely solely on ratings issued by rating organizations when selecting investments for the Fund. The Fund can buy unrated securities that offer high current income. The Manager may assign a rating to an unrated security that is equivalent to the rating of a rated security that the Manager believes offers comparable yields and risks. While investment-grade securities are subject to risks of non-payment of interest and principal, generally, higher yielding lower-grade bonds, whether rated or unrated, have greater risks than investment-grade securities. They may be subject to greater market fluctuations and risk of loss of income and principal than investment-grade securities. There may be less of a market for them and therefore they may be harder to sell at an acceptable price. There is a relatively greater possibility that the issuer's earnings may be insufficient to make the payments of interest and principal due on the bonds. These risks mean that the Fund may not achieve the expected income from lower-grade securities. |X| Foreign Debt Securities. The Fund can buy a variety of debt securities issued by foreign governments and companies, as well as "supra-national" entities, such as the World Bank. They can include bonds, debentures, and notes, including derivative investments called "structured" notes, described below. The Fund will not invest 25% or more of its total assets in debt securities of any one foreign government or in debt securities of companies in any one industry. The Fund has no requirements as to the maturity range of the foreign debt securities it can buy, or as to the market capitalization range of the issuers of those securities. The Fund's foreign debt investments can be denominated in U.S. dollars or in foreign currencies. The Fund will buy foreign currency only in connection with the purchase and sale of foreign securities and not for speculation. The Fund can buy "Brady Bonds," which are U.S.-dollar denominated debt securities collateralized by zero-coupon U.S. Treasury securities. They are typically issued by emerging markets countries and are considered speculative securities with higher risks of default. The debt obligations of foreign governments and entities may or may not be supported by the full faith and credit of the foreign government. The Fund may buy securities issued by certain "supra-national" entities, which include entities designated or supported by governments to promote economic reconstruction or development, international banking organizations and related government agencies. Examples are the International Bank for Reconstruction and Development (commonly called the "World Bank"), the Asian Development bank and the Inter-American Development Bank. The governmental members of these supra-national entities are "stockholders" that typically make capital contributions and may be committed to make additional capital contributions if the entity is unable to repay its borrowings. A supra-national entity's lending activities may be limited to a percentage of its total capital, reserves and net income. There can be no assurance that the constituent foreign governments will continue to be able or willing to honor their capitalization commitments for those entities. The Fund can invest in U.S. dollar-denominated "Brady Bonds." These foreign debt obligations may be fixed-rate par bonds or floating-rate discount bonds. They are generally collateralized in full as to repayment of principal at maturity by U.S. Treasury zero-coupon obligations that have the same maturity as the Brady Bonds. Brady Bonds can be viewed as having three or four valuation components: (i) the collateralized repayment of principal at final maturity; (ii) the collateralized interest payments; (iii) the uncollateralized interest payments; and (iv) any uncollateralized repayment of principal at maturity. Those uncollateralized amounts constitute what is called the "residual risk." If there is a default on collateralized Brady Bonds resulting in acceleration of the payment obligations of the issuer, the zero-coupon U.S. Treasury securities held as collateral for the payment of principal will not be distributed to investors, nor will those obligations be sold to distribute the proceeds. The collateral will be held by the collateral agent to the scheduled maturity of the defaulted Brady Bonds. The defaulted bonds will continue to remain outstanding, and the face amount of the collateral will equal the principal payments which would have then been due on the Brady Bonds in the normal course. Because of the residual risk of Brady Bonds and the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, Brady Bonds are considered speculative investments. |_| Risks of Foreign Investing. Investments in foreign securities may offer special opportunities for investing but also present special additional risks and considerations not typically associated with investments in domestic securities. Some of these additional risks are: o reduction of income by foreign taxes; o fluctuation in value of foreign investments due to changes in currency rates or currency control regulations (for example, currency blockage); o transaction charges for currency exchange; o lack of public information about foreign issuers; o lack of uniform accounting, auditing and financial reporting standards in foreign countries comparable to those applicable to domestic issuers; o less volume on foreign exchanges than on U.S. exchanges; o greater volatility and less liquidity on foreign markets than in the U.S.; o less governmental regulation of foreign issuers, stock exchanges and brokers than in the U.S.; o greater difficulties in commencing lawsuits; o higher brokerage commission rates than in the U.S.; o increased risks of delays in settlement of portfolio transactions or loss of certificates for portfolio securities; o possibilities in some countries of expropriation, confiscatory taxation, political, financial or social instability or adverse diplomatic developments; and o 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. |_| Special Risks of Emerging Markets. Emerging and developing markets abroad may also offer special opportunities for investing but have greater risks than more developed foreign markets, such as those in Europe, Canada, Australia, New Zealand and Japan. There may be even less liquidity in their securities markets, and settlements of purchases and sales of securities may be subject to additional delays. They are subject to greater risks of limitations on the repatriation of income and profits because of currency restrictions imposed by local governments. Those countries may also be subject to the risk of greater political and economic instability, which can greatly affect the volatility of prices of securities in those countries. The Manager will consider these factors when evaluating securities in these markets, because the selection of those securities must be consistent with the Fund's investment objective. |X| Mortgage-Related Securities. Mortgage-related securities are a form of derivative investment collateralized by pools of commercial or residential mortgages. Pools of mortgage loans are assembled as securities for sale to investors by government agencies or entities or by private issuers. These securities include collateralized mortgage obligations ("CMOs"), mortgage pass-through securities, stripped mortgage pass-through securities, interests in real estate mortgage investment conduits ("REMICs") and other real-estate related securities. Mortgage-related securities that are issued or guaranteed by agencies or instrumentalities of the U.S. government have relatively little credit risk (depending on the nature of the issuer) but are subject to interest rate risks and prepayment risks, as described in the Prospectus. Mortgage-related securities issued by private issuers have greater credit risks. As with other debt securities, the prices of mortgage-related securities tend to move inversely to changes in interest rates. The Fund can buy mortgage-related securities that have interest rates that move inversely to changes in general interest rates, based on a multiple of a specific index. Although the value of a mortgage-related security may decline when interest rates rise, the converse is not always the case. In periods of declining interest rates, mortgages are more likely to be prepaid. Therefore, a mortgage-related security's maturity can be shortened by unscheduled prepayments on the underlying mortgages. Therefore, it is not possible to predict accurately the security's yield. The principal that is returned earlier than expected may have to be reinvested in other investments having a lower yield than the prepaid security. Therefore, these securities may be less effective as a means of "locking in" attractive long-term interest rates, and they may have less potential for appreciation during periods of declining interest rates, than conventional bonds with comparable stated maturities. Prepayment risks can lead to substantial fluctuations in the value of a mortgage-related security. In turn, this can affect the value of the Fund's shares. If a mortgage-related security has been purchased at a premium, all or part of the premium the Fund paid may be lost if there is a decline in the market value of the security, whether that results from interest rate changes or prepayments on the underlying mortgages. In the case of stripped mortgage-related securities, if they experience greater rates of prepayment than were anticipated, the Fund may fail to recoup its initial investment on the security. During periods of rapidly rising interest rates, prepayments of mortgage-related securities may occur at slower than expected rates. Slower prepayments effectively may lengthen a mortgage-related security's expected maturity. Generally, that would cause the value of the security to fluctuate more widely in responses to changes in interest rates. If the prepayments on the Fund's mortgage-related securities were to decrease broadly, the Fund's effective duration, and therefore its sensitivity to interest rate changes, would increase. As with other debt securities, the values of mortgage-related securities may be affected by changes in the market's perception of the creditworthiness of the entity issuing the securities or guaranteeing them. Their values may also be affected by changes in government regulations and tax policies. |_| Collateralized Mortgage Obligations. CMOs are multi-class bonds that are backed by pools of mortgage loans or mortgage pass-through certificates. They may be collateralized by: (1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac, (2) unsecuritized mortgage loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans' Affairs, (3) unsecuritized conventional mortgages, (4) other mortgage-related securities, or (5) any combination of these. Each class of CMO, referred to as a "tranche," is issued at a specific coupon rate and has a stated maturity or final distribution date. Principal prepayments on the underlying mortgages may cause the CMO to be retired much earlier than the stated maturity or final distribution date. The principal and interest on the underlying mortgages may be allocated among the several classes of a series of a CMO in different ways. One or more tranches may have coupon rates that reset periodically at a specified increase over an index. These are floating rate CMOs, and typically have a cap on the coupon rate. Inverse floating rate CMOs have a coupon rate that moves in the reverse direction to an applicable index. The coupon rate on these CMOs will increase as general interest rates decrease. These are usually much more volatile than fixed rate CMOs or floating rate CMOs. |X| Forward Rolls. The Fund can enter into "forward roll" transactions with respect to mortgage-related securities. In this type of transaction, the Fund sells a mortgage-related security to a buyer and simultaneously agrees to repurchase a similar security (the same type of security, and having the same coupon and maturity) at a later date at a set price. The securities that are repurchased will have the same interest rate as the securities that are sold, but typically will be collateralized by different pools of mortgages (with different prepayment histories) than the securities that have been sold. Proceeds from the sale are invested in short-term instruments, such as repurchase agreements. The income from those investments, plus the fees from the forward roll transaction, are expected to generate income to the Fund in excess of the yield on the securities that have been sold. The Fund will only enter into "covered" rolls. To assure its future payment of the purchase price, the Fund will identify on its books liquid assets in an amount equal to the payment obligation under the roll. These transactions have risks. During the period between the sale and the repurchase, the Fund will not be entitled to receive interest and principal payments on the securities that have been sold. It is possible that the market value of the securities the Fund sells may decline below the price at which the Fund is obligated to repurchase securities. |X| U.S. Government Securities. These are securities issued or guaranteed by the U.S. Treasury or other government agencies or federally-chartered corporate entities referred to as "instrumentalities." The obligations of U.S. government agencies or instrumentalities in which the Fund may invest may or may not be guaranteed or supported by the "full faith and credit" of the United States. "Full faith and credit" means generally that the taxing power of the U.S. government is pledged to the payment of interest and repayment of principal on a security. If a security is not backed by the full faith and credit of the United States, the owner of the security must look principally to the agency issuing the obligation for repayment. The owner might not be able to assert a claim against the United States if the issuing agency or instrumentality does not meet its commitment. The Fund will invest in securities of U.S. government agencies and instrumentalities only if the Manager is satisfied that the credit risk with respect to the agency or instrumentality is minimal. |_| U.S. Treasury Obligations. These include Treasury bills (maturities of one year or less when issued), Treasury notes (maturities of from one to 10 years), and Treasury bonds (maturities of more than 10 years). Treasury securities are backed by the full faith and credit of the United States as to timely payments of interest and repayments of principal. They also can include U. S. Treasury securities that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S. Treasury securities described below, and Treasury Inflation-Protection Securities ("TIPS"). |_| Treasury Inflation-Protection Securities. The Fund can buy these U.S. Treasury securities, called "TIPS," that are designed to provide an investment vehicle that is not vulnerable to inflation. The interest rate paid by TIPS is fixed. The principal value rises or falls semi-annually based on changes in the published Consumer Price Index. If inflation occurs, the principal and interest payments on TIPS are adjusted to protect investors from inflationary loss. If deflation occurs, the principal and interest payments will be adjusted downward, although the principal will not fall below its face amount at maturity. |_| Obligations Issued or Guaranteed by U.S. Government Agencies or Instrumentalities. These include direct obligations and mortgage-related securities that have different levels of credit support from the government. Some are supported by the full faith and credit of the U.S. government, such as Government National Mortgage Association pass-through mortgage certificates (called "Ginnie Maes"). Some are supported by the right of the issuer to borrow from the U.S. Treasury under certain circumstances, such as Federal National Mortgage Association bonds ("Fannie Maes"). Others are supported only by the credit of the entity that issued them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie Macs"). |_| U.S. Government Mortgage-Related Securities. The Fund can invest in a variety of mortgage-related securities that are issued by U.S. government agencies or instrumentalities, some of which are described below. |_| GNMA Certificates. The Government National Mortgage Association ("GNMA") is a wholly-owned corporate instrumentality of the United States within the U.S. Department of Housing and Urban Development. GNMA's principal programs involve its guarantees of privately-issued securities backed by pools of mortgages. Ginnie Maes are debt securities representing an interest in one or a pool of mortgages that are insured by the Federal Housing Administration or the Farmers Home Administration or guaranteed by the Veterans Administration. The Ginnie Maes in which the Fund invests are of the "fully modified pass-through" type. They provide that the registered holders of the Ginnie Maes will receive timely monthly payments of the pro-rata share of the scheduled principal payments on the underlying mortgages, whether or not those amounts are collected by the issuers. Amounts paid include, on a pro rata basis, any prepayment of principal of such mortgages and interest (net of servicing and other charges) on the aggregate unpaid principal balance of the Ginnie Maes, whether or not the interest on the underlying mortgages has been collected by the issuers. The Ginnie Maes purchased by the Fund are guaranteed as to timely payment of principal and interest by GNMA. In giving that guaranty, GNMA expects that payments received by the issuers of Ginnie Maes on account of the mortgages backing the Ginnie Maes will be sufficient to make the required payments of principal of and interest on those Ginnie Maes. However if those payments are insufficient, the guaranty agreements between the issuers of the Ginnie Maes and GNMA require the issuers to make advances sufficient for the payments. If the issuers fail to make those payments, GNMA will do so. Under federal law, the full faith and credit of the United States is pledged to the payment of all amounts that may be required to be paid under any guaranty issued by GNMA as to such mortgage pools. An opinion of an Assistant Attorney General of the United States, dated December 9, 1969, states that such guaranties "constitute general obligations of the United States backed by its full faith and credit." GNMA is empowered to borrow from the United States Treasury to the extent necessary to make any payments of principal and interest required under those guaranties. Ginnie Maes are backed by the aggregate indebtedness secured by the underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the extent of payments received by the issuers on account of such mortgages, Ginnie Maes do not constitute a liability of those issuers, nor do they evidence any recourse against those issuers. Recourse is solely against GNMA. Holders of Ginnie Maes (such as the Fund) have no security interest in or lien on the underlying mortgages. Monthly payments of principal will be made, and additional prepayments of principal may be made, to the Fund with respect to the mortgages underlying the Ginnie Maes owned by the Fund. All of the mortgages in the pools relating to the Ginnie Maes in the Fund are subject to prepayment without any significant premium or penalty, at the option of the mortgagors. While the mortgages on one-to-four-family dwellings underlying certain Ginnie Maes have a stated maturity of up to 30 years, it has been the experience of the mortgage industry that the average life of comparable mortgages, as a result of prepayments, refinancing and payments from foreclosures, is considerably less. |_| Federal Home Loan Mortgage Corporation Certificates ("FHLMC"). FHLMC, a corporate instrumentality of the United States, issues FHLMC Certificates representing interests in mortgage loans. FHLMC guarantees to each registered holder of a FHLMC Certificate timely payment of the amounts representing a holder's proportionate share in: (i) interest payments less servicing and guarantee fees, (ii) principal prepayments and (iii) the ultimate collection of amounts representing the holder's proportionate interest in principal payments on the mortgage loans in the pool represented by the FHLMC Certificate, in each case whether or not such amounts are actually received. The obligations of FHLMC under its guarantees are obligations solely of FHLMC and are not backed by the full faith and credit of the United States. |_| Federal National Mortgage Association (Fannie Mae) Certificates. Fannie Mae, a federally-chartered and privately-owned corporation, issues Fannie Mae Certificates which are backed by a pool of mortgage loans. Fannie Mae guarantees to each registered holder of a Fannie Mae Certificate that the holder will receive amounts representing the holder's proportionate interest in scheduled principal and interest payments, and any principal prepayments, on the mortgage loans in the pool represented by such Certificate, less servicing and guarantee fees, and the holder's proportionate interest in the full principal amount of any foreclosed or other liquidated mortgage loan. In each case the guarantee applies whether or not those amounts are actually received. The obligations of Fannie Mae under its guarantees are obligations solely of Fannie Mae and are not backed by the full faith and credit of the United States or any of its agencies or instrumentalities other than Fannie Mae. |_| Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon U.S. government securities. These will typically be U.S. Treasury Notes and Bonds that have been stripped of their unmatured interest coupons, the coupons themselves, or certificates representing interests in those stripped debt obligations and coupons. Zero-coupon securities do not make periodic interest payments and are sold at a deep discount from their face value at maturity. The buyer recognizes a rate of return determined by the gradual appreciation of the security, which is redeemed at face value on a specified maturity date. This discount depends on the time remaining until maturity, as well as prevailing interest rates, the liquidity of the security and the credit quality of the issuer. The discount typically decreases as the maturity date approaches. Because zero-coupon securities pay no interest and compound semi-annually at the rate fixed at the time of their issuance, their value is generally more volatile than the value of other debt securities that pay interest. Their value may fall more dramatically than the value of interest-bearing securities when interest rates rise. When prevailing interest rates fall, zero-coupon securities tend to rise more rapidly in value because they have a fixed rate of return. The Fund's investment in zero-coupon securities may cause the Fund to recognize income and make distributions to shareholders before it receives any cash payments on the zero-coupon investment. To generate cash to satisfy those distribution requirements, the Fund may have to sell portfolio securities that it otherwise might have continued to hold or to use cash flows from other sources such as the sale of Fund shares. |X| Portfolio Turnover. "Portfolio turnover" describes the rate at which the Fund trades its portfolio securities during its fiscal year. For example, if a fund sold all of its securities during the year, its portfolio turnover rate would have been 100%. The Fund's portfolio turnover rate will fluctuate from year to year, but it is not expected that the Fund's portfolio turnover rate will exceed 100%. Increased turnover of the non-mutual fund securities the Fund may purchase can result in higher brokerage and transaction costs for the Fund, which may reduce its overall performance. The Fund incurs no brokerage and transaction costs when it buys and sells shares of the underlying funds. Additionally, the realization of capital gains from selling portfolio securities may result in distributions of long-term capital gains to shareholders, since the Fund will normally distribute all of its capital gains realized each year, to avoid excise taxes under the Internal Revenue Code. Other Investment Techniques and Strategies. In seeking its objective, the Fund may from time to time use the types of investment strategies and investments described below. It is not required to use all of these strategies at all times and at times may not use them. |X| Other Zero-Coupon Securities. The Fund may buy zero-coupon and delayed interest securities, and "stripped" securities of corporations and of foreign government issuers. These are similar in structure to zero-coupon and "stripped" U.S. government securities, but in the case of foreign government securities may or may not be backed by the "full faith and credit" of the issuing foreign government. Zero-coupon securities issued by foreign governments and by corporations will be subject to greater credit risks than U.S. government zero-coupon securities. |X| "Stripped" Mortgage-Related Securities. The Fund can invest in stripped mortgage-related securities that are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two or more new securities. Each has a specified percentage of the underlying security's principal or interest payments. These are a form of derivative investment. Mortgage securities may be partially stripped so that each class receives some interest and some principal. However, they may be completely stripped. In that case all of the interest is distributed to holders of one type of security, known as an "interest-only" security, or "I/O," and all of the principal is distributed to holders of another type of security, known as a "principal-only" security or "P/O." Strips can be created for pass-through certificates or CMOs. The yields to maturity of I/Os and P/Os are very sensitive to principal repayments (including prepayments) on the underlying mortgages. If the underlying mortgages experience greater than anticipated prepayments of principal, the Fund might not fully recoup its investment in an I/O based on those assets. If underlying mortgages experience less than anticipated prepayments of principal, the yield on the P/Os based on them could decline substantially. The market for some of these securities may be limited, making it difficult for the Fund to dispense of its holdings at an acceptable price. |X| Preferred Stocks. Preferred stock, unlike common stock, has a stated dividend rate payable from the corporation's earnings. Preferred stock dividends may be cumulative or non-cumulative, participating, or auction rate. "Cumulative" dividend provisions require all or a portion of prior unpaid dividends to be paid. Preferred stock may be "participating" stock, which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, which can be a negative feature when interest rates decline. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation. The rights of preferred stock on distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities. |X| Floating Rate and Variable Rate Obligations. Some securities the Fund can purchase have variable or floating interest rates. Variable rates are adjusted at stated periodic intervals. Variable rate obligations can have a demand feature that allows the Fund to tender the obligation to the issuer or a third party prior to its maturity. The tender may be at par value plus accrued interest, according to the terms of the obligations. The interest rate on a floating rate demand note is adjusted automatically according to a stated prevailing market rate, such as a bank's prime rate, the 91 day U.S. Treasury Bill rate, or some other standard. The instrument's rate is adjusted automatically each time the base rate is adjusted. The interest rate on a variable rate note is also based on a stated prevailing market rate but is adjusted automatically at specified intervals of not less than one year. Generally, the changes in the interest rate on such securities reduce the fluctuation in their market value. As interest rates decrease or increase, the potential for capital appreciation or depreciation is less than that for fixed-rate obligations of the same maturity. The Manager may determine that an unrated floating rate or variable rate demand obligation meets the Fund's quality standards by reason of being backed by a letter of credit or guarantee issued by a bank that meets those quality standards. Floating rate and variable rate demand notes that have a stated maturity in excess of one year may have features that permit the holder to recover the principal amount of the underlying security at specified intervals not exceeding one year and upon no more than 30 days' notice. The issuer of that type of note normally has a corresponding right in its discretion, after a given period, to prepay the outstanding principal amount of the note plus accrued interest. Generally the issuer must provide a specified number of days' notice to the holder. |X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund may invest in securities on a "when-issued" basis and may purchase or sell securities on a "delayed-delivery" (or "forward-commitment") basis. When-issued and delayed-delivery are terms that refer to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. When such transactions are negotiated, the price (which is generally expressed in yield terms) is fixed at the time the commitment is made. Delivery and payment for the securities take place at a later date. The securities are subject to change in value from market fluctuations during the period until settlement. The value at delivery may be less than the purchase price. For example, changes in interest rates in a direction other than that expected by the Manager before settlement will affect the value of such securities and may cause a loss to the Fund. During the period between purchase and settlement, no payment is made by the Fund to the issuer and no interest accrues to the Fund from the investment. No income begins to accrue to the Fund on a when-issued security until the Fund receives the security at settlement of the trade. The Fund will engage in when-issued transactions to secure what the Manager considers to be an advantageous price and yield at the time of entering into the obligation. When the Fund enters into a when-issued or delayed-delivery transaction, it relies on the other party to complete the transaction. Its failure to do so may cause the Fund to lose the opportunity to obtain the security at a price and yield the Manager considers to be advantageous. When the Fund engages in when-issued and delayed-delivery transactions, it does so for the purpose of acquiring or selling securities consistent with its investment objective and policies or for delivery pursuant to options contracts it has entered into, and not for the purpose of investment leverage. Although the Fund will enter into delayed-delivery or when-issued purchase transactions to acquire securities, it may dispose of a commitment prior to settlement. If the Fund chooses to dispose of the right to acquire a when-issued security prior to its acquisition or to dispose of its right to delivery or receive against a forward commitment, it may incur a gain or loss. At the time the Fund makes the commitment to purchase or sell a security on a when-issued or delayed-delivery basis, it records the transaction on its books and reflects the value of the security purchased in determining the Fund's net asset value. In a sale transaction, it records the proceeds to be received. The Fund will identify on its books liquid assets at least equal in value to the value of the Fund's purchase commitments until the Fund pays for the investment. When-issued and delayed-delivery transactions can be used by the Fund as a defensive technique to hedge against anticipated changes in interest rates and prices. For instance, in periods of rising interest rates and falling prices, the Fund might sell securities in its portfolio on a forward commitment basis to attempt to limit its exposure to anticipated falling prices. In periods of falling interest rates and rising prices, the Fund might sell portfolio securities and purchase the same or similar securities on a when-issued or delayed-delivery basis to obtain the benefit of currently higher cash yields. |X| Participation Interests. The Fund may invest in participation interests, subject to the Fund's limitation on investments in illiquid investments. A participation interest is an undivided interest in a loan made by the issuing financial institution in the proportion that the buyers participation interest bears to the total principal amount of the loan. No more than 5% of the Fund's net assets can be invested in participation interests of the same borrower. The issuing financial institution may have no obligation to the Fund other than to pay the Fund the proportionate amount of the principal and interest payments it receives. Participation interests are primarily dependent upon the creditworthiness of the borrowing corporation, which is obligated to make payments of principal and interest on the loan. There is a risk that a borrower may have difficulty making payments. If a borrower fails to pay scheduled interest or principal payments, the Fund could experience a reduction in its income. The value of that participation interest might also decline, which could affect the net asset value of the Fund's shares in the absence of the Wrap Agreements. If the issuing financial institution fails to perform its obligations under the participation agreement, the Fund might incur costs and delays in realizing payment and suffer a loss of principal and/or interest. |X| Repurchase Agreements. The Fund can acquire securities subject to repurchase agreements. It might do so for liquidity purposes to meet anticipated redemptions of Fund shares, or pending the investment of the proceeds from sales of Fund shares, or pending the settlement of portfolio securities transactions, or for temporary defensive purposes, as described below. In a repurchase transaction, the Fund buys a security from, and simultaneously resells it to, an approved vendor for delivery on an agreed-upon future date. 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. Approved vendors include U.S. commercial banks, U.S. branches of foreign banks, or broker-dealers that have been designated as primary dealers in government securities. They must meet credit requirements set by the Manager from time to time. The majority of these transactions run from day to day, and delivery pursuant to the resale typically occurs within one to five days of the purchase. Repurchase agreements having a maturity beyond seven days are subject to the Fund's limits on holding illiquid investments. 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. There is no limit on the amount of the Fund's net assets that may be subject to repurchase agreements having maturities of seven days or less. Repurchase agreements, considered "loans" under the Investment Company Act, are 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. 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 Manager will monitor the vendor's creditworthiness requirements to confirm that the vendor is financially sound and will continuously monitor the collateral's value. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the "SEC"), the Fund, along with other affiliated entities managed by the Manager, may transfer uninvested cash balances into one or more joint repurchase accounts. These balances are invested in one or more repurchase agreements, secured by U.S. government securities. Securities that are pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each joint repurchase arrangement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default by the other party to the agreement, retention or sale of the collateral may be subject to legal proceedings. |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 Wrap Agreement is considered to be an illiquid security. To enable the Fund to sell its holdings of a restricted security not registered under the Securities Act of 1933, the Fund may have to cause those securities to be registered. The expenses of registering restricted securities may be negotiated by the Fund with the issuer at the time the Fund buys the securities. When the Fund must arrange registration because the Fund wishes to sell the security, a considerable period may elapse between the time the decision is made to sell the security and the time the security is registered so that the Fund could sell it. The Fund would bear the risks of any downward price fluctuation during that period. The Fund may also acquire restricted securities through private placements. Those securities have contractual restrictions on their public resale. Those restrictions might limit the Fund's ability to dispose of the securities and might lower the amount the Fund could realize upon the sale. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under applicable securities laws. The Fund will not invest more than 15% of its net assets in illiquid or restricted securities. The restriction applies on an ongoing basis. That percentage restriction does not limit purchases of restricted securities that are eligible for sale to qualified institutional purchasers under Rule 144A of the Securities Act of 1933, if those securities have been determined to be liquid 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 holdings of that security may be considered to be illiquid. Illiquid securities include repurchase agreements maturing in more than seven days and participation interests that do not have puts exercisable within seven days. |X| Loans of Portfolio Securities. To raise cash for liquidity or income purposes, the Fund can lend its portfolio securities to brokers, dealers and other types of financial institutions approved by the Fund's Board of Trustees. These loans are limited to not more than 25% of the value of the Fund's total assets. The Fund currently does not intend to lend securities, but if it does so, such loans will not likely exceed 5% 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 recovery of the loaned securities if the borrower defaults. The Fund must receive collateral for a loan. Under current applicable regulatory requirements (which are subject to change), on each business day the loan collateral must be at least equal to the value of the loaned securities. It must consist of cash, bank letters of credit, securities of the U.S. government or its agencies or instrumentalities, or other cash equivalents in which the Fund is permitted to invest. 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. The terms of the letter of credit and the issuing bank both must be satisfactory to the Fund. When it lends securities, the Fund receives amounts equal to the dividends or interest on loaned securities. It also receives one or more of (a) negotiated loan fees, (b) interest on securities used as collateral, and (c) interest on any short-term debt securities purchased with such loan collateral. Either type of interest may be shared with the borrower. The Fund may also pay reasonable finders', custodian and administrative fees in connection with these loans. 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| Borrowing for Leverage. The Fund has the ability to borrow from banks on an unsecured basis to invest the borrowed funds in portfolio securities. This speculative technique is known as "leverage." The Fund may borrow only from banks for investment purposes. Currently, under the Investment Company Act, absent exemptive relief, a mutual fund may borrow only from banks and the maximum amount it may borrow is up to one-third of its total assets (including the amount borrowed) less all liabilities and indebtedness other than borrowing. If the value of the Fund's assets fails to meet this 300% asset coverage requirement, the Fund will reduce its bank debt within three days to meet the requirement. To do so, the Fund might have to sell a portion of its investments at a disadvantageous time. The Fund will pay interest on these loans, and that interest expense will raise the overall expenses of the Fund and reduce its returns. If it does borrow, its expenses will be greater than comparable funds that do not borrow for leverage. Additionally, the Fund's net asset value per share might fluctuate more than that of funds that do not borrow. Currently, the Fund does not contemplate using this technique in the next year but if it does so, it will not likely be to a substantial degree. |X| Interfund Borrowing and Lending Arrangements. Consistent with its fundamental policies and pursuant to an exemptive order issued by the SEC, the Fund may engage in borrowing and lending activities with other funds in the OppenheimerFunds complex. Borrowing money from affiliated funds may afford the Fund the flexibility to use the most cost-effective alternative to satisfy its borrowing requirements. Lending money to an affiliated fund may allow the Fund to obtain a higher rate of return than it could from interest rates on alternative short-term investments. Implementation of interfund lending will be accomplished consistent with applicable regulatory requirements, including the provisions of the SEC order. o Interfund Borrowing. The Fund will not borrow from affiliated funds unless the terms of the borrowing arrangement are at least as favorable as the terms the Fund could otherwise negotiate with a third party. To assure that the Fund will not be disadvantaged by borrowing from an affiliated fund, certain safeguards may be implemented. Examples of these safeguards include the following: o the Fund will not borrow money from affiliated funds unless the interest rate is more favorable than available bank loan rates; o the Fund's borrowing from affiliated funds must be consistent with its investment objective and investment policies; o the loan rates will be the average of the overnight repurchase agreement rate available through the OppenheimerFunds joint repurchase agreement account and a pre-established formula based on quotations from independent banks to approximate the lowest interest rate at which bank loans would be available to the Fund; o if the Fund has outstanding borrowings from all sources greater than 10% of its total assets, then the Fund must secure each additional outstanding interfund loan by segregating liquid assets of the Fund as collateral; o the Fund cannot borrow from an affiliated fund in excess of 125% of its total redemptions for the preceding seven days; o each interfund loan may be repaid on any day by the Fund; and o the Trustees will be provided with a report of all interfund loans and the Trustees will monitor all such borrowings to ensure that the Fund's participation is appropriate. There is a risk that a borrowing fund could have a loan called on one day's notice. In that circumstance, the Fund might have to borrow from a bank at a higher interest cost if money to lend were not available from another Oppenheimer fund. o Interfund Lending. To assure that the Fund will not be disadvantaged by making loans to affiliated funds, certain safeguards will be implemented. Examples of these safeguards include the following: o the Fund will not lend money to affiliated funds unless the interest rate on such loan is determined to be reasonable under the circumstances; o the Fund may not make interfund loans in excess of 15% of its net assets; o an interfund loan to any one affiliated fund shall not exceed 5% of the Fund's net assets; o an interfund loan may not be outstanding for more than seven days; o each interfund loan may be called on one business day's notice; and o the Manager will provide the Trustees reports on all interfund loans demonstrating that the Fund's participation is appropriate and that the loan is consistent with its investment objectives and policies. When the Fund lends assets to another affiliated fund, the Fund is subject to the risk that the borrowing fund fails to repay the loan. |X| Asset-Backed Securities. Asset-backed securities are fractional interests in pools of assets, typically accounts receivable or consumer loans. They are issued by trusts or special-purpose corporations. They are similar to mortgage-backed securities, described above, and are backed by a pool of assets that consist of obligations of individual borrowers. The income from the pool is passed through to the holders of participation interests in the pools. The pools may offer a credit enhancement, such as a bank letter of credit, to try to reduce the risks that the underlying debtors will not pay their obligations when due. However, the enhancement, if any, might not be for the full par value of the security. If the enhancement is exhausted and any required payments of interest or repayments of principal are not made, the Fund could suffer losses on its investment or delays in receiving payment. The value of an asset-backed security is affected by changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans, or the financial institution providing any credit enhancement, and is also affected if any credit enhancement has been exhausted. The risks of investing in asset-backed securities are ultimately related to payment of consumer loans by the individual borrowers. As a purchaser of an asset-backed security, the Fund would generally have no recourse to the entity that originated the loans in the event of default by a borrower. The underlying loans are subject to prepayments, which may shorten the weighted average life of asset-backed securities and may lower their return, in the same manner as in the case of mortgage-backed securities and CMOs, described above. Unlike mortgage-backed securities, asset-backed securities typically do not have the benefit of a security interest in the underlying collateral. |X| Derivatives. The Fund can invest in a variety of derivative investments to seek income or for hedging purposes. Some derivative investments the Fund can use are the hedging instruments described below in this Statement of Additional Information. Among the derivative investments the Fund can invest in are structured notes called "index-linked" or "currency-linked" notes. Principal and/or interest payments on index-linked notes depend on the performance of an underlying index. Currency-indexed securities are typically short-term or intermediate-term debt securities. Their value at maturity or the rates at which they pay income are determined by the change in value of the U.S. dollar against one or more foreign currencies or an index. In some cases, these securities may pay an amount at maturity based on a multiple of the amount of the relative currency movements. This type of index security offers the potential for increased income or principal payments but at a greater risk of loss than a typical debt security of the same maturity and credit quality. Other derivative investments the Fund can use include "debt exchangeable for common stock" of an issuer or "equity-linked debt securities" of an issuer. At maturity, the debt security is exchanged for common stock of the issuer or it is payable in an amount based on the price of the issuer's common stock at the time of maturity. Both alternatives present a risk that the amount payable at maturity will be less than the principal amount of the debt because the price of the issuer's common stock might not be as high as the Manager expected. |X| Hedging. Although the Fund does not anticipate the extensive use of hedging instruments, the Fund can use hedging instruments. It is not obligated to use them in seeking its objective. To attempt to protect against declines in the market value of the Fund's portfolio, to permit the Fund to retain unrealized gains in the value of portfolio securities that have appreciated, or to facilitate selling securities for investment reasons, the Fund could: o sell futures contracts, o buy puts on such futures or on securities, or o write covered calls on securities or futures. Covered calls may also be used to increase the Fund's income, but the Manager does not expect to engage extensively in that practice. The Fund can use hedging to establish a position in the securities market as a temporary substitute for purchasing particular securities. In that case, the Fund would normally seek to purchase the securities and then terminate that hedging position. The Fund might also use this type of hedge to attempt to protect against the possibility that its portfolio securities would not be fully included in a rise in value of the market. To do so the Fund could: o buy futures, or o buy calls on such futures or on securities. The Fund is not obligated to use hedging instruments, even though it is permitted to use them in the Manager's discretion, as described below. The Fund's strategy of hedging with futures and options on futures will be incidental to the Fund's activities in the underlying cash market. The particular hedging instruments the Fund can use are described below. The Fund may employ new hedging instruments and strategies when they are developed, if those investment methods are consistent with the Fund's investment objective and are permissible under applicable regulations governing the Fund. |_| Futures. The Fund can buy and sell futures contracts that relate to (1) broadly-based securities indices (these are referred to as "financial futures"), (2) commodities (these are referred to as "commodity index futures"), (3) debt securities (these are referred to as "interest rate futures"), (4) foreign currencies (these are referred to as "forward contracts") and (5) an individual stock ("single stock futures"). A broadly-based bond index is used as the basis for trading bond index futures. They may in some cases be based on bonds of issuers in a particular industry or group of industries. A bond index assigns relative values to the securities included in the index and its value fluctuates in response to the changes in value of the underlying securities. A bond index cannot be purchased or sold directly. These contracts obligate the seller to deliver, and the purchaser to take, cash to settle the futures transaction. There is no delivery made of the underlying securities to settle the futures obligation. Either party may also settle the transaction by entering into an offsetting contract. An interest rate future obligates the seller to deliver (and the purchaser to take) cash or a specified type of debt security to settle the futures transaction. Either party could also enter into an offsetting contract to close out the position. Similarly, a single stock future obligates the seller to deliver (and the purchaser to take) cash or a specified equity security to settle the futures transaction. Either party could also enter into an offsetting contract to close out the position. Single stock futures trade on a very limited number of exchanges, with contracts typically not fungible among the exchanges. The Fund can invest a portion of its assets in commodity futures contracts. Commodity futures may be based upon commodities within five main commodity groups: (1) energy, which includes crude oil, natural gas, gasoline and heating oil; (2) livestock, which includes cattle and hogs; (3) agriculture, which includes wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4) industrial metals, which includes aluminum, copper, lead, nickel, tin and zinc; and (5) precious metals, which includes gold, platinum and silver. The Fund may purchase and sell commodity futures contracts, options on futures contracts and options and futures on commodity indices with respect to these five main commodity groups and the individual commodities within each group, as well as other types of commodities. No money is paid or received by the Fund on the purchase or sale of a future. Upon entering into a futures transaction, the Fund will be required to deposit an initial margin payment with the futures commission merchant (the "futures broker"). Initial margin payments will be deposited with the Fund's custodian bank in an account registered in the futures broker's name. However, the futures broker can gain access to that account only under 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 daily. At any time prior to 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 any additional cash must be paid by or released to the Fund. Any loss or gain on the future is then realized by the Fund for tax purposes. All futures transactions (other than forward contracts) are effected through a clearinghouse associated with the exchange on which the contracts are traded. |_| Put and Call Options. The Fund may buy and sell certain kinds of put options ("puts") and call options ("calls"). The Fund can 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 above. |_| Writing Covered Call Options. The Fund can write (that is, sell) covered calls. If the Fund sells a call option, it must be covered. That means the Fund must own the security subject to the call while the call is outstanding, or, for certain types of calls, the call may be covered by segregating liquid assets to enable the Fund to satisfy its obligations if the call is exercised. There is no limit on the amount of the Fund's total assets that may be subject to covered calls the Fund writes. When the Fund writes a call on a security, it receives cash (a premium). The Fund agrees to sell the underlying security to a purchaser of a corresponding call on the same security during the call period at a fixed exercise price regardless of market price changes during the call period. The call period is usually not more than nine months. The exercise price may differ from the market price of the underlying security. The Fund has the risk of loss that the price of the underlying security may decline during the call period. That risk may be offset to some extent by the premium the Fund receives. If the value of the investment does not rise above the call price, it is likely that the call will lapse without being exercised. In that case the Fund would keep the cash premium and the investment. When the Fund writes a call on an index, it receives cash (a premium). If the buyer of the call exercises it, the Fund will pay an amount of cash equal to the difference between the closing price of the call and the exercise price, multiplied by the specified multiple that determines the total value of the call for each point of difference. If the value of the underlying investment does not rise above the call price, it is likely that the call will lapse without being exercised. In that case the Fund would keep the cash premium. 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 calls traded on exchanges or as to other acceptable escrow securities. In that way, no margin will be required for such transactions. OCC will release the securities on the expiration of the option or when the Fund enters into a closing transaction. 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 will establish a formula price at which the Fund will have the absolute right to repurchase that OTC option. The formula price will 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 option is "in the money"). When the Fund writes an OTC option, it will treat as illiquid (for purposes of its restriction on holding illiquid securities) the mark-to-market value of any OTC option it holds, unless the option is subject to a buy-back agreement by the executing broker. To terminate its obligation on a call it has written, the Fund may purchase a corresponding call in a "closing purchase transaction." The Fund will then realize a profit or loss, depending upon whether the net of the amount of the option transaction costs and the premium received on the call the Fund wrote is more or less than the price of the call the Fund purchases to close out the transaction. The Fund may realize a profit if the call expires unexercised, because the Fund will retain the underlying security and the premium it received when it wrote the call. Any such profits are considered short-term capital gains for federal income tax purposes, as are the premiums on lapsed calls. When distributed by the Fund they are taxable as ordinary income. If the Fund cannot effect a closing purchase transaction due to the lack of a market, it will have to hold the callable securities until the call expires or is exercised. The Fund may also write calls on a futures contract without owning the futures contract or securities deliverable under the contract. To do so, at the time the call is written, the Fund must cover the call by segregating on its books liquid assets. The Fund will segregate additional liquid assets if the value of the segregated assets drops below 100% of the current value of the future. Because of this segregation requirement, in no circumstances would the Fund's receipt of an exercise notice as to that future require the Fund to deliver a futures contract. It would simply put the Fund in a short futures position, which is permitted by the Fund's hedging policies. |_| Writing Put Options. The Fund can sell put options on securities, broadly-based securities indices, foreign currencies and futures. A put option on securities 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. The Fund will not write puts if, as a result, more than 50% of the Fund's net assets would be required to be segregated to cover such put options. If the Fund writes a put, the put must be covered by segregated liquid assets. The premium the Fund receives from writing a put represents a profit, as long as the price of the underlying investment remains equal to or above the exercise price of the put. However, the Fund also assumes the obligation during the option period to buy the underlying investment from the buyer of the put at the exercise price, even if the value of the investment falls below the exercise price. If a put the Fund has written expires unexercised, the Fund realizes a gain in the amount of the premium less the transaction costs incurred. If the put is exercised, the Fund must fulfill its obligation to purchase the underlying investment at the exercise price. That price will usually exceed the market value of the investment at that time. In that case, the Fund may incur a loss if it sells the underlying investment. That loss will be 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 the Fund incurred. When writing a put option on a security, 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 Fund's obligation as the put writer continues, it may be assigned an exercise notice by the broker-dealer through which the put was sold. That notice will require the Fund to take delivery of the underlying security and pay 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. That obligation terminates upon expiration of the put. It may also terminate if, before it receives an exercise notice, the Fund effects a closing purchase transaction by purchasing a put of the same series as it sold. Once the Fund has been assigned an exercise notice, it cannot effect a closing purchase transaction. The Fund may decide to effect a closing purchase transaction to realize a profit on an outstanding put option it has written or to prevent the underlying security from being put. Effecting a closing purchase transaction will also permit the Fund to write another put option on the security, or to sell the security and use the proceeds from the sale for other investments. The Fund will realize a profit or loss from a closing purchase transaction depending on whether the cost of the transaction is less or more than the premium received from writing the put option. Any profits from writing puts are considered short-term capital gains for federal tax purposes, and when distributed by the Fund, are taxable as ordinary income. |_| Purchasing Calls and Puts. The Fund can purchase calls on securities, broadly-based securities indices, foreign currencies and futures. It may do so to protect against the possibility that the Fund's portfolio will not participate in an anticipated rise in the securities market. When the Fund buys a call (other than in a closing purchase transaction), it pays a premium. The Fund then 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. The Fund benefits only if it sells the call at a profit or if, during the call period, the market price of the underlying investment is above the sum of the call price plus the transaction costs and the premium paid for the call and the Fund exercises the call. If the Fund does not exercise the call or sell it (whether or not at a profit), the call will become worthless at its expiration date. In that case the Fund will have paid the premium but lost the right to purchase the underlying investment. The Fund can buy puts on securities, broadly-based securities indices, foreign currencies and futures, whether or not it owns the underlying investment. When the Fund purchases a put, it pays a premium and, except as to puts on indices, has the right to sell the underlying investment to a seller of a put on a corresponding investment during the put period at a fixed exercise price. Buying a put on an investment the Fund does not own (such as an index or future) permits the Fund either to resell the put or to buy the underlying investment and sell it at the exercise price. The resale price will vary inversely to 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 its expiration date. Buying a put on securities or futures the Fund owns 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 date. In that case the Fund will have paid the premium but lost the right to sell the underlying investment. However, the Fund may sell the put prior to its expiration. That sale may or may not be at a profit. When the Fund purchases a call or put on an index or future, it pays a premium, but settlement is in cash rather than by delivery of the underlying investment to the Fund. Gain or loss depends on changes in the index in question (and thus on price movements in the securities market generally) rather than on price movements in individual securities or futures contracts. The Fund may also purchase calls and puts on spread options. Spread options pay the difference between two interest rates, two exchange rates or two referenced assets. Spread options are used to hedge the decline in the value of an interest rate, currency or asset compared to a reference or base interest rate, currency or asset. The risks associated with spread options are similar to those of interest rate options, foreign exchange options and debt or equity options. The Fund may buy a call or put only if, after the purchase, the value of all call and put options held by the Fund will not exceed 5% of the Fund's total assets. |_| Buying and Selling Options on Foreign Currencies. The Fund can buy and sell calls and puts on foreign currencies. They include puts and calls that trade on a securities or commodities exchange or in the over-the-counter markets or are quoted by major recognized dealers in such options. The Fund could use these calls and puts to try to protect against declines in the dollar value of foreign securities and increases in the dollar cost of foreign securities the Fund wants to acquire. 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 those securities may be partially offset by purchasing calls or writing puts on that foreign currency. If the Manager anticipates a decline in the dollar value of a foreign currency, the decline in the dollar value of portfolio securities denominated in that currency might be partially offset by writing calls or purchasing puts on that foreign currency. However, the currency rates could fluctuate in a direction adverse to the Fund's position. The Fund will then have incurred option premium payments and transaction costs without a corresponding benefit. A call the Fund writes on a foreign currency 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 it can do so for additional cash consideration identified on the books of the Fund) upon conversion or exchange of other foreign currency held in its portfolio. The Fund could write a call on a foreign currency to provide a hedge against a decline 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. That decline might be one that occurs due to an expected adverse change in the exchange rate. This is known as a "cross-hedging" strategy. In those circumstances, the Fund covers the option by identifying on the books of the Fund cash, U.S. government securities or other liquid, high grade debt securities in an amount equal to the exercise price of the option. |_| Risks of Hedging with Options and Futures. 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. The Fund's option activities could affect its portfolio turnover rate and brokerage commissions. The exercise of calls written by the Fund might 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 could pay a brokerage commission each time it buys a call or put, sells a call or put, or buys or sells an underlying investment in connection with the exercise of a call or put. Those commissions could be higher on a relative basis 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. 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 investment. If a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price. It will not be able to realize any profit if the investment has increased in value above the call price. 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. The Fund might experience losses if it could not close out a position because of an illiquid market for the future or option. There is a risk in using short hedging by selling futures or purchasing puts on broadly-based indices or futures to attempt to protect against declines in the value of the Fund's portfolio securities. The risk is that the prices of the futures or the applicable index will correlate imperfectly with the behavior of the cash prices of the Fund's securities. For example, it is possible that while the Fund has used hedging instruments in a short hedge, the market might advance and the value of the securities held in the Fund's portfolio might decline. If that occurred, the Fund would lose money on the hedging instruments and also experience a decline in the value of 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 securities will tend to move in the same direction as the indices upon which the hedging instruments are based. 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 portfolio securities being hedged and movements in the price of the hedging instruments, the Fund might use hedging instruments in a greater dollar amount than the dollar amount of portfolio securities being hedged. It might do so if the historical volatility of the prices of the portfolio securities being hedged is more than the historical volatility of the applicable index. The ordinary spreads between prices in the cash and futures markets are subject to distortions, due to differences in the nature of those markets. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market 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 market could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities markets. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. The Fund can use hedging instruments to establish a position in the securities markets as a temporary substitute for the purchase of individual securities (long hedging) by buying futures and/or calls on such futures, broadly-based indices or on securities. It is possible that when the Fund does so the market might decline. If the Fund then concludes not to invest in securities because of concerns that the market might decline further 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 securities purchased. |_| 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 "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 a foreign currency. The Fund limits its exposure in foreign currency exchange contracts in a particular foreign currency to the amount of its assets denominated in that currency or a closely-correlated 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. Under a forward contract, one party agrees to purchase, and another party agrees to sell, a specific currency at a future date. That date may be any fixed number of days from the date of the contract agreed upon by the parties. The transaction price is set at the time the contract is entered into. These contracts are traded in the inter-bank market conducted directly among currency traders (usually large commercial banks) and their customers. 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 the risk of 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. Although forward contracts may reduce the risk of loss from a decline in the value of the hedged currency, at the same time they limit any potential gain if the value of the hedged currency increases. When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when it anticipates receiving dividend payments in a foreign currency, the Fund might desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of the dividend payments. To do so, the Fund could enter into a forward contract for the purchase or sale of the amount of foreign currency involved in the underlying transaction, in a fixed amount of U.S. dollars per unit of the foreign currency. This is called a "transaction hedge." The transaction hedge will protect the Fund against a loss from an adverse change in 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 the payments are made or received. The Fund could also use forward contracts to lock in the U.S. dollar value of portfolio positions. This is called a "position hedge." When the Fund believes that foreign currency might suffer a substantial decline against the U.S. dollar, it could enter into a forward contract to sell an amount of that foreign currency approximating the value of some or all of the Fund's portfolio securities denominated in that foreign currency. When the Fund believes that the U.S. dollar might suffer a substantial decline against a foreign currency, it could enter into a forward contract to buy that foreign currency for a fixed dollar amount. Alternatively, the Fund could enter into a forward contract to sell a different foreign currency for a fixed U.S. dollar amount if the Fund believes that the U.S. dollar value of the foreign currency to be sold pursuant to its forward contract will fall whenever there is a decline in the U.S. dollar value of the currency in which portfolio securities of the Fund are denominated. That is referred to as a "cross hedge." The Fund will cover its short positions in these cases by identifying on the books of the Fund assets having a value equal to the aggregate amount of the Fund's commitment under forward contracts. The Fund will not enter into forward contracts or maintain a net exposure to such contracts if 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. However, to avoid excess transactions and transaction costs, the Fund may maintain a net exposure to forward contracts in excess of the value of the Fund's portfolio securities or other assets denominated in foreign currencies if the excess amount is "covered" by liquid securities denominated in any currency. The cover must be at least equal at all times to the amount of that excess. As one 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. As another alternative, 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. The precise matching of the amounts under forward contracts and the value of the securities involved generally will not be possible because the future value of securities denominated in foreign currencies will change as a consequence of market movements between the date the forward contract is entered into and the date it is sold. In some cases the Manager might decide to sell the security and deliver foreign currency to settle the original purchase obligation. If the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver, the Fund might have to purchase additional foreign currency on the "spot" (that is, cash) market to settle the security trade. If the market value of the security instead exceeds the amount of foreign currency the Fund is obligated to deliver to settle the trade, the Fund might have to sell on the spot market some of the foreign currency received upon the sale of the security. There will be additional transaction costs on the spot market in those cases. 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 to pay additional transactions costs. The use of forward contracts in this manner might reduce the Fund's performance if there are unanticipated changes in currency prices to a greater degree than if the Fund had not entered into such contracts. At or before the maturity of a forward contract requiring the Fund to sell a currency, the Fund might sell a portfolio security and use the sale proceeds to make delivery of the currency. In the alternative the Fund might retain the security and offset its contractual obligation to deliver the currency by purchasing a second contract. Under that contract the Fund will obtain, on the same maturity date, the same amount of the currency that it is obligated to deliver. Similarly, the Fund might 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. The gain or loss will depend on the extent to which the exchange rate or rates between the currencies involved moved between the execution dates of the first contract and offsetting contract. The costs 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 brokerage fees or commissions are involved. Because these contracts are not traded on an exchange, the Fund must evaluate the credit and performance risk of the counterparty under each forward contract. Although the Fund values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of foreign currencies into U.S. dollars on a daily basis. The Fund may convert foreign currency from time to time, and will incur costs in doing so. Foreign exchange dealers do not charge a fee for conversion, but 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 might offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange if the Fund desires to resell that currency to the dealer. |_| Interest Rate Swap Transactions. The Fund can enter into interest rate swap agreements. In an interest rate swap, the Fund and another party exchange their right to receive or their obligation to pay interest on a security. For example, they might swap the right to receive floating rate payments for fixed rate payments. The Fund can enter into swaps only on securities that it owns. The Fund will not enter into swaps with respect to more than 25% of its total assets. Also, the Fund will segregate liquid assets (such as cash or U.S. government securities) to cover any amounts it could owe under swaps that exceed the amounts it is entitled to receive, and it will adjust that amount daily, as needed. Swap agreements entail both interest rate risk and credit risk. There is a risk that, based on movements of interest rates in the future, the payments made by the Fund under a swap agreement will be greater than the payments it received. Credit risk arises from the possibility that the counterparty will default. If the counterparty defaults, the Fund's loss will consist of the net amount of contractual interest payments that the Fund has not yet received. The Manager will monitor the creditworthiness of counterparties to the Fund's interest rate swap transactions on an ongoing basis. The Fund can enter into swap transactions with certain counterparties pursuant to master netting agreements. A master netting agreement provides that all swaps done between the Fund and that counterparty shall be regarded as parts of an integral agreement. If amounts are payable on a particular date in the same currency in respect of one or more swap transactions, the amount payable on that date in that currency shall be the net amount. In addition, the master netting agreement may provide that if one party defaults generally or on one swap, the counterparty can terminate all of the swaps with that party. Under these agreements, if a default results in a loss to one party, the measure of that party's damages is calculated by reference to the average cost of a replacement swap for each swap. It is measured by the mark-to-market value at the time of the termination of each swap. The gains and losses on all swaps are then netted, and the result is the counterparty's gain or loss on termination. The termination of all swaps and the netting of gains and losses on termination is generally referred to as "aggregation." o Swaption Transactions. The Fund may enter into a swaption transaction, which is a contract that grants the holder, in return for payment of the purchase price (the "premium") of the option, the right, but not the obligation, to enter into an interest rate swap at a preset rate within a specified period of time, with the writer of the contract. The writer of the contract receives the premium and bears the risk of unfavorable changes in the preset rate on the underlying interest rate swap. Unrealized gains/losses on swaptions are reflected in investment assets and investment liabilities in the Fund's statement of financial condition. |_| Regulatory Aspects of Hedging Instruments. The Commodities Futures Trading Commission (the "CFTC") recently eliminated limitations on futures trading by certain regulated entities including registered investment companies and consequently registered investment companies may engage in unlimited futures transactions and options thereon provided that the Fund claims an exclusion from regulation as a commodity pool operator. The Fund has claimed such an exclusion from registration as a commodity pool operator under the Commodity Exchange Act ("CEA"). The Fund may use futures and options for hedging and non-hedging purposes to the extent consistent with its investment objective, internal risk management guidelines adopted by the Fund's Manager (as they may be amended from time to time), and as otherwise set forth in the Fund's prospectus or this statement of additional information. Transactions in options by the Fund are subject to limitations established by the option exchanges. The exchanges limit the maximum number of options that may be written or held by a single investor or group of investors acting in concert. Those limits apply 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 that the Fund may write or hold may be affected by options written or held by other entities, including other investment companies having the same advisor as the Fund (or an advisor that is an affiliate of the Fund's advisor). The exchanges also impose position limits on futures transactions. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions. Under interpretations of staff members of the SEC regarding applicable provisions of the Investment Company Act, when the Fund purchases a future, it must segregate cash or readily marketable short-term debt instruments in an amount equal to the purchase price of the future, less the margin deposit applicable to it. |_| Tax Aspects of Certain Hedging Instruments. Certain foreign currency exchange contracts in which the Fund may invest are treated as "Section 1256 contracts" under the Internal Revenue Code. In general, gains or losses relating to Section 1256 contracts are characterized as 60% long-term and 40% short-term capital gains or losses under the Code. However, foreign currency gains or losses arising from Section 1256 contracts that are 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," and unrealized gains or losses are treated as though they were realized. These contracts also may be marked-to-market for purposes of determining 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 those transactions from this marked-to-market treatment. Certain forward contracts the Fund enters into may result in "straddles" for federal income tax purposes. The straddle rules may affect the character and timing of gains (or losses) recognized by the Fund on straddle positions. Generally, a loss sustained on the disposition of a position making up a straddle is allowed only to the extent that the 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, the following gains or losses are treated as ordinary income or loss: (1) gains or losses attributable to fluctuations in exchange rates that 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, and (2) gains or losses attributable to fluctuations in the value of a foreign currency between the date of acquisition of a debt security denominated in a foreign currency or foreign currency forward contracts and the date of disposition. Currency gains and losses are offset against market gains and losses on each trade before determining a net "Section 988" gain or loss under the Internal Revenue Code for that trade, which may increase or decrease the amount of the Fund's investment income available for distribution to its shareholders. |X| Temporary Defensive and Interim Investments. When market conditions are unstable, or the Manager believes it is otherwise appropriate to reduce the Fund's duration, the Fund can invest in a variety of debt securities for defensive purposes. The Fund can also purchase these securities for liquidity purposes to meet cash needs due to the redemption of Fund shares, or to hold while waiting to reinvest cash received from the sale of other portfolio securities. The Fund's temporary defensive investments can include the following short-term (maturing in one year or less) dollar-denominated debt obligations: o obligations issued or guaranteed by the U. S. government or its instrumentalities or agencies, o commercial paper (short-term, unsecured promissory notes) of domestic or foreign companies, o debt obligations of domestic or foreign corporate issuers, o certificates of deposit and bankers' acceptances of domestic and foreign banks having total assets in excess of $1 billion, and o repurchase agreements. Short-term debt securities would normally be selected for defensive or cash management purposes because they can normally be disposed of quickly, are not generally subject to significant fluctuations in principal value and their value will be less subject to interest rate risk than longer-term debt securities. Investment in Other Investment Companies. The Fund can also invest in the securities of investment companies other than the underlying funds, which can include open-end funds, closed-end funds and unit investment trusts, subject to the limits set forth in the Investment Company Act and any exemption therefrom that apply to those types of investments. For example, the Fund can invest in Exchange-Traded Funds, which are typically open-end funds or unit investment trusts, listed on a stock exchange. The Fund might do so as a way of gaining exposure to the segments of the equity or fixed-income markets represented by the Exchange-Traded Funds' portfolio, at times when the Fund may not be able to buy those portfolio securities directly. Investing in another investment company may involve the payment of substantial premiums above the value of such investment company's portfolio securities and is subject to limitations under the Investment Company Act. The Fund does not intend to invest in other investment companies unless the Manager believes that the potential benefits of the investment justify the payment of any premiums or sales charges. As a shareholder of an investment company, the Fund would be subject to its ratable share of that investment company's expenses, including its advisory and administration expenses. At the same time, the Fund would bear its own management fees and expenses. The Fund does not anticipate investing a substantial amount of its net assets in shares of the investment companies other than the underlying funds. Subject to the limits under the Investment Company Act, the Fund may also invest in foreign mutual funds which are also deemed PFICs (since nearly all of the income of a mutual fund is generally passive income). Investing in these types of PFICs may allow exposure to various countries because some foreign countries limit, or prohibit, all direct foreign investment in the securities of companies domiciled therein. In addition to bearing their proportionate share of a fund's expenses (management fees and operating expenses), shareholders will also indirectly bear similar expenses of such entities. Additional risks of investing in other investment companies are described above. Investment Restrictions |X| What Are "Fundamental Policies?" Fundamental policies are those policies that the Fund has adopted to govern its investments that can be changed only by the vote of a "majority" of the Fund's outstanding voting securities. Under the Investment Company Act, a "majority" vote is defined as the vote of the holders of the lesser of: o 67% or more of the shares present or represented by proxy at a shareholder meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy, or o more than 50% of the outstanding shares. The Fund's investment objectives are a fundamental policy. Other policies described in the Prospectus or this Statement of Additional Information are "fundamental" only if they are identified as such. The Fund's Board of Trustees can change non-fundamental policies without shareholder approval. However, significant changes to investment policies will be described in supplements or updates to the Prospectus or this Statement of Additional Information, as appropriate. The Fund's most significant investment policies are described in the Prospectus. |X| Does the Fund Have Additional Fundamental Policies? The following investment restrictions are fundamental policies of the Fund. o The Fund cannot concentrate investments. That means the Fund cannot invest 25% or more of its total assets in any single industry. However, there is no limitation on investments in affiliated funds and obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities; o The Fund cannot buy securities issued or guaranteed by any one issuer, other than an underlying fund, if more than 5% of its total assets would be invested in securities of that issuer or if it would then own more than 10% of that issuer's voting securities. This limitation applies to 75% of the Fund's total assets. The limit does not apply to securities issued by the U.S. government or any of its agencies or instrumentalities; o The Fund cannot purchase or sell real estate, commodities or commodity contracts; however, the Fund may use hedging instruments approved by its Board whether or not such hedging instruments are considered commodities or commodity contracts; o The Fund cannot underwrite securities except to the extent the Fund may be deemed to be an underwriter in connection with the sale of securities held in its portfolio; o The Fund cannot lend money, except that the Fund may (a) lend its portfolio securities, (b) purchase debt securities which are permitted by the Fund's investment policies and restrictions, (c) enter into repurchase agreements, and (d) lend money to other affiliated funds provided that no such loan may be made if, as a result, the aggregate of such loans would exceed 33 1/3% of the value of its total assets (taken at market value at the time of such loans) subject to obtaining all required authorizations and regulatory approvals; o The Fund cannot borrow money in excess of one-third of the value of its total assets. The Fund can borrow only from other affiliated funds and from banks for temporary or emergency purposes, and the Fund can borrow only from banks for investment purposes. 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; o The Fund cannot issue "senior securities," but this does not prohibit certain investment activities for which assets of the Fund are designated as segregated, or margin, collateral or escrow arrangements are established, to cover the related obligations. Examples of those activities include borrowing money, reverse repurchase agreements, delayed-delivery and when-issued arrangements for portfolio securities transactions, and contracts to buy or sell derivatives, hedging instruments, options or futures. Non-Fundamental Investment Restrictions. The following operating policies of the Fund are not fundamental policies and, as such, may be changed by vote of a majority of the Fund's Board of Trustees without shareholder approval. These additional restrictions provide that the Fund cannot: o purchase securities on margin. However, the Fund can make margin deposits when using hedging instruments permitted by any of its other policies. o invest in companies for the purpose of acquiring control or management of those companies. Unless the Prospectus or this Statement of Additional Information states that a percentage restriction applies on an ongoing basis, it applies only at the time the Fund makes an investment (except in the case of borrowing and investments in illiquid securities). 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. For purposes of the Fund's policy not to concentrate its investments, the Fund has adopted the industry classifications set forth in Appendix A to this Statement of Additional Information. That is not a fundamental policy. How the Fund is Managed Organization and History. The Fund is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest. The Fund was organized on June 2, 1998 as a Massachusetts business trust. |X| Classes of Shares. The Trustees are authorized, without shareholder approval, to create new series and classes of shares. The Trustees may reclassify unissued shares of the Fund into additional series or classes of shares. The Trustees also may divide or combine the shares of a class into a greater or lesser number of shares without changing the proportionate beneficial interest of a shareholder in the Fund. Shares do not have cumulative voting rights or preemptive or subscription rights. Shares may be voted in person or by proxy at shareholder meetings. The Fund currently has five classes of shares: Class A, Class B, Class C, Class N and Class Y. All classes invest in the same investment portfolio. Only retirement plans may purchase Class N shares. Only certain institutional investors may elect to purchase Class Y shares. Each class of shares: o has its own dividends and distributions, o pays certain expenses which may be different for the different classes, o may have a different net asset value, o may have separate voting rights on matters in which interests of one class are different from interests of another class, and o votes as a class on matters that affect that class alone. Shares are freely transferable, and each share of each class has one vote at shareholder meetings, with fractional shares voting proportionally on matters submitted to the vote of shareholders. Each share of the Fund represents an interest in the Fund proportionately equal to the interest of each other share of the same class. |X| Meetings of Shareholders. As a Massachusetts business trust, the Fund is not required to hold, and does not plan to hold, regular annual meetings of shareholders, but may do so from time to time on important matters or when required to do so by the Investment Company Act or other applicable law. 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 or to take other action described in the Fund's Declaration of Trust. 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. If the Trustees receive a request from at least 10 shareholders 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. The shareholders making the request must have been shareholders for at least six months and must hold shares of the Fund valued at $25,000 or more or constituting at least 1% of the Fund's outstanding shares. The Trustees may also take other action as permitted by the Investment Company Act. |X| Shareholder and Trustee Liability. The Fund's Declaration of Trust contains an express disclaimer of shareholder or Trustee liability for the Fund's obligations. It also provides for indemnification and reimbursement of expenses out of the Fund's property for any shareholder held personally liable for its obligations. The Declaration of Trust also states that upon request, the Fund shall assume the defense of any claim made against a shareholder for any act or obligation of the Fund and shall satisfy any judgment on that claim. Massachusetts law permits a shareholder of a business trust (such as the Fund) to be held personally liable as a "partner" under certain circumstances. However, the risk that a Fund shareholder will incur financial loss from being held liable as a "partner" of the Fund is limited to the relatively remote circumstances in which the Fund would be unable to meet its obligations. The Fund's contractual arrangements state that any person doing business with the Fund (and each shareholder of the Fund) agrees under its Declaration of Trust to look solely to the assets of the Fund for satisfaction of any claim or demand that may arise out of any dealings with the Fund. Additionally, the Trustees shall have no personal liability to any such person, to the extent permitted by law. Board of Trustees and Oversight Committees. 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. The Board of Trustees has an Audit Committee, a Regulatory & Oversight Committee, a Governance Committee, and a Proxy Committee. The Audit Committee is comprised solely of Independent Trustees. The members of the Audit Committee are Edward Regan (Chairman), Kenneth Randall and Russell Reynolds. The Audit Committee held 6 meetings during the Fund's fiscal year ended October 31, 2003. The Audit Committee provides the Board with recommendations regarding the selection of the Fund's independent auditor. The Audit Committee also reviews the scope and results of audits and the audit fees charged, reviews reports from the Fund's independent auditor concerning the Fund's internal accounting procedures, and controls and reviews reports of the Manager's internal auditor, among other duties as set forth in the Committee's charter. The members of the Regulatory & Oversight Committee are Robert Galli (Chairman), Joel Motley and Phillip Griffiths. The Regulatory & Oversight Committee held 6 meetings during the Fund's fiscal year ended October 31, 2003. The Regulatory & Oversight Committee evaluates and reports to the Board on the Fund's contractual arrangements, including the Investment Advisory and Distribution Agreements, transfer and shareholder service agreements and custodian agreements as well as the policies and procedures adopted by the Fund to comply with the Investment Company Act and other applicable law, among other duties as set forth in the Committee's charter. The members of the Governance Committee are Joel Motley (Acting Chairman), Phillip Griffiths and Kenneth Randall. The Governance Committee held 3 meetings during the Fund's fiscal year ended October 31, 2003. The Governance Committee reviews the Fund's governance guidelines, the adequacy of the Fund's Codes of Ethics, and develops qualification criteria for Board members consistent with the Fund's governance guidelines, among other duties set forth in the Committee's charter. The members of the Proxy Committee are Edward Regan (Chairman), Russell Reynolds and John Murphy. The Proxy Committee held 2 meetings during the Fund's fiscal year ended October 31, 2003. The Proxy Committee provides the Board with recommendations for proxy voting and monitors proxy voting by the Fund. Trustees and Officers of the Fund. Except for Mr. Murphy, each of the Trustees is an "Independent Trustee" under the Investment Company Act. Mr. Murphy is an "Interested Trustee," because he is affiliated with the Manager by virtue of his positions as an officer and director of the Manager, and as a shareholder of its parent company. The Fund's Trustees and officers and their positions held with the Fund and length of service in such position(s) and their principal occupations and business affiliations during the past five years are listed in the chart below. The information for the Trustees also includes the dollar range of shares of the Fund as well as the aggregate dollar range of shares beneficially owned in any of the Oppenheimer funds overseen by the Trustees. All of the Trustees are also trustees or directors of the following publicly offered Oppenheimer funds (referred to as "Board I Funds"): Oppenheimer AMT-Free Municipals Oppenheimer Global Opportunities Fund Oppenheimer AMT-Free New York Municipals Oppenheimer Gold & Special Minerals Fund Oppenheimer California Municipal Fund Oppenheimer Growth Fund Oppenheimer Capital Appreciation Fund Oppenheimer International Growth Fund Oppenheimer International Small Company Oppenheimer Capital Preservation Fund Fund Oppenheimer Developing Markets Fund Oppenheimer Money Market Fund, Inc. Oppenheimer Discovery Fund Oppenheimer Multiple Strategies Fund Oppenheimer Emerging Growth Fund Oppenheimer Multi-Sector Income Trust Oppenheimer Emerging Technologies Fund Oppenheimer Multi-State Municipal Trust Oppenheimer Enterprise Fund Oppenheimer Series Fund, Inc. Oppenheimer Global Fund Oppenheimer U.S. Government Trust In addition to being a trustee or director of the Board I Funds, Mr. Galli is also a director or trustee of 10 other portfolios in the OppenheimerFunds complex. Present or former officers, directors, trustees and employees (and their immediate family members) of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees are permitted to purchase Class A shares of the Fund and the other Oppenheimer funds at net asset value without sales charge. The sales charges on Class A shares is waived for that group because of the economies of sales efforts realized by the Distributor. Messrs. Murphy, Manioudakis, Molleur, Vottiero, Wixted and Zack, and Mses. Bechtolt, Feld and Ives respectively hold the same offices with one or more of the other Board I Funds as with the Fund. As of November 24, 2003 the Trustees and officers of the Fund, as a group, owned of record or beneficially less than 1% of each class of shares of the Fund. The foregoing statement does not reflect ownership of shares of the Fund held of record by an employee benefit plan for employees of the Manager, other than the shares beneficially owned under the plan by the officers of the Fund listed above. In addition, each Independent Trustee, and his or her family members, does not own securities of either the Manager or Distributor of the Board I Funds or any person directly or indirectly controlling, controlled by or under common control with the Manager or Distributor. |X| Affiliated Transactions and Material Business Relationships. Mr. Reynolds has reported he has a controlling interest in The Directorship Group, Inc. ("The Directorship Search Group"), a director recruiting firm that provided consulting services to Massachusetts Mutual Life Insurance Company (which controls the Manager) for fees aggregating $247,500 from January 1, 2001 through December 31, 2002. Mr. Reynolds estimates that The Directorship Search Group will not provide consulting services to Massachusetts Mutual Life Insurance Company during the calendar year 2003. The Independent Trustees have unanimously (except for Mr. Reynolds, who abstained) determined that the consulting arrangements between The Directorship Search Group and Massachusetts Mutual Life Insurance Company were not material business or professional relationships that would compromise Mr. Reynolds' status as an Independent Trustee. Nonetheless, to assure certainty as to determinations of the Board and the Independent Trustees as to matters upon which the Investment Company Act or the rules thereunder require approval by a majority of Independent Trustees, Mr. Reynolds will not be counted for purposes of determining whether a quorum of Independent Trustees was present or whether a majority of Independent Trustees approved the matter. The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until his or her resignation, retirement, death or removal. Mr. Motley was elected as Trustee to the Board I funds effective October 10, 2002 and did not hold shares of Board I funds during the calendar year ended December 31, 2002. - ----------------------------------------------------------------------------------- Independent Trustees - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Name, Principal Occupation(s) During Past 5 Dollar Aggregate Dollar Range Of Shares Beneficially Owned in Years; Range of Any of the Position(s) Held Other Trusteeships/Directorships Held Shares Oppenheimer with Fund, by Trustee; BeneficiallFunds Length of Service, Number of Portfolios in Fund Complex Owned in Overseen Age Currently Overseen by Trustee the Fund by Trustee - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- As of December 31, 2002 - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Clayton K. Of Counsel (since 1993), Hogan & None $50,001-$100,000 Yeutter, Chairman Hartson (a law firm). Other of the Board of directorships: Weyerhaeuser Corp. Trustees since (since 1999) and Danielson Holding 2003; Corp. (since 2002); formerly a director Trustee since 1999 of Caterpillar, Inc. (1993-December Age: 73 2002). Oversees 25 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Robert G. Galli, A trustee or director of other None Over Trustee since 1999 Oppenheimer funds. Oversees 35 $100,000 Age: 70 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Phillip A. A director (since 1991) of the None Over Griffiths, Institute for Advanced Study, $100,000 Trustee, since Princeton, N.J., a director (since 1999 2001) of GSI Lumonics, a trustee (since Age: 65 1983) of Woodward Academy, a Senior Advisor (since 2001) of The Andrew W. Mellon Foundation. A member of: the National Academy of Sciences (since 1979), American Academy of Arts and Sciences (since 1995), American Philosophical Society (since 1996) and Council on Foreign Relations (since 2002). Formerly a director of Bankers Trust New York Corporation (1994-1999). Oversees 25 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Joel W. Motley, Director (since 2002) Columbia Equity None None Trustee since 2002 Financial Corp. (privately-held Age: 51 financial adviser); Managing Director (since 2002) Carmona Motley, Inc. (privately-held financial adviser); Formerly he held the following positions: Managing Director (January 1998-December 2001), Carmona Motley Hoffman Inc. (privately-held financial adviser); Managing Director (January 1992-December 1997), Carmona Motley & Co. (privately-held financial adviser). Oversees 25 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Kenneth A. A director of Dominion Resources, Inc. None Over Randall, Trustee (electric utility holding company); $100,000 since 1999 formerly a director of Prime Retail, Age: 76 Inc. (real estate investment trust) and Dominion Energy, Inc. (electric power and oil & gas producer), 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. Oversees 25 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Edward V. Regan, President, Baruch College, CUNY; a None $50,001-$100,000 Trustee since 1999 director of RBAsset (real estate Age: 73 manager); a director of OffitBank; formerly Trustee, Financial Accounting Foundation (FASB and GASB), Senior Fellow of Jerome Levy Economics Institute, Bard College, Chairman of Municipal Assistance Corporation for the City of New York, New York State Comptroller and Trustee of New York State and Local Retirement Fund. Oversees 25 investment companies in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Russell S. Chairman (since 1993) of The None $10,001-$50,000 Reynolds, Jr., Directorship Search Group, Inc. Trustee since 1999 (corporate governance consulting and Age: 72 executive recruiting); a life trustee of International House (non-profit educational organization), and a trustee (since 1996) of the Greenwich Historical Society. Oversees 25 portfolios in the OppenheimerFunds complex. - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Donald W. Spiro, Chairman Emeritus (since January 1991) None Over Vice Chairman of of the Manager. Formerly a director $100,000 the Board of (January 1969-August 1999) of the Trustees, Manager. Oversees 25 portfolios in the Trustee since 1999 OppenheimerFunds complex. Age: 78 - ----------------------------------------------------------------------------------- The address of Mr. Murphy in the chart below is Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008. Mr. Murphy serves for an indefinite term, until his resignation, death or removal. - ------------------------------------------------------------------------------------- Interested Trustee and Officer - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Name, Principal Occupation(s) During Past 5 Dollar Aggregate Dollar Range Of Shares Beneficially Owned in Years; Range of Any of the Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer with Fund, Trustee; BeneficiallFunds Length of Service Number of Portfolios in Fund Complex Owned in Overseen Age Currently Overseen by Trustee the Fund by Trustee - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- As of December 31, 2002 - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- John V. Murphy, Chairman, Chief Executive Officer and None Over President and director (since June 2001) and President $100,000 Trustee, (since September 2000) of the Manager; Trustee since 2001 President and a director or trustee of Age: 54 other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager); President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc. and Centennial Asset Management Corporation (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager); Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company that owns the shares of David L. Babson & Company, Inc.); formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 72 portfolios as Trustee/Director and 10 portfolios as Officer in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- The address of the Officers in the chart below is as follows: for Messrs. Molleur and Zack and Ms. Feld, Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008, for Messrs. Vottiero and Wixted and Mses. Bechtolt and Ives, 6803 S. Tucson Way, Centennial, CO 80112-3924, and for Mr. Manioudakis, 10 St. James Avenue, 10th Floor, Boston, MA 02116. Each Officer serves for an annual term or until his or her earlier resignation, death or removal. - ------------------------------------------------------------------------------------- Officers of the Fund - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Name, Principal Occupation(s) During Past 5 Years Position(s) Held with Fund, Length of Service, Age - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Angelo Manioudakis, Senior Vice President of the Manager and of HarbourView Vice President and Asset Management Corporation (since April 2002); an officer Portfolio Manager and portfolio manager of other Oppenheimer funds; formerly since 2002 Executive Director and portfolio manager for Miller, Age: 37 Anderson & Sherrerd, a division of Morgan Stanley Investment Management (August 1993-March 2002). - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of Treasurer since 1999 the Manager; Treasurer (since March 1999) of HarbourView Age: 44 Asset Management Corporation, Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000) and OFI Institutional Asset Management, Inc. (since November 2000) (offshore fund management subsidiaries of the Manager); Treasurer and Chief Financial Officer (since May 2000) of Oppenheimer Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief Operating Officer (March 1995-March 1999), Bankers Trust Company-Mutual Fund Services Division. An officer of 82 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Connie Bechtolt, Assistant Vice President of the Manager (since September Assistant Treasurer 1998); formerly Manager/Fund Accounting (September since 2002 1994-September 1998) of the Manager. An officer of 82 Age: 40 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Philip Vottiero, Vice President/Fund Accounting of the Manager (since March Assistant Treasurer 2002); formerly Vice President/Corporate Accounting of the since 2002 Manager (July 1999-March 2002) prior to which he was Chief Age: 40 Financial Officer at Sovlink Corporation (April 1996-June 1999). An officer of 82 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Robert G. Zack, Senior Vice President (since May 1985) and General Counsel Secretary since 2001 (since February 2002) of the Manager; General Counsel and a Age: 55 director (since November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Vice President and a director (since November 2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset Management, Inc.; General Counsel (since November 2001) of Centennial Asset Management Corporation; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director (since November 2001) of OppenheimerFunds International Ltd.; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Secretary (since November 2001) of Oppenheimer Acquisition Corp.; formerly Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); OppenheimerFunds International Ltd. and OppenheimerFunds plc (October 1997-November 2001). An officer of 82 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Katherine P. Feld, Vice President and Senior Counsel (since July 1999) of the Assistant Secretary Manager; Vice President (since June 1990) of since 2001 OppenheimerFunds Distributor, Inc.; Director, Vice Age: 45 President and Assistant Secretary (since June 1999) of Centennial Asset Management Corporation; Vice President (since 1997) of Oppenheimer Real Asset Management, Inc.; formerly Vice President and Associate Counsel of the Manager (June 1990-July 1999). An officer of 82 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel (since Assistant Secretary October 2003) of the Manager; Vice President (since 1999) since 2001 of OppenheimerFunds Distributor, Inc.; Vice President and Age: 38 Assistant Secretary (since 1999) of Shareholder Services, Inc.; Assistant Secretary (since December 2001) of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc.; formerly an Assistant Counsel (August 1994-October 2003) and Assistant Vice President of the Manager (August 1997-June 1998). An officer of 82 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Denis R. Molleur, Vice President and Senior Counsel of the Manager (since Assistant Secretary July 1999); formerly a Vice President and Associate Counsel since 2001 of the Manager (September 1995-July 1999). An officer of 73 Age: 46 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------- |X| Remuneration of Trustees. The officers of the Fund and one of the Trustees of the Fund (Mr. Murphy) who are affiliated with the Manager receive no salary or fee from the Fund. The remaining Trustees of the Fund received the compensation shown below from the Fund with respect to the Fund's fiscal year ended October 31, 2003. The compensation from all 31 of the Board I Funds (including the Fund) represents compensation received for serving as a director or trustee and member of a committee (if applicable) of the boards of those funds during the calendar year ended December 31, 2002. - --------------------------------------------------------------------------------- Trustee Name and Other Fund Aggregate RetirementEstimated Total Compensation From All Annual Oppenheimer Benefits Retirement Funds for Accrued Benefits which as Part to be Individual Compensationof Fund Paid Upon Serves As Position(s) (as applicable) From Fund1 Expenses Retirement2Trustee/Director - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Clayton K. Yeutter $1,5173 $586 $36,372 $71,792 Chairman of the Board - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Robert G. Galli Regulatory & Oversight Committee $1,285 $747 $55,6784 $198,3865 Chairman - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Phillip Griffiths Regulatory & Oversight Committee Member and Governance Committee $8086 $191 $10,256 $60,861 Member - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Leon Levy7 $775 $0 $133,352 $173,700 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Benjamin Lipstein7 $1,005 $181 $115,270 $150,152 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Joel W. Motley Governance Committee Acting Chairman and Regulatory & $7448 $4 $0 $14,453 Oversight Committee Member - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Elizabeth Moynihan7 $1,024 $1,149 $57,086 $105,760 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Kenneth A. Randall Audit Committee Member and $1,055 $144 $74,471 $97,012 Governance Committee Member - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Edward V. Regan Audit Committee Chairman and $1,098 $552 $46,313 $95,960 Proxy Committee Chairman - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Russell S. Reynolds, Jr. Proxy Committee Member and Audit $848 $568 $48,991 $71,792 Committee Member - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Donald Spiro $715 $219 $9,3969 $64,080 - --------------------------------------------------------------------------------- 1. Aggregate Compensation From Fund includes fees and deferred compensation, if any, for a Trustee. 2. Estimated Annual Retirement Benefits to be Paid Upon Retirement is based on a straight life payment plan election with the assumption that a Trustee will retire at the age of 75 and is eligible (after 7 years of service) to receive retirement plan benefits as described below under "Retirement Plan for Trustees." 3. Includes $379 deferred by Mr. Yeutter under the Deferred Compensation Plan described below. 4. Includes $24,989 estimated to be paid to Mr. Galli for serving as a trustee or director of 10 other Oppenheimer funds that are not Board I Funds. 5. Includes $92,626 paid to Mr. Galli for serving as trustee or director of 10 other Oppenheimer funds that are not Board I Funds. 6. Includes $808 deferred by Mr. Griffiths under the Deferred Compensation Plan described below. 7. Messrs. Levy and Lipstein and Ms. Moynihan retired as Trustees from the Board I Funds effective January 1, 2003, March 31, 2003 and July 31, 2003, respectively. 8. Includes $149 deferred by Mr. Motley under the Deferred Compensation Plan described below. 9. The amount for Mr. Spiro is based on the assumption that he will retire at age 82 when he becomes eligible to receive retirement plan benefits (after 7 years of service). |X| Retirement Plan for Trustees. The Fund has adopted a retirement plan that provides for payments to retired Independent Trustees. Payments are up to 80% of the average compensation paid during a Trustee's five years of service in which the highest compensation was received. A Trustee must serve as trustee for any of the Board I Funds for at least seven years in order to be eligible for retirement plan benefits and must serve for at least 15 years to be eligible for the maximum benefit. Each Trustee's retirement benefits will depend on the amount of the Trustee's future compensation and length of service. |X| Deferred Compensation Plan for Trustees. 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 Trustee under the plan is 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 or 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 SEC, the Fund may invest in the funds selected by the Trustee under the plan without shareholder approval for the limited purpose of determining the value of the Trustee's deferred fee account. |X| Major Shareholders. As of November 24, 2003, the only persons who owned of record or were known by the Fund to own beneficially 5% or more of any class of the Fund's outstanding shares, and their holdings of that class as of that date, were the following: RPSS TR, Tetco Inc., 401K Employees Savings Plan, P.O. Box 171720 San Antonio, Texas 78217, which owned 873,821.562 Class A shares (representing approximately 9.27% of the Fund's then outstanding Class A shares). RPSS TR, UMG Manufacturing & Logistics Inc., 401K, 700 S Battleground Ave, Grover, North Carolina 28073, which owned 618,385.503 Class A shares (representing approximately 6.56% of the Fund's then outstanding Class A shares). MCB Trust Services TR, Footlocker 401K Plan, 700 17th Street, Suite 300, Denver, Colorado 80202, which owned 559,454.038 Class A shares (representing approximately 5.93% of the Fund's then outstanding Class N shares). City National Bank TR, PHJ&W Pooled Plan #1624-491, PO Box 51312, Los Angeles, California 90051, which owned 2,401,903.986 Class N shares (representing approximately 10.83% of the Fund's then outstanding Class N shares). Saturn & Co., c/o Investors Bank & Trust Co. T, PO Box 9130, Boston, Massachusetts 02117, which owned 72,546.010 Class Y shares (representing approximately 99.67% of the Fund's then outstanding Class N shares). The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding company controlled by Massachusetts Mutual Life Insurance Company, a global, diversified insurance and financial services organization, a global, diversified insurance and financial services organization. |X| Code of Ethics. The Fund, the Manager and the Distributor 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. Covered persons include persons with knowledge of the investments and investment intentions of the Fund and other funds advised by the Manager. The Code of Ethics does permit personnel subject to the Code to invest in securities, including securities that may be purchased or held by the Fund, subject to a number of restrictions and controls. Compliance with the Code of Ethics is carefully monitored and enforced by the Manager. The Code of Ethics is an exhibit to the Fund's registration statement filed with the SEC and can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. You can obtain information about the hours of operation of the Public Reference Room by calling the SEC at 1.202.942.8090. The Code of Ethics can also be viewed as part of the Fund's registration statement on the SEC's EDGAR database at the SEC's Internet website at www.sec.gov. Copies may be obtained, after paying a - ----------- duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov., or by writing to the ------------------- SEC's Public Reference Section, Washington, D.C. 20549-0102. |X| Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. The Fund's primary consideration in voting portfolio proxies is the financial interests of the Fund and its shareholders. The Fund has retained an unaffiliated third-party as its agent to vote portfolio proxies in accordance with the Fund's Portfolio Proxy Voting Guidelines and to maintain records of such portfolio proxy voting. The Proxy Voting Guidelines include provisions to address conflicts of interest that may arise between the Fund and OppenheimerFunds, Inc. where an OppenheimerFunds, Inc. directly-controlled affiliate manages or administers the assets of a pension plan of a company soliciting the proxy. The Fund's Portfolio Proxy Voting Guidelines on routine and non-routine proxy proposals are summarized below. o The Fund votes with the recommendation of the issuer's management on routine matters, including election of directors nominated by management and ratification of auditors, unless circumstances indicate otherwise. o In general, the Fund opposes anti-takeover proposals and supports elimination of anti-takeover proposals, absent unusual circumstances. o The Fund supports shareholder proposals to reduce a super-majority vote requirement, and opposes management proposals to add a super-majority vote requirement. o The Fund opposes proposals to classify the board of directors. o The Fund supports proposals to eliminate cumulative voting. o The Fund opposes re-pricing of stock options. o The Fund generally considers executive compensation questions such as stock option plans and bonus plans to be ordinary business activity. The Fund analyzes stock option plans, paying particular attention to their dilutive effect. While the Fund generally supports management proposals, the Fund opposes plans it considers to be excessive. The Fund will be required to file new Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The first such filing is due no later than August 31, 2004, for the twelve months ended June 30, 2004. Once filed, the Fund's Form N-PX filing will be available (i) without charge, upon request, by calling the Fund toll-free at 1.800.225.5677 and (ii) on the SEC's website at www.sec.gov. ----------- |X| The Investment Advisory Agreement. The Manager provides investment advisory and management services to the Fund under an investment advisory agreement between the Manager and the Fund. The Manager selects securities for the Fund's portfolio and handles its day-to-day business. The portfolio manager of the Fund is employed by the Manager and is the person who is principally responsible for the day-to-day management of the Fund's portfolio. Other members of the Manager's fixed-income Portfolio Team provide the portfolio manager with counsel and support in managing the Fund's portfolio. The agreement requires the Manager, at its expense, to provide the Fund with adequate office space, facilities and equipment. It also requires the Manager to provide and supervise the activities of all administrative and clerical personnel required to provide effective administration for the Fund. Those responsibilities include 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. The Fund pays expenses not expressly assumed by the Manager under the advisory agreement. The advisory agreement lists examples of expenses paid by the Fund. The major categories 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. The management fees paid by the Fund to the Manager are calculated at the rates described in the Prospectus, which are applied to the assets of the Fund as a whole. The fees are allocated to each class of shares based upon the relative proportion of the Fund's net assets represented by that class. The management fees paid by the Fund to the Manager during its last three fiscal years were: -------------------------------------------------------------------------- Fiscal Period ended 10/31: Management Fees Paid to OppenheimerFunds, Inc. -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2001 $278,833 -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2002 $1,016,474 -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2003 $2,220,602 -------------------------------------------------------------------------- The investment advisory agreement states that in the absence of willful misfeasance, bad faith, gross negligence in the performance of its duties or reckless disregard of its obligations and duties under the investment advisory agreement, the Manager is not liable for any loss the Fund sustains for any investment, adoption of any investment policy, or the purchase, sale or retention of any security. The agreement permits the Manager to act as investment advisor 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 advisor or general distributor. If the Manager shall no longer act as investment advisor to the Fund, the Manager may withdraw the right of the Fund to use the name "Oppenheimer" as part of its name. |X| Annual Approval of Investment Advisory Agreement. Each year, the Board of Trustees, including a majority of the Independent Trustees, is required to approve the renewal of the investment advisory agreement. The Investment Company Act requires that the Board request and evaluate and the Manager provide such information as may be reasonably necessary to evaluate the terms of the investment advisory agreement. The Board employs an independent consultant to prepare a report that provides such information as the Board requests for this purpose. The Board also receives information about the 12b-1 distribution fees the Fund pays. These distribution fees are reviewed and approved at a different time of the year. The Board reviewed the foregoing information in arriving at its decision to renew the investment advisory agreement. Among other factors, the Board considered: o The nature, cost, and quality of the services provided to the Fund and its shareholders; o The profitability of the Fund to the Manager; o The investment performance of the Fund in comparison to regular market indices; o Economies of scale that may be available to the Fund from the Manager; o Fees paid by other mutual funds for similar services; o The value and quality of any other benefits or services received by the Fund from its relationship with the Manager; and o The direct and indirect benefits the Manager received from its relationship with the Fund. These included services provided by the Distributor and the Transfer Agent, and brokerage and soft dollar arrangements permissible under Section 28(e) of the Securities Exchange Act. The Board considered that the Manager must be able to pay and retain high quality personnel at competitive rates to provide services to the Fund. The Board also considered that maintaining the financial viability of the Manager is important so that the Manager will be able to continue to provide quality services to the Fund and its shareholders in adverse times. The Board also considered the investment performance of other mutual funds advised by the Manager. The Board is aware that there are alternatives to the use of the Manager. These matters were also considered by the Independent Trustees, meeting separately from the full Board with experienced Counsel to the Fund who assisted the Board in its deliberations. The Fund's Counsel is independent of the Manager within the meaning and intent of the SEC Rules regarding the independence of counsel. After careful deliberation, the Board, including the Independent Trustees, concluded that it was in the best interest of shareholders to continue the investment advisory agreement for another year. In arriving at a decision, the Board did not single out any one factor or group of factors as being more important than other factors, but considered all factors together. The Board judged the terms and conditions of the investment advisory agreement, including the investment advisory fee, in light of all of the surrounding circumstances. 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 to effect the Fund's portfolio transactions. 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. The Manager may employ broker-dealers that the Manager thinks, in its best judgment based on all relevant factors, will implement the policy of the Fund to obtain, at reasonable expense, the "best execution" of the Fund's portfolio transactions. "Best execution" means prompt and reliable execution at the most favorable price obtainable. The Manager need not seek competitive commission bidding. However, it is expected to be aware of the current rates of eligible brokers and to minimize the commissions paid to the extent consistent with the interests and policies of the Fund as established by its Board of Trustees. Under the investment advisory agreement, the Manager may select brokers (other than affiliates) 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 charge, if the Manager makes a good faith determination that the commission is fair and reasonable in relation to the services provided. Subject to those considerations, as a factor in selecting brokers for the Fund's portfolio transactions, the Manager may also consider sales of shares of the Fund and other investment companies for which the Manager or an affiliate serves as investment advisor. Brokerage Practices Followed by the Manager. The Manager allocates brokerage for the Fund subject to the provisions of the investment advisory agreement and the procedures and rules described above. Generally, the Manager's portfolio traders allocate brokerage based upon recommendations from the Manager's portfolio managers. In certain instances, portfolio managers may directly place trades and allocate brokerage. In either case, the Manager's executive officers supervise the allocation of brokerage. Transactions in securities other than those for which an exchange is the primary market are generally done with principals or market makers. In transactions on foreign exchanges, the Fund may be required to pay fixed brokerage commissions and therefore would not have the benefit of negotiated commissions available in U.S. markets. Brokerage commissions are paid primarily for transactions in listed securities or for certain fixed-income agency transactions in the secondary market. Otherwise brokerage commissions are paid only if it appears likely that a better price or execution can be obtained by doing so. In an option transaction, the Fund ordinarily uses the same broker for the purchase or sale of the option and any transaction in the securities to which the option relates. Other funds advised by the Manager have investment policies similar to those of the Fund. Those other funds may purchase or sell the same securities as the Fund at the same time as the Fund, which could affect the supply and price of the securities. If two or more funds advised by the Manager purchase the same security on the same day from the same dealer, the transactions under those combined orders are averaged as to price and allocated in accordance with the purchase or sale orders actually placed for each account. Most purchases of debt obligations are principal transactions at net prices. Instead of using a broker for those transactions, the Fund normally deals directly with the selling or purchasing principal or market maker unless the Manager determines that a better price or execution can be obtained by using the services of a broker. Purchases of portfolio securities from underwriters include a commission or concession paid by the issuer to the underwriter. Purchases from dealers include a spread between the bid and asked prices. The Fund seeks to obtain prompt execution of these orders at the most favorable net price. Purchases of shares of other Oppenheimer funds do not require the payment of a commission, concession or spread. The investment advisory agreement permits the Manager to allocate brokerage for research services. 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. The investment research received for the commissions of those other accounts may be useful both to the Fund and one or more of the Manager's other accounts. Investment research may be supplied to the Manager by a third party at the instance of a broker through which trades are placed. Investment research services include information and analysis on particular companies and industries as well as market or economic trends and portfolio strategy, 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 in commission dollars. The Board of Trustees permits the Manager to use stated commissions on secondary fixed-income agency trades to obtain research if the broker represents 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 Board of Trustees permits the Manager to use concessions on fixed-price offerings to obtain research, in the same manner as is permitted for agency transactions. The research services provided by brokers broadens the scope and supplements the research activities of the Manager. That research provides additional views and comparisons for consideration, and helps the Manager to obtain market information for the valuation of securities that are either held in the Fund's portfolio or are being considered for purchase. The Manager provides information to the Board about the commissions paid to brokers furnishing such services, together with the Manager's representation that the amount of such commissions was reasonably related to the value or benefit of such services. - ------------------------------------------------------------------------------- Fiscal Year Ended 10/31: Total Brokerage Commissions Paid by the Fund1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 2001 None - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 2002 None - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 2003 $8322 - ------------------------------------------------------------------------------- 1. Amounts do not include spreads or commissions on principal transactions on a net trade basis 2. In the fiscal year ended 10/31/03, there were no transactions directed to brokers for research services. Distribution and Service Plans 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 classes of shares. The Distributor is not obligated to sell a specific number of shares. Expenses normally attributable to sales, including advertising and the cost of printing and mailing prospectuses, other than those furnished to existing shareholders, are borne by the Distributor. The sales charges and concessions paid to, or retained by, the Distributor from the sale of shares during the Fund's three most recent fiscal years, and the contingent deferred sales charges retained by the Distributor on the redemption of shares for the 3 most recent fiscal years are shown in the tables below. - --------------------------------------------------------------------------------- Fiscal Year Aggregate Front-End Class A Front-End Sales Charges Ended 10/31: Sales Charges on Class A Retained by Distributor1 Shares - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2001 $111,927 $3,417 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2002 $68,872 $756 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2003 $58,328 $4,626 - --------------------------------------------------------------------------------- 1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the Distributor. - --------------------------------------------------------------------------------- Fiscal Concessions on Concessions on Concessions on Concessions on Year Class A Shares Class B Shares Class C Shares Class N Shares Ended Advanced by Advanced by Advanced by Advanced by 10/31: Distributor Distributor Distributor Distributor1 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2001 $121,032 $38,645 $19,846 16,376 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2002 $63,148 $106,463 $99,210 $270,3082 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2003 $57,446 $192,916 $174,510 $338,576 - --------------------------------------------------------------------------------- 1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales of Class B, Class C and Class N shares from its own resources at the time of sale. 2. The inception date of Class N shares was March 1, 2001 - --------------------------------------------------------------------------------- Fiscal Class A Class B Class C Class N Contingent Deferred Sales Contingent Contingent Contingent Year Charges Deferred Sales Deferred Sales Deferred Sales Ended Retained by Charges Retained Charges Retained Charges Retained 10/31 Distributor by Distributor by Distributor by Distributor - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2001 None None None None - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2002 $12,918 $9,627 $7,434 $166,036 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 2003 $964 $65,558 $26,968 $325,198 - --------------------------------------------------------------------------------- Distribution and Service Plans. The Fund has adopted a Service Plan for Class A shares and Distribution and Service Plans for Class B, Class C and Class N shares under Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the Distributor for all or a portion of its costs incurred in connection with the distribution and/or servicing of the shares of the particular class. Each plan has been approved by a vote of the Board of Trustees, including a majority of the Independent Trustees1, cast in person at a meeting called for the purpose of voting on that plan. Under the plans, the Manager and the Distributor may make payments to affiliates and, in their sole discretion, from time to time, may use their own resources (at no direct cost to the Fund) to make payments to brokers, dealers or other financial institutions for distribution and administrative services they perform. The Manager may use its profits from the advisory fee it receives from the Fund. In their sole discretion, the Distributor and the Manager may increase or decrease the amount of payments they make from their own resources to plan recipients. Unless a plan is terminated as described below, the plan continues in effect from year to year but only if the Fund's Board of Trustees and its Independent Trustees specifically vote annually to approve its continuance. Approval must be by a vote cast in person at a meeting called for the purpose of voting on continuing the plan. A 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. The Board of Trustees and the Independent Trustees must approve all material amendments to a plan. An amendment to increase materially the amount of payments to be made under a plan must be approved by shareholders of the class affected by the amendment. Because Class B shares of the Fund automatically convert into Class A shares after six years, the Fund must obtain the approval of both Class A and Class B shareholders for a proposed material amendment to the Class A Plan that would materially increase payments under the Plan. That approval must be by a "majority" (as defined in the Investment Company Act) of the shares of each Class, voting separately by class. While the Plans are in effect, the Treasurer of the Fund shall provide separate written reports on the plans to the Board of Trustees at least quarterly for its review. The reports shall detail the amount of all payments made under a plan and the purpose for which the payments were made. Those reports are subject to the review and approval of the Independent Trustees. Each Plan states 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 the selection and nomination process as long as the final decision as to selection or nomination is approved by a majority of the Independent Trustees. Under the Plan for a class, no payment will be made to any recipient in any quarter in which the aggregate net asset value of all Fund shares of that class held by the recipient for itself and its customers does not exceed a minimum amount, if any, that may be set from time to time by a majority of the Independent Trustees. The Board of Trustees has set no minimum amount of assets to qualify for payments under the plans. |X| Class A Service Plan Fees. Under the Class A Service Plan, the Distributor currently uses the fees it receives from the Fund to pay brokers, dealers and other financial institutions (they are referred to as "recipients") for personal services and account maintenance services they provide for their customers who hold Class A shares. The services 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. While the plan permits the Board to authorize payments to the Distributor to reimburse itself for services under the plan, the Board has not yet done so except in the case of the special arrangement described below regarding grandfathered retirement accounts. The Distributor makes payments to plan recipients quarterly at an annual rate not to exceed 0.25% of the average annual net assets consisting of Class A shares held in the accounts of the recipients or their customers. With respect to purchases of Class A shares subject to a contingent deferred sales charge by certain retirement plans that purchased such shares prior to March 1, 2001 ("grandfathered retirement accounts"), the Distributor currently intends to pay the service fee to recipients in advance for the first year after the shares are purchased. During the first year the shares are sold to grandfathered retirement accounts, the Distributor retains the service fee to reimburse itself for the costs of distributing the shares. After the first year shares are outstanding, the Distributor makes service fee payments to recipients quarterly on those shares. The advance payment is based on the net asset value of shares sold. Shares purchased by exchange do not qualify for the advance service fee payment. If Class A shares purchased by grandfathered retirement account are redeemed during the first year after their purchase, the recipient of the service fees on those shares will be obligated to repay the Distributor a pro rata portion of the advance payment of the service fee made on those shares. For the fiscal year ended October 31, 2003, payments under the Class A plan totaled $228,125, of which $73 was retained by the Distributor under the arrangement described above, and included $8,208 paid to an affiliate of the Distributor's parent company. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. The Distributor may not use payments received under the Class A Plan to pay any of its interest expenses, carrying charges, or other financial costs, or allocation of overhead. |X| Class B, Class C and Class N Service and Distribution Plan Fees. Under the Class B and Class C plans, service fees and distribution fees, and with respect to the Class N plan the service 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. Each plan provides for the Distributor to be compensated at a flat rate, whether the Distributor's distribution expenses are more or less than the amounts paid by the Fund under the plan during the period for which the fee is paid. The types of services that recipients provide are similar to the services provided under the Class A service plan, described above. Each Plan permits the Distributor to retain both the asset-based sales charges and the service fees or to pay recipients the service fee on a quarterly basis, without payment in advance. However, the Distributor currently intends to pay the service fee to recipients in advance for the first year after the shares are purchased. After the first year shares are purchased, the Distributor makes service fee payments quarterly on those shares. The advance payment is based on the net asset value of shares sold. Shares purchased by exchange do not qualify for the advance service fee payment. If Class B, Class C or Class N shares are redeemed during the first year after their purchase, the recipient of the service fees on those shares will be obligated to repay the Distributor a pro rata portion of the advance payment of the service fee made on those shares. The asset-based sales charge and service fees increase Class B and Class C expenses by 1.00% and the service fees increases Class N expenses by 0.25% of the net assets per year of the respective class. The Distributor retains the asset-based sales charge on Class B shares. The Distributor retains the asset-based sales charge on Class C shares during the first year the shares are outstanding. It pays the asset-based sales charge as an ongoing concession to the recipient on Class C shares outstanding for a year or more. If a dealer has a special agreement with the Distributor, the Distributor will pay the Class B, Class C and/or Class N service fee and the asset-based sales charge to the dealer quarterly in lieu of paying the sales concessions and service fee in advance at the time of purchase. The asset-based sales charges on Class B and Class C shares allow investors to buy 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. The payments are made to the Distributor in recognition that the Distributor: o pays sales concessions to authorized brokers and dealers at the time of sale and pays service fees as described above, o may finance payment of sales concessions and/or the advance of the service fee payment to recipients under the plans, or may provide such financing from its own resources or from the resources of an affiliate, o employs personnel to support distribution of Class B and Class C shares, o bears the costs of sales literature, advertising and prospectuses (other than those furnished to current shareholders) and state "blue sky" registration fees and certain other distribution expenses, o may not be able to adequately compensate dealers that sell Class B and Class C shares without receiving payment under the plans and therefore may not be able to offer such Classes for sale absent the plans, o receives payments under the plans consistent with the service fees and asset-based sales charges paid by other non-proprietary funds that charge 12b-1 fees, o may use the payments under the plan to include the Fund in various third-party distribution programs that may increase sales of Fund shares, o may experience increased difficulty selling the Fund's shares if payments under the plan are discontinued because most competitor funds have plans that pay dealers for rendering distribution services as much or more than the amounts currently being paid by the Fund, and o may not be able to continue providing, at the same or at a lesser cost, the same quality distribution sales efforts and services, or to obtain such services from brokers and dealers, if the plan payments were to be discontinued. When Class B, Class C or Class N shares are sold without the designation of a broker-dealer, the Distributor is automatically designated as the broker-dealer of record. In those cases, the Distributor retains the service fee paid on Class B, Class C and Class N shares and retains the asset-based sales charge paid on Class B and Class C shares. The Distributor's actual expenses in selling Class B, Class C and Class N shares may be more than the payments it receives from the contingent deferred sales charges collected on redeemed shares and from the Fund under the plans. If either the Class B, Class C or Class N 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. - ------------------------------------------------------------------------------- Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/03 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Distributor's Distributor's Aggregate Unreimbursed Total Amount Unreimbursed Expenses as % Payments Retained by Expenses of Net Assets Class Under Plan Distributor Under Plan of Class - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class B Plan $80,423 $68,7341 $272,489 2.73% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class C Plan $193,012 $131,1052 $331,686 1.36% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class N Plan $450,965 $03 $1,008,962 0.46% - ------------------------------------------------------------------------------- 1. Includes $1,518 paid to an affiliate of the Distributor's parent company. 2. Includes $4,529 paid to an affiliate of the Distributor's parent company. 3. $17,649 was paid to an affiliate of the Distributor's parent company. All payments under the Plans are subject to the limitations imposed by the Conduct Rules of the National Association of Securities Dealers, Inc. on payments of asset-based sales charges and service fees. Performance of the Fund Explanation of Performance Terminology. The Fund uses a variety of terms to illustrate its performance. These terms include "standardized yield," "dividend yield," "average annual total return," "cumulative total return," "average annual total return at net asset value" and "total return at net asset value." An explanation of how yields and total returns are calculated is set forth below. The charts below show the Fund's performance as of the Fund's most recent fiscal period. You can obtain current performance information by calling the Fund's Transfer Agent at 1.800.225.5677 or by visiting the OppenheimerFunds Internet website at www.oppenheimerfunds.com. The Fund's illustrations of its performance data in advertisements must comply with rules of the SEC. Those rules describe the types of performance data that may be used and how it is to be calculated. In general, any advertisement by the Fund of its performance data must include the average annual total returns for the advertised class of shares of the Fund. Those returns must be shown 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 (or its submission for publication). Certain types of yields may also be shown, provided that they are accompanied by standardized average annual total returns. Use of standardized performance calculations 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 the Fund's performance information as a basis for comparison with other investments: o Yields and total 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. Your account's performance will vary from the model performance data if your dividends are received in cash, or you buy or sell shares during the period, or you bought your shares at a different time and price than the shares used in the model. o The Fund's performance returns may not reflect the effect of taxes on dividends and capital gains distributions. o An investment in the Fund is not insured by the FDIC or any other government agency. o The principal value of the Fund's shares, and its yields and total returns are not guaranteed and normally will fluctuate on a daily basis. o When an investor's shares are redeemed, they may be worth more or less than their original cost. o Yields and total returns for any given past period represent historical performance information and are not, and should not be considered, a prediction of future yields or returns. The performance of each class of shares is shown separately, because the performance of each class of shares will usually be different. That is because of the different kinds of expenses each class bears. The yields and total returns of each class of shares of the Fund are affected by market conditions, the quality of the Fund's investments, the maturity of those investments, the types of investments the Fund holds, and its operating expenses that are allocated to the particular class. |X| Yields. The Fund uses a variety of different yields to illustrate its current returns. Each class of shares calculates its yield separately because of the different expenses that affect each class. |_| Standardized Yield. The "standardized yield" (sometimes referred to just as "yield") is shown for a class of shares for a stated 30 day period. It is not based on actual distributions paid by the Fund to shareholders in the 30 day period, but is a hypothetical yield based upon the net investment income from the Fund's portfolio investments for that period. It may therefore differ from the "dividend yield" for the same class of shares, described below. Standardized yield is calculated using the following formula set forth in rules adopted by the SEC, designed to assure uniformity in the way that all funds calculate their yields: Standardized Yield = 2a-b + 1)6 -1] --- [( cd The symbols above represent the following factors: a = dividends and interest earned during the 30 day period. b = expenses accrued for the period (net of any expense assumptions). c = the average daily number of shares of that class outstanding during the 30 day period that were entitled to receive dividends. d = the maximum offering price per share of that class on the last day of the period, adjusted for undistributed net investment income. The standardized yield for a particular 30 day period may differ from the yield for other periods. The SEC formula assumes that the standardized yield for a 30 day period occurs at a constant rate for a six month period and is annualized at the end of the six month period. Additionally, because each class of shares is subject to different expenses, it is likely that the standardized yields of the Fund's classes of shares will differ for any 30 day period. |_| Dividend Yield. The Fund may quote a "dividend yield" for each class of its shares. Dividend yield is based on the dividends paid on a class of shares during the actual dividend period. To calculate dividend yield, the dividends of a class declared during a stated period are added together, and the sum is multiplied by 12 (to annualize the yield) and divided by the maximum offering price on the last day of the dividend period. The formula is shown below: Dividend Yield = dividends paid x 12/maximum offering price (payment date) The maximum offering price for Class A shares includes the current maximum initial sales charge. The maximum offering price for Class B and Class C shares is the net asset value per share, without considering the effect of contingent deferred sales charges. There is no sales charge on Class Y shares. The Class A dividend yield may also be quoted without deducting the maximum initial sales charge. - ------------------------------------------------------------------------------- The Fund's Yields for the 30-Day Periods Ended 10/31/03 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Standardized Yield Dividend Yield Class of Shares - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Without After Without After Sales Sales Sales Sales Charge Charge Charge Charge - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class A 2.18% 2.10% 1.18% 1.14% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class B 1.44% N/A 0.43% N/A - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class C 1.44% N/A 0.41% N/A - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class N 2.25% N/A 1.24% N/A - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class Y 2.78% N/A 1.77% N/A - ------------------------------------------------------------------------------- |X| Total Return Information. There are different types of "total returns" 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 and that the investment is redeemed at the end of the period. Because of differences in expenses for each class of shares, the total returns for each class are separately measured. The cumulative total return measures the change in value over the entire period (for example, 10 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 actual year-by-year performance. The Fund uses standardized calculations for its total returns as prescribed by the SEC. The methodology is discussed below. In calculating total returns for Class A shares, the current maximum sales charge of 3.50% (as a percentage of the offering price) is deducted from the initial investment ("P") (unless the return is shown without sales charge, as described below). For Class B shares, payment of the applicable contingent deferred sales charge is applied, depending on the period for which the return is shown: 4.0% in the first year, 3.0% in the second year, 2.0% in the third and fourth years, 1.0% in the fifth year and none thereafter. For Class C shares, the 1% contingent deferred sales charge is deducted for returns for the one year period. For Class N shares, the 1% contingent deferred sales charge is deducted for returns for the one year period Class N total returns may also be calculated for the periods prior to March 1, 2001 (the inception date for Class N shares), based on the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1 fees. Class Y shares are not subject to a sales charge. |_| Average Annual Total Return. The "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" in the formula) to achieve an Ending Redeemable Value ("ERV" in the formula) of that investment, according to the following formula: ERV - 1= Average Annual Total - --- l/n Return P |_| Cumulative Total Return. 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 |_| Total Returns at Net Asset Value. From time to time the Fund may also quote a cumulative or an average annual total return "at net asset value" (without deducting sales charges) for Class A, Class B, Class C or Class N shares. There is no sales charge on Class Y 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 Fund's Total Returns for the Periods Ended 10/31/03 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class of Cumulative Total Average Annual Total Returns Returns (10 years or Shares life of class) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 1-Year 5 Years (or life-of-class) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- After Without After Without After Without Sales Sales Sales Sales Sales Sales Charge Charge Charge Charge Charge Charge - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class A 17.49%(1) 21.75% -1.36% 2.22% 4.02%(1) 4.92%(1) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class B 17.37%1 18.37%1 -2.55% 1.45% 3.99%(1) 4.20%(1) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class C 18.34%1 18.34%1 0.43% 1.43% 4.20%(1) 4.20%(1) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class N 11.95%2 11.95%2 1.37% 2.37% 4.32%2 4.32%2 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Class Y 23.58%1 23.58%1 3.15% 3.15% 5.31%1 5.31%(1) - --------------------------------------------------------------------------------- 2. Inception of Class A, Class B, Class C and Class Y: 9/27/99. 3. Inception of Class N: 3/1/01 - --------------------------------------------------------------------------------- Average Annual Total Returns for Class A Shares (After Taxes) For the Periods Ended 10/31/03 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- 5 years 1 year (or life of class) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- After Taxes on Distributions -2.13% 2.09%1 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- After Taxes on Distributions and Redemption Of Fund -0.91% 2.21%1 Shares - --------------------------------------------------------------------------------- 1. Inception of Class A shares: 9/27/99 Other Performance Comparisons. The Fund compares its performance annually to that of an appropriate broadly-based market index in its Annual Report to shareholders. You can obtain that information by contacting the Transfer Agent at the addresses or telephone numbers shown on the cover of this Statement of Additional Information. The Fund may also compare its performance to that of other investments, including other mutual funds, or use rankings of its performance by independent ranking entities. Examples of these performance comparisons are set forth below. |X| Lipper Rankings. From time to time the Fund may publish the ranking of the performance of its classes of shares by Lipper, Inc. ("Lipper"). 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 in categories based on investment styles. 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. Lipper also publishes "peer-group" indices of the performance of all mutual funds in a category that it monitors and averages of the performance of the funds in particular categories. |X| Morningstar Ratings. From time to time the Fund may publish the star rating of the performance of its classes of shares by Morningstar, Inc., an independent mutual fund monitoring service. Morningstar rates mutual funds in their specialized market sector. The Fund is rated among the Multisector Bond category. Morningstar proprietary star ratings reflect historical risk-adjusted total investment return. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating(TM)based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five-and ten-year (if applicable) Morningstar Rating metrics. |X| Performance Rankings and Comparisons by Other Entities and Publications. From time to time the Fund may include in its advertisements and sales literature performance information about the Fund cited in newspapers and other periodicals such as The New York Times, The Wall Street Journal, Barron's, or similar publications. That information may include performance quotations from other sources, including Lipper and Morningstar. The performance of the Fund's classes of shares may be compared in publications to the performance of various market indices or other investments, and averages, performance rankings or other benchmarks prepared by recognized mutual fund statistical services. Investors may also wish to compare the returns on the Fund's share classes to the return on fixed-income investments available from banks and thrift institutions. Those include certificates of deposit, ordinary interest-paying checking and savings accounts, and other forms of fixed or variable time deposits, and various other instruments such as Treasury bills. However, the Fund's returns and share price are not guaranteed or insured by the FDIC or any other agency and will fluctuate daily, while bank depository obligations may be insured by the FDIC and may provide fixed rates of return. Repayment of principal and payment of interest on Treasury securities is backed by the full faith and credit of the U.S. government. From time to time, the Fund may publish rankings or ratings of the Manager or Transfer Agent, and of 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 and investor services by third parties may include comparisons of their services to those provided by other mutual fund families selected by the rating or ranking services. They may be based upon the opinions of the rating or ranking service itself, using its research or judgment, or based upon surveys of investors, brokers, shareholders or others. From time to time the Fund may include in its advertisements and sales literature the total return performance of a hypothetical investment account that includes shares of the Fund and other Oppenheimer funds. The combined account may be part of an illustration of an asset allocation model or similar presentation. The account performance may combine total return performance of the Fund and the total return performance of other Oppenheimer funds included in the account. Additionally, from time to time, the Fund's advertisements and sales literature may include, for illustrative or comparative purposes, statistical data or other information about general or specific market and economic conditions. That may include, for example, o information about the performance of certain securities or commodities markets or segments of those markets, o information about the performance of the economies of particular countries or regions, o the earnings of companies included in segments of particular industries, sectors, securities markets, countries or regions, o the availability of different types of securities or offerings of securities, o information relating to the gross national or gross domestic product of the United States or other countries or regions, o comparisons of various market sectors or indices to demonstrate performance, risk, or other characteristics of the Fund. About Your Account How to Buy Shares Additional information is presented below about the methods that can be used to buy shares of the Fund. Appendix B contains more information about the special sales charge arrangements offered by the Fund, and the circumstances in which sales charges may be reduced or waived for certain classes of investors. AccountLink. When shares are purchased through AccountLink, each purchase must be at least $50 and shareholders must --- invest at least $500 before an Asset Builder Plan (described below) can be established on a new account. Accounts established prior to November 1, 2002 will remain at $25 for additional purchases. 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 with 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"). The Exchange normally closes at 4:00 P.M., but may close earlier on certain days. The proceeds of ACH transfers are normally received by the Fund three days after the transfers are initiated. If the proceeds of the ACH transfer are not received on a timely basis, the Distributor reserves the right to cancel the purchase order. 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 Appendix B to this Statement of Additional Information because the Distributor or dealer or broker incurs little or no selling expenses. |X| Right of Accumulation. To qualify for the lower sales charge rates that apply to larger purchases of Class A shares and Class B shares, you and your spouse can add together: o Class A and Class B shares you purchase for your individual accounts (including IRAs and 403(b) plans), or for your joint accounts, or for trust or custodial accounts on behalf of your children who are minors, o 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, and o 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. 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. 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 reduced sales charge will apply only to current purchases. You must request it when you buy shares. |X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for which the Distributor acts as the distributor or the sub-distributor and currently include the following: Oppenheimer AMT-Free Municipals Oppenheimer Limited Term Municipal Fund Oppenheimer AMT-Free New York Municipals Oppenheimer Main Street Fund Oppenheimer Bond Fund Oppenheimer Main Street Opportunity Fund Oppenheimer California Municipal Fund Oppenheimer Main Street Small Cap Fund Oppenheimer Capital Appreciation Fund Oppenheimer Multiple Strategies Fund Oppenheimer Capital Preservation Fund Oppenheimer New Jersey Municipal Fund Oppenheimer Capital Income Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer Principal Protected Main Oppenheimer Champion Income Fund Street Fund Oppenheimer Principal Protected Main Oppenheimer Convertible Securities Fund Street Fund II Oppenheimer Developing Markets Fund Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Capital Value Fund, Oppenheimer Disciplined Allocation Fund Inc. Oppenheimer Quest International Value Oppenheimer Discovery Fund Fund, Inc. Oppenheimer Emerging Growth Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer Emerging Technologies Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Enterprise Fund Oppenheimer Real Asset Fund Oppenheimer Equity Fund, Inc. Oppenheimer Real Estate Fund Oppenheimer Rochester National Oppenheimer Global Fund Municipals Oppenheimer Global Opportunities Fund Oppenheimer Senior Floating Rate Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Small Cap Value Fund Oppenheimer Growth Fund Oppenheimer Strategic Income Fund Oppenheimer High Yield Fund Oppenheimer Total Return Bond Fund Oppenheimer International Bond Fund Oppenheimer U.S. Government Trust Oppenheimer International Growth Fund Oppenheimer Value Fund Oppenheimer International Small Company Fund Limited-Term New York Municipal Fund Oppenheimer Limited-Term Government Fund Rochester Fund Municipals Oppenheimer MidCap Fund And the following money market funds: Oppenheimer Cash Reserves Centennial Government Trust Oppenheimer Money Market Fund, Inc. Centennial Money Market Trust Centennial America Fund, L. P. Centennial New York Tax Exempt Trust Centennial California Tax Exempt Trust Centennial Tax Exempt Trust There is an initial sales charge on the purchase of Class A shares of each of the Oppenheimer funds described above except the money market funds. Under certain circumstances described in this Statement of Additional Information, redemption proceeds of certain money market fund shares may be subject to a contingent deferred sales charge. Letters 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. You can include purchases made up to 90 days before the date of the Letter. Letters of Intent do not consider Class C or Class N shares you purchase or may have purchased. A Letter of Intent 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"). At the investor's request, this may 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 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. However, 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. That amount is described in "Terms of Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to time by the Fund, the investor agrees to be bound by the amended terms and that those amendments will apply automatically to existing Letters of Intent. If the total eligible purchases made during the Letter of Intent period do not equal or exceed the intended purchase amount, the concessions 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 total 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 Prospectus, the sales charges paid will be adjusted to the lower rate. That adjustment will be made only if and when the dealer returns to the Distributor the excess of the amount of concessions allowed or paid to the dealer over the amount of concessions that apply to the actual amount of purchases. The excess concessions 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. The Transfer Agent will not hold shares in escrow for purchases of shares of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k) plans under a Letter of Intent. If the intended purchase amount under a Letter of Intent entered into by an OppenheimerFunds prototype 401(k) plan is not purchased by the plan by the end of the Letter of Intent period, there will be no adjustment of concessions paid to the broker-dealer or financial institution of record for accounts held in the name of that plan. 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 when placing any purchase orders for the investor during the Letter of Intent period. All of such purchases must be made through the Distributor. |X| 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 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 total minimum investment specified under the Letter is completed within the 13 month Letter of Intent period, the escrowed shares will be promptly released to the investor. 3. If, at the end of the 13 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. That sales charge adjustment will apply to any shares redeemed prior to the completion of the Letter. If the 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 of other Oppenheimer funds acquired subject to a contingent deferred sales charge, and (c) Class A or Class B shares acquired by exchange of either (1) 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 (2) 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 "How to Exchange Shares" and the escrow will be transferred to that other fund. Retirement Plans. Certain types of retirement plans are entitled to purchase shares of the Fund without sales charge or at reduced sales charge rates, as described in Appendix B to this Statement of Additional Information. Certain special sales charge arrangements described in that Appendix apply to retirement plans whose records are maintained on a daily valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent record keeper that has a contract or special arrangement with Merrill Lynch. If on the date the plan sponsor signed the Merrill Lynch record keeping service agreement the plan has less than $3 million in assets (other than assets invested in money market funds) invested in applicable investments, then the retirement plan may purchase only Class B shares of the Oppenheimer funds. Any retirement plans in that category that currently invest in Class B shares of the Fund will have their Class B shares converted to Class A shares of the Fund when the plan's applicable investments reach $5 million. OppenheimerFunds has entered into arrangements with certain record keepers whereby the Transfer Agent compensates the record keeper for its record keeping and account servicing functions that it performs on behalf of the participant level accounts of a retirement plan. While such compensation may act to reduce the record keeping fees charged by the retirement plan's record keeper, that compensation arrangement may be terminated at any time, potentially affecting the record keeping fees charged by the retirement plan's record keeper. 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. Classes of Shares. Each class of shares of the Fund represents an interest in the same portfolio of investments of the Fund. However, each class has different shareholder privileges and features. The net income attributable to Class B, Class C or Class N shares and the dividends payable on Class B, Class C or Class N shares will be reduced by incremental expenses borne solely by that class. Those expenses include the asset-based sales charges to which Class B, Class C and Class N shares are subject. The availability of different classes of shares permits an investor to choose the method of purchasing shares that is more appropriate for the investor. That may depend on the amount of the purchase, the length of time the investor expects to hold shares, and other relevant circumstances. Class A shares normally are sold subject to an initial sales charge. While Class B, Class C and Class N shares have no initial sales charge, the purpose of the deferred sales charge and asset-based sales charge on Class B, Class C and Class N shares is the same as that of the initial sales charge on Class A shares - to compensate the Distributor and brokers, dealers and financial institutions that sell shares of the Fund. A salesperson who is entitled to receive compensation from his or her firm for selling Fund shares may receive different levels of compensation for selling one class of shares rather than another. The Distributor will not accept any order in the amount of $250,000 or more for Class B shares or $1 million or more for Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts). That is because generally it will be more advantageous for that investor to purchase Class A shares of the Fund. Class A Shares Subject to a Contingent Deferred Sales Charge. For purchases of Class A shares at net asset value whether or not subject to a contingent deferred sales charge as described in the Prospectus, no sales concessions will be paid to the broker-dealer of record, as described in the Prospectus, on sales of Class A shares purchased with the redemption proceeds of shares of another mutual fund 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, if the purchase occurs more than 30 days after the Oppenheimer funds are added as an investment option under that plan. Additionally, that concession will not be paid on purchases of Class A shares by a retirement plan made with the redemption proceeds of Class N shares of one or more Oppenheimer funds held by the plan for more than 18 months. |X| Class B Conversion. Under current interpretations of applicable federal income tax law by the Internal Revenue Service, the conversion of Class B shares to Class A shares 72 months after purchase is not treated as a taxable event for the shareholder. If those laws or the IRS interpretation of those laws should change, the automatic conversion feature may be suspended. In that event, no further conversion of Class B shares would occur while that 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 shareholder, and absent such exchange, Class B shares might continue to be subject to the asset-based sales charge for longer than five years. |X| Availability of Class N Shares. In addition to the description of the types of retirement plans which may purchase Class N shares contained in the prospectus, Class N shares also are offered to the following: o to all rollover IRAs, o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and Ascender retirement plans, o to all trustee-to-trustee IRA transfers, o to all 90-24 type 403(b) transfers, o to Group Retirement Plans (as defined in Appendix B to this Statement of Additional Information) which have entered into a special agreement with the Distributor for that purpose, o to Retirement Plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, the recordkeeper or the plan sponsor for which has entered into a special agreement with the Distributor, o to Retirement Plans of a plan sponsor where the aggregate assets of all such plans invested in the Oppenheimer funds is $500,000 or more, and o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the purchase with the redemption proceeds of Class A shares of one or more Oppenheimer funds. |X| Allocation of Expenses. The Fund pays expenses related to its daily operations, such as custodian fees, Trustees' fees, transfer agency fees, legal fees 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. The methodology for calculating the net asset value, dividends and distributions of the Fund's share classes recognizes two types of expenses. General expenses that do not pertain specifically to any one class are allocated pro rata to the shares of all classes. The allocation is based on the percentage of the Fund's total assets that is represented by the assets of each class, and then equally to each outstanding share within a given class. Such general expenses include management fees, Wrap Agreement fees, legal, bookkeeping and audit fees, printing and mailing costs of shareholder reports, Prospectuses, Statements of Additional Information and other materials for current shareholders, fees to unaffiliated Trustees, custodian expenses, share issuance costs, organization and start-up costs, interest, taxes and brokerage commissions, and non-recurring expenses, such as litigation costs. Other expenses that are directly attributable to a particular class are allocated equally to each outstanding share within that class. Examples of such expenses include distribution and service plan (12b-1) fees, transfer and shareholder servicing agent fees and expenses, and shareholder meeting expenses (to the extent that such expenses pertain only to a specific class). Account Fees. A $12 annual fee is assessed on any account valued at less than $500. This fee will not be assessed on the following accounts: o Accounts that have balances below $500 due to the automatic conversion of shares from Class B to Class A shares; o Accounts with an active Asset Builder Plan, payroll deduction plan or a military allotment plan; o OppenheimerFunds-sponsored group retirement accounts that are making continuing purchases; o Certain accounts held by broker-dealers through the National Securities Clearing Corporation; and o Accounts that fall below the $500 threshold due solely to market fluctuations within the 12-month period preceding the date the fee is deducted. The fee is automatically deducted from qualifying accounts annually on or about the second to last business day of September. This annual fee is waived for any shareholders who elect to access their account documents through electronic document delivery rather than in paper copy and who elect to utilize the Internet or PhoneLink as their primary source for their general servicing needs. To sign up to access account documents electronically via eDocs Direct, please visit the Service Center on our website at www.oppenheimerfunds.com or call 1.888.470.0862 for instructions. Determination of Net Asset Values Per Share. The net asset values per share of each class of shares of the Fund are determined as of the close of business of the Exchange on each day that the Exchange is open. The calculation is done 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 Exchange normally closes at 4:00 P.M., Eastern time, but may close earlier on some other days (for example, in case of weather emergencies or on days falling before a U.S. holiday). All references tro time in this Statement of Additional Information mean "Eastern time." The Exchange's most recent annual announcement (which is subject to change) states that it will close on New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may also close on other days. Dealers other than Exchange members may conduct trading in certain securities on days on which the Exchange is closed (including weekends and U.S. holidays) or after 4:00 P.M. and a regular business day. Because the Fund's net asset values will not be calculated on those days, the Fund's net asset values per share may be significantly affected on such days, when shareholders may not purchase or redeem shares. Additionally, trading on European and Asian stock exchanges and over-the-counter markets normally is completed before the close of the Exchange. Changes in the values of securities traded on foreign exchanges or markets as a result of events that occur after the prices of those securities are determined, but before the close of the Exchange, will not be reflected in the Fund's calculation of its net asset values that day unless the Manager determines that the event is likely to effect a material change in the value of the security. The Manager, or an internal valuation committee established by the Manager, as applicable, may establish a valuation, under procedures established by the Board and subject to the approval, ratification and confirmation by the Board at its next ensuing meeting. |X| Securities Valuation. The Fund's Board of Trustees has established procedures for the valuation of the Fund's securities. In general those procedures are as follows: o Equity securities traded on a U.S. securities exchange or on Nasdaq(R)are valued as follows: (1) if last sale information is regularly reported, they are valued at the last reported sale price on the principal exchange on which they are traded or on Nasdaq, as applicable, on that day, or (2) if last sale information is not available on a valuation date, they are valued 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, at the closing "bid" price on the valuation date. o Equity securities traded on a foreign securities exchange generally are valued in one of the following ways: (1) at the last sale price available to the pricing service approved by the Board of Trustees, or (2) at the last sale price obtained by the Manager from the report of the principal exchange on which the security is traded at its last trading session on or immediately before the valuation date, or (3) at the mean between the "bid" and "asked" prices obtained from the principal exchange on which the security is traded or, on the basis of reasonable inquiry, from two market makers in the security. o Long-term debt securities having a remaining maturity in excess of 60 days are valued based on the mean between the "bid" and "asked" prices determined by a portfolio pricing service approved by the Fund's Board of Trustees or obtained by the Manager from two active market makers in the security on the basis of reasonable inquiry. o The following securities are valued at the mean between the "bid" and "asked" prices determined by a pricing service approved by the Fund's Board of Trustees or obtained by the Manager from two active market makers in the security on the basis of reasonable inquiry: (1) debt instruments that have a maturity of more than 397 days when issued, (2) debt instruments that had a maturity of 397 days or less when issued and have a remaining maturity of more than 60 days, and (3) non-money market debt instruments that had a maturity of 397 days or less when issued and which have a remaining maturity of 60 days or less. o The following securities are valued at cost, adjusted for amortization of premiums and accretion of discounts: (1) money market debt securities held by a non-money market fund that had a maturity of less than 397 days when issued that have a remaining maturity of 60 days or less, and (2) debt instruments held by a money market fund that have a remaining maturity of 397 days or less. o Securities (including restricted securities) not having readily-available market quotations are valued at fair value determined under the Board's procedures. If the Manager is unable to locate two market makers willing to give quotes, a security may be priced at the mean between the "bid" and "asked" prices provided by a single active market maker (which in certain cases may be the "bid" price if no "asked" price is available). In the case of U.S. government securities, mortgage-backed securities, corporate bonds and foreign government securities, when last sale information is not generally available, the Manager may use pricing services approved by the Board of Trustees. The pricing service may use "matrix" comparisons to the prices for comparable instruments on the basis of quality, yield, and maturity. Other special factors may be involved (such as the tax-exempt status of the interest paid by municipal securities). The Manager will monitor the accuracy of the pricing services. That monitoring may include comparing prices used for portfolio valuation to actual sales prices of selected securities. The closing prices in the London foreign exchange market on a particular business day that are provided to the Manager by a bank, dealer or pricing service that the Manager has determined to be reliable are used to value foreign currency, including forward contracts, and to convert to U.S. dollars securities that are denominated in foreign currency. Puts, calls, and futures are valued at the last sale 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, they shall be valued at the last sale price on the preceding trading day if it is within the spread of the closing "bid" and "asked" prices on the principal exchange or on Nasdaq on the valuation date. If not, the 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 by the mean between "bid" and "asked" prices obtained by the Manager from two active market makers. In certain cases that may be at the "bid" price if no "asked" price is available. When the Fund writes an option, an amount equal to the premium received is included in the Fund's Statement of Assets and Liabilities as an asset. An equivalent credit is included in the liability section. The credit is adjusted ("marked-to-market") to reflect the current market value of the option. In determining the Fund's gain on investments, if a call or put written by the Fund is exercised, the proceeds are increased by the premium received. If a call or put written by the Fund expires, the Fund has a gain in the amount of the premium. If the Fund enters into a closing purchase transaction, it will have a gain or loss, depending on whether the premium received was more or less than the cost of the closing transaction. If the Fund exercises a put it holds, the amount the Fund receives on its sale of the underlying investment is reduced by the amount of premium paid by the Fund. Pursuant to procedures adopted by the Fund's Board of Trustees, fair value of a Wrap Agreement generally will be equal to the difference between the Book Value and the market value of the Covered Assets. If the market value of the Covered Assets is greater than their Book Value, the value of the Wrap Agreement will be reflected as a liability of the Fund for valuation purposes in the amount of the difference, i.e., a negative value, reflecting the potential liability of the Fund to the provider of the Wrap Agreement. The Fund will identify on its books assets equal to the amount of such potential liability. If, upon liquidation of all Covered Assets the value of the Wrap Agreements is zero or less, then the Wrap Providers will have no payment obligation to the Fund under the Wrap Agreements. If the market value of the Covered Assets is less than their Book Value, the value of the Wrap Agreement will be reflected as an asset of the Fund in the amount of the difference, i.e., a positive value, reflecting the potential liability of the provider of the Wrap Agreement to the Fund. In performing its fair value determination, the Fund's Board expects to consider the creditworthiness, willingness and ability of a provider of a Wrap Agreement to pay amounts due under the Wrap Agreements. If the Board determines that a provider of Wrap Agreements is unable to make such payments, the Board may assign a fair value to the Wrap Agreement that is less than the difference between the Book Value and the market value of the applicable Covered Assets. If the Board were to materially discount the value of a Wrap Agreement, the Fund may be unable to maintain a stable net asset value. The staff of the Securities and Exchange Commission has inquired of registered "stable value" mutual funds, including this Fund, as to the valuation methodology used by such funds to value their wrapper agreements. At the present time, the Fund has not received any indication whether or when the Securities and Exchange Commission will take any action as a result of their review of this matter. If the Securities and Exchange Commission determines that the valuation method currently used by "stable value" mutual funds is no longer acceptable, the Fund may be required to use a different accounting methodology under which the fair value of the Fund's wrapper agreements could fluctuate daily, and if that were to occur, the Fund would probably not be able to maintain a stable net asset value per share. As a result, the Fund's net asset value could be greater or less than $10 per share on a daily basis. How to Sell Shares The information below supplements the terms and conditions for redeeming shares set forth in the Prospectus. Reinvestment Privilege. Within six months of a redemption, a shareholder may reinvest all or part of the redemption proceeds of: o Class A shares purchased subject to an initial sales charge or Class A shares on which a contingent deferred sales charge was paid, or o Class B shares that were subject to the Class B contingent deferred sales charge when redeemed. 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 in "How to Exchange Shares" below. Reinvestment will be at the net asset value next computed after the Transfer Agent receives the reinvestment order. The shareholder must ask the Transfer Agent for that privilege at the time of reinvestment. This privilege does not apply to Class C, Class N or Class Y shares. 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. Payments "In Kind". The Prospectus states that payment for shares tendered for redemption is ordinarily made in cash. However, under certain circumstances, 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 liquid securities from the portfolio of the Fund and Wrap Agreements, in lieu of cash. The Fund has elected to be governed by Rule 18f-1 under the Investment Company Act. Under that rule, 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 Fund will value securities and Wrap Agreements used to pay redemptions in kind using the same method the Fund uses to value its portfolio securities described above under "Determination of Net Asset Values Per Share." That valuation will be made as of the time the redemption price is determined. To the extent that a redemption in-kind includes Wrap Agreements, the Fund will assign to the redeeming Plan one or more Wrap Agreements issued by the Wrap Providers covering the securities of the underlying funds that are distributed in-kind. The terms and conditions of Wrap Agreements provided to a redeeming Plan will be the same or substantially similar to the terms and conditions of the Wrap Agreements held by the Fund. Wrap Agreements are not liquid securities and may impose restrictions on termination or withdrawal, including notice periods of one year or more for non-participant directed withdrawals. The maintenance of Wrap Agreements distributed in-kind may also require that a Plan pay fees to the Wrap Provider directly, rather than through the Fund. Such fees are anticipated to be comparable to the fees paid by the Fund with respect to Covered Assets (typically 0.10% to 0.25% per dollar of Covered Assets). And, in most circumstances the Wrap Agreements will be of value to the Plan only as long as the Plan holds shares of the underlying funds. A Wrap Provider, prior to the assignment of a Wrap Agreement to a Plan, may require the Plan to represent and warrant that such assignment does not violate any applicable laws. Moreover, the Wrap Provider may require the Plan to obtain at its own expense the services of a qualified professional asset manager acceptable to the Wrap Provider to manage the Covered Assets distributed in-kind in conformity with the Wrap Agreement provisions. In the event a Wrap Agreement cannot be assigned to the shareholder, the Fund in its discretion may satisfy the redemption request through (a) a cash payment, (b) a redemption in-kind consisting entirely of Covered Assets, (c) a combination of cash and Covered Assets, or (d) the Fund may give the redeeming shareholder the opportunity to choose between one of the foregoing options or providing the Fund with 12 months notice of its request for such redemption (which 12 month notice option would cause the redemption not to be subject to the redemption fee). 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 $1,000 or such lesser amount as the Board may fix. The Board will not cause the involuntary redemption of shares in an account if the aggregate net asset value of such shares has fallen below the stated minimum solely as a result of market fluctuations. If the Board exercises this right, it may also fix the requirements for any notice to be given to the shareholders in question (not less than 30 days). The Board may alternatively set requirements for the shareholder to increase the investment, or set other terms and conditions so that the shares would not be involuntarily redeemed. Redemption Fee. As described in the prospectus, any redemption of Fund shares by the plan sponsor without first providing the Fund's transfer agent at least 12 months prior written notice, will be subject to a 2% redemption fee in addition to any applicable contingent deferred sales charge. If a plan (or group of affiliated plans) holds less than 1% of the outstanding shares of the Fund, and if any decision or action of an employer or plan sponsor which affects a significant number of plan participants, such as, but not limited to, plant closings, divestitures, partial plan termination, bankruptcy, layoff or early retirement incentive programs, results in redemption of Fund shares without 12 months notice, then those redemptions may be subject to a redemption fee. However, the redemption fee will not be assessed against any such redemptions if, as a direct result of such decision or action by the employer or plan sponsor, the affected Plan participants suffer an immediate, involuntary loss of employment. Transfers of Shares. A transfer of shares to a different registration is not an event that triggers the payment of sales charges. Therefore, shares are not subject to the payment of a contingent deferred sales charge of any class at the time of transfer to the name of another person or entity. It does not matter whether the transfer occurs by absolute assignment, gift or bequest, as long as it does not involve, directly or indirectly, a public sale of the shares. When shares subject to a contingent deferred sales charge are transferred, the transferred shares will remain subject to the contingent deferred sales charge. It will be 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, Class C or Class N 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 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: (1) state the reason for the distribution; (2) state the owner's awareness of tax penalties if the distribution is premature; and (3) conform to the requirements of the plan and the Fund's other redemption requirements. Participants (other than self-employed persons) in OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the Fund held in the name of the plan or its fiduciary may not directly request redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the Transfer Agent 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, 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. Shareholders should contact their 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. However, if the Distributor receives a repurchase order from a dealer or broker after the close of the 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 customers prior to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but may do so earlier on some days. Additionally, the order must have been 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. The signature(s) of the registered owners on the redemption documents must be guaranteed as described in the Prospectus. Automatic Withdrawal and Exchange Plans. Plans owning shares of the Fund valued at $5,000 or more can authorize the Transfer Agent to redeem shares (having a value of at least $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 Plan 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. Payments must also be sent to the address of record for the account and the address must not have 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, Plans having AccountLink privileges (see "How to Buy Shares") may arrange to have Automatic Withdrawal Plan payments transferred to the bank account designated on the account application or by signature-guaranteed instructions sent to the Transfer Agent. Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three business days before the payment transmittal 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. The Fund reserves the right to amend, suspend or discontinue offering these plans at any time without prior notice. Because of the sales charge assessed on Class A share purchases, Plans should not make regular additional Class A share purchases while participating in an Automatic Withdrawal Plan. Class B, Class C and Class N shareholders should not establish automatic withdrawal plans, because of the potential imposition of the contingent deferred sales charge on such withdrawals (except where the contingent deferred sales charge is waived as described in Appendix B, below). By requesting an Automatic Withdrawal or Exchange Plan, the shareholder agrees to the terms and conditions that apply to such plans, as stated below. These provisions may be amended from time to time by the Fund and/or the Distributor. When adopted, any amendments will automatically apply to existing Plans. Automatic Exchange Plans. Plans can authorize the Transfer Agent 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 $50. Instructions should be provided on the OppenheimerFunds application or signature-guaranteed instructions. 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. Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to meet withdrawal payments. Shares acquired without a sales charge will be redeemed first. 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 these plans should not be considered as a yield or income on your investment. The Transfer Agent will administer the Plan's Automatic Withdrawal Plan as agent for the shareholder(s) (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 not taken by the Transfer Agent in good faith to administer the Plan. Share 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. Shares will be redeemed to make withdrawal payments at the net asset value per share determined on the redemption date. Checks or AccountLink payments representing the proceeds of Plan withdrawals will normally be transmitted three business days prior to the date selected for receipt of the payment, according to the choice specified in writing by the Planholder. Receipt of payment on the date selected cannot be guaranteed. 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 after 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 to redeem all, or any part of, the shares held under the Plan. That notice must be in proper form in accordance with the requirements of the then-current Prospectus of the Fund. In that case, the Transfer Agent will redeem the number of shares requested at the net asset value per share in effect and will mail a check for the proceeds to the Planholder. The Planholder may terminate a Plan at any time by writing to the Transfer Agent. The Fund may also give directions to the Transfer Agent to terminate a Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence satisfactory to it that the Planholder has died or is legally incapacitated. Upon termination of a Plan by the Transfer Agent or the Fund, shares that have not been redeemed will be held in uncertificated form in the name of the Planholder. The account will continue as a dividend-reinvestment, uncertificated account unless and until proper instructions are received from the Planholder, his or her executor or guardian, or another authorized person. 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. You can obtain a current list showing which funds offer which classes of shares by calling the Distributor. o All of the Oppenheimer funds currently offer Class A, B, C, N and Y shares with the following exceptions: The following funds only offer Class A shares: Centennial America Fund, L.P. Centennial New York Tax Exempt Trust Centennial California Tax Exempt Trust Centennial Tax Exempt Trust Centennial Government Trust Oppenheimer Money Market Fund, Inc. Centennial Money Market Trust The following funds do not offer Class N shares: Oppenheimer AMT-Free Municipals Oppenheimer Pennsylvania Municipal Fund Oppenheimer AMT-Free New York Oppenheimer Rochester National Municipals Municipals Oppenheimer California Municipal Fund Limited Term New York Municipal Fund Oppenheimer Limited Term Municipal Oppenheimer Senior Floating Rate Fund Fund Oppenheimer New Jersey Municipal Fund Rochester Fund Municipals The following funds do not offer Class Y shares: Oppenheimer AMT-Free Municipals Oppenheimer Limited Term Municipal Fund Oppenheimer AMT-Free New York Municipals Oppenheimer Multiple Strategies Fund Oppenheimer California Municipal Fund Oppenheimer New Jersey Municipal Fund Oppenheimer Capital Income Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer Cash Reserves Oppenheimer Principal Protected Main Street Fund Oppenheimer Champion Income Fund Oppenheimer Principal Protected Main Street Fund II Oppenheimer Convertible Securities Fund Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Disciplined Allocation Fund Oppenheimer Quest International Value Fund, Inc. Oppenheimer Developing Markets Fund Oppenheimer Rochester National Municipals Oppenheimer Gold & Special Minerals Fund Oppenheimer Senior Floating Rate Fund Oppenheimer International Bond Fund Oppenheimer Small Cap Value Fund Oppenheimer International Growth Fund Oppenheimer Total Return Bond Fund Oppenheimer International Small Company Limited Term New York Municipal Fund Fund o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares of any other fund. o Class B, Class C and Class N 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. o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for Class A shares of other Oppenheimer funds. They may not be acquired by exchange of shares of any class of any other Oppenheimer funds except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves acquired by exchange of Class M shares. o Class X shares of Limited Term New York Municipal Fund may be exchanged only for Class B shares of other Oppenheimer funds and no exchanges may be made to Class X shares. o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government Fund. Only participants in certain retirement plans may purchase shares of Oppenheimer Capital Preservation Fund, and only those participants may exchange shares of other Oppenheimer funds for shares of Oppenheimer Capital Preservation Fund. o Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to an early withdrawal charge or contingent deferred sales charge. o 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 sales charge or contingent deferred sales charge. 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. If requested, they must supply proof of entitlement to this privilege. o Shares of the Fund acquired by reinvestment of dividends or distributions from any of the other Oppenheimer funds 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. o Shares of Oppenheimer Principal Protected Main Street Fund may be exchanged at net asset value for shares of any of the Oppenheimer funds. However, shareholders are not permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer Principal Protected Main Street Fund until after the expiration of the warranty period (8/5/2010). o Shares of Oppenheimer Principal Protected Main Street Fund II may be exchanged at net asset value for shares of any of the Oppenheimer funds. However, shareholders are not permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer Principal Protected Main Street Fund II until after the expiration of the warranty period (2/4/2011). The Fund may amend, suspend or terminate the exchange privilege at any time. Although the Fund may impose these changes at any time, it will provide you with notice of those changes whenever it is required to do so by applicable law. It may be required to provide 60 days notice prior to materially amending or terminating the exchange privilege. That 60 day notice is not required in extraordinary circumstances. How Exchanges Affect Contingent Deferred Sales Charges. No contingent deferred sales charge is imposed on exchanges of shares of any class purchased subject to a contingent deferred sales charge. However, when Class A shares of the Fund are acquired by exchange of Class A shares of other Oppenheimer funds purchased subject to a Class A contingent deferred sales charge are redeemed within 18 months of the end of the calendar month of the initial purchase of the exchanged Class A shares, the Class A contingent deferred sales charge is imposed on the redeemed shares. 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. With respect to Class N shares, a 1% contingent deferred sales charge will be imposed if the retirement plan (not including IRAs and 403(b) plan) is terminated or Class N shares of all Oppenheimer funds are terminated as an investment option of the plan and Class N shares are redeemed within 18 months after the plan's first purchase of Class N shares of any Oppenheimer fund or with respect to an individual retirement plan or 403(b) plan, Class N shares are redeemed within 18 months of the plan's first purchase of Class N shares of any Oppenheimer fund. 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. Before exchanging shares, shareholders should take into account how the exchange may affect any contingent deferred sales charge that might be imposed in the subsequent redemption of remaining shares. If Class B shares of an Oppenheimer fund are exchanged for Class B shares of Oppenheimer Limited-Term Government Fund, Limited-Term New York Municipal Fund or Oppenheimer Senior Floating Rate Fund and those shares acquired by exchange are subsequently redeemed or repurchased by the fund, they will be subject to the contingent deferred sales charge of the Oppenheimer fund from which they were exchanged. The contingent deferred sales charge rates of Class B shares of other Oppenheimer funds are typically higher for the same holding period than for Class B shares of Oppenheimer Limited-Term Government Fund, Limited-Term New York Municipal Fund and Oppenheimer Senior Floating Rate Fund. They will not be subject to the contingent deferred sales charge of Oppenheimer Limited-Term Government Fund, Limited-Term New York Municipal Fund or Oppenheimer Senior Floating Rate Fund. Shareholders owning shares of more than one class must specify which class of shares they wish to exchange. Limits on Multiple Exchange Orders. 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. Telephone Exchange Requests. When exchanging shares by telephone, a shareholder must have an existing account in the fund to which the exchange is to be made. Otherwise, the investors must obtain a Prospectus of that fund before the exchange request may be submitted. 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. Processing 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 Fund may refuse the request. When you exchange some or all of your shares from one fund to another, any special account feature such as an Asset Builder Plan or Automatic Withdrawal Plan, will be switched to the new fund account unless you tell the Transfer Agent not to do so. However, special redemption and exchange features such as Automatic Exchange Plans and Automatic Withdrawal Plans cannot be switched to an account in Oppenheimer Senior Floating Rate Fund. 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. The different Oppenheimer funds available for exchange have different investment objectives, policies and risks. 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 will not be declared or paid on newly purchased shares 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. Shares purchased through dealers or brokers normally are paid for by the third business day following the placement of the purchase order. Shares redeemed through the regular redemption procedure will be paid dividends through and including the day on which the redemption request is received by the Transfer Agent in proper form. Dividends will be declared on shares repurchased by a dealer or broker for three business days following the trade date (that is, up 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. The Fund has no fixed dividend rate for each class of shares and the rate can change for its shares. There can be no assurance as to the payment of any dividends or the realization of any capital gains. The dividends and distributions paid by a class of shares will vary from time to time depending on market conditions, the composition of the Fund's portfolio, and expenses borne by the Fund or borne separately by a class. Dividends are calculated in the same manner, at the same time, and on the same day for each class of shares. However, dividends on Class B, Class C and Class N shares are expected to be lower than dividends on Class A and Class Y shares. That is because of the effect of the asset-based sales charge on Class B, Class C and Class N shares. Those dividends will also differ in amount as a consequence of any difference in the net asset values of the different classes of shares. Dividends, distributions and proceeds of the redemption of Fund shares represented by checks returned to the Transfer Agent by the Postal Service as undeliverable will be reinvested in shares of the Fund. Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment laws, and the Fund and the Transfer Agent will not be liable to shareholders or their representatives for compliance with those laws in good faith. Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares. The federal tax treatment of the Fund's dividends and capital gains distributions is briefly highlighted in the Prospectus. The following is only a summary of certain additional tax considerations generally affecting the Fund and its shareholders. The tax discussion in the Prospectus and this Statement of Additional Information is based on tax law in effect on the date of the Prospectus and this Statement of Additional Information. Those laws and regulations may be changed by legislative, judicial, or administrative action, sometimes with retroactive effect. State and local tax treatment of ordinary income dividends and capital gain dividends from regulated investment companies may differ from the treatment under the Internal Revenue Code described below. Potential purchasers of shares of the Fund are urged to consult their tax advisors with specific reference to their own tax circumstances as well as the consequences of federal, state and local tax rules affecting an investment in the Fund. |X| Qualification as a Regulated Investment Company. The Fund has elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. As a regulated investment company, the Fund is not subject to federal income tax on the portion of its investment company taxable income (that is, taxable interest, dividends, and other taxable ordinary income net of expenses and net short-term capital gain in excess of long-term capital loss) and capital gain net income (that is, the excess of net long-term capital gains over net short-term capital losses) that it distributes to shareholders. 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 their Fund shares are held in a retirement account or the shareholder is otherwise exempt from tax). The Internal Revenue Code contains a number of complex tests relating to qualification that the Fund might not meet in a particular year. If it did not qualify as a regulated investment company, the Fund would be treated for tax purposes as an ordinary corporation and would receive no tax deduction for payments made to shareholders. To qualify as a regulated investment company, the Fund must distribute at least 90% of its investment company taxable income (in brief, net investment income and the excess of net short-term capital gain over net long-term capital loss) for the taxable year. The Fund must also satisfy certain other requirements of the Internal Revenue Code, some of which are described below. Distributions by the Fund made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year, will be considered distributions of income and gains for the taxable year and will therefore count toward satisfaction of the above-mentioned requirement. To qualify as a regulated investment company, the Fund must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies (to the extent such currency gains are directly related to the regulated investment company's principal business of investing in stock or securities) and certain other income. In addition to satisfying the requirements described above, the Fund must satisfy an asset diversification test in order to qualify as a regulated investment company. Under that test, at the close of each quarter of the Fund's taxable year, at least 50% of the value of the Fund's assets must consist of cash and cash items, U.S. government securities, securities of other regulated investment companies, and securities of other issuers. As to each of those issuers, the Fund must not have invested more than 5% of the value of the Fund's total assets in securities of each such issuer and the Fund must not hold more than 10% of the outstanding voting securities of each such issuer. No more than 25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. government securities and securities of other regulated investment companies), or in two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses. For purposes of this test, obligations issued or guaranteed by certain agencies or instrumentalities of the U.S. government are treated as U.S. government securities. |X| Excise Tax on Regulated Investment Companies. 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. If it does not, the Fund must pay an excise tax on the amounts not distributed. It is presently anticipated that the Fund will meet those requirements. To meet this requirement, in certain circumstances the Fund might be required to liquidate portfolio investments to make sufficient distributions to avoid excise tax liability. However, the Board of Trustees and the Manager might determine in a particular year that it would be in the best interests 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 made by the Fund must be re-characterized a s a non-taxable return of capital at the end of the fiscal year as a result of the effect of the Fund's investment policies, they will be identified as such in notices sent to Plans. 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 above, except for Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government Fund. Reinvestment will be made without sales charge at the net asset value per share in effect at the close of business on the payable date of the dividend or distribution. To elect this option, the shareholder must notify the Transfer Agent in writing and must have an existing account in the fund selected for reinvestment. Otherwise the shareholder first must obtain a prospectus for that fund and an application from the Distributor to establish an account. Dividends and/or distributions from shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves) may be invested in shares of this Fund on the same basis. Additional Information About the Fund 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 shares of the other Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of the Manager. The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a division of the Manager. It is responsible for maintaining the Fund's shareholder registry and shareholder accounting records, and for paying dividends and distributions to shareholders. It also handles shareholder servicing and administrative functions. It serves as the Transfer Agent for an annual per account fee. It also acts as shareholder servicing agent for the other Oppenheimer funds. Shareholders should direct inquiries about their accounts to the Transfer Agent at the address and toll-free numbers shown on the back cover. The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The custodian's responsibilities include safeguarding and controlling the Fund's portfolio securities and handling the delivery of such securities to and from the Fund. 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. KPMG LLP are the independent auditors of the Fund. They 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.INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Oppenheimer Capital Preservation Fund:
We have audited the accompanying statement of assets and liabilities of Oppenheimer Capital Preservation Fund, including the statement of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, and the period from September 27, 1999 (commencement of operations) to October 31, 1999. These financial statements and financial highlights are the responsibility of the Fundamp;#146;s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Capital Preservation Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, and the period from September 27, 1999 (commencement of operations) to October 31, 1999, in conformity with accounting principles generally accepted in the United States of America.
/s/ KPMG LLP__________ KPMG LLP Denver, Colorado November 21, 2003 STATEMENT OF INVESTMENTS October 31, 2003 - -------------------------------------------------------------------------------- Market Value Shares See Note 1 ---------------------------------------------------------------------------- Investments in Affiliated Companies--101.1% ---------------------------------------------------------------------------- Fixed Income Funds--96.0% Oppenheimer Bond Fund, Cl. Y 3,443,783 $ 35,298,772 ---------------------------------------------------------------------------- Oppenheimer Limited-Term Government Fund, Cl. Y 23,457,985 240,678,927 ---------------------------------------------------------------------------- Oppenheimer Strategic Income Fund, Cl. Y 14,510,240 59,346,883 ------------- 335,324,582 ---------------------------------------------------------------------------- Money Market Fund--5.1% Oppenheimer Money Market Fund, Inc. 18,006,131 18,006,131 ---------------------------------------------------------------------------- Total Investments, at Value (Cost $347,576,825) 101.1% 353,330,713 ---------------------------------------------------------------------------- Liabilities in Excess of Other Assets (1.1) (3,896,798) -------------------------- Net Assets 100.0% $349,433,915 ========================== See accompanying Notes to Financial Statements. 11 OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 - -------------------------------------------------------------------------------- ---------------------------------------------------------------------------- Assets
Investments, at value--see accompanying statement:
Affiliated companies (cost $347,576,825) $353,330,713 ---------------------------------------------------------------------------- Cash used for collateral on futures 25,000 ---------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 713,959 Interest and dividends 702,087 Other 1,159 ------------- Total assets 354,772,918 ---------------------------------------------------------------------------- Liabilities Bank overdraft 378,513 ---------------------------------------------------------------------------- Payables and other liabilities: Wrapper agreement 3,434,739 Shares of beneficial interest redeemed 1,072,770 Wrapper fee payable 191,750 Transfer and shareholder servicing agent fees 86,752 Distribution and service plan fees 74,051 Shareholder reports 34,146 Trustees' compensation 11,390 Futures margins 3,734 Other 51,158 ------------- Total liabilities 5,339,003 ---------------------------------------------------------------------------- Net Assets $349,433,915 ============= ---------------------------------------------------------------------------- Composition of Net Assets Paid-in capital $347,811,995 ---------------------------------------------------------------------------- Overdistributed net investment income (10,216) ---------------------------------------------------------------------------- Accumulated net realized loss on investment transactions (643,436) ---------------------------------------------------------------------------- Net unrealized appreciation on investments and wrapper agreement 2,275,572 ------------- Net Assets $349,433,915 ============= 12 OPPENHEIMER CAPITAL PRESERVATION FUND ---------------------------------------------------------------------------- Net Asset Value Per Share Class A Shares:Net asset value and redemption price per share (based on net assets of $94,727,427 and 9,473,122 shares of beneficial interest outstanding) $10.00 Maximum offering price per share (net asset value plus sales charge of 3.50% of offering price) $10.36
---------------------------------------------------------------------------- Class B Shares:Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $9,986,747 and 998,663 shares of beneficial
interest outstanding) $10.00 ---------------------------------------------------------------------------- Class C Shares:Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $24,404,533 and 2,440,518 shares of beneficial
interest outstanding) $10.00 ---------------------------------------------------------------------------- Class N Shares:Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $219,590,275 and 21,958,614 shares of beneficial
interest outstanding) $10.00 ---------------------------------------------------------------------------- Class Y Shares:Net asset value, redemption price and offering price per share (based on net assets of $724,933 and 72,473 shares of beneficial interest
outstanding) $10.00 See accompanying Notes to Financial Statements. 13 OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENT OF OPERATIONS For the Year Ended October 31, 2003 - -------------------------------------------------------------------------------- ---------------------------------------------------------------------------- Investment Income Dividends from affiliated companies $ 9,469,836 ---------------------------------------------------------------------------- Interest 76,236 ------------ Total investment income 9,546,072 ---------------------------------------------------------------------------- Expenses Management fees 2,220,602 ----------------------------------------------------------------------------Distribution and service plan fees:
Class A 228,125 Class B 80,423 Class C 193,012 Class N 450,965 ----------------------------------------------------------------------------Transfer and shareholder servicing agent fees:
Class A 456,802 Class B 65,890 Class C 139,907 Class N 457,882 Class Y 30 ---------------------------------------------------------------------------- Wrapper fees 489,897 ---------------------------------------------------------------------------- Shareholder reports 64,109 ---------------------------------------------------------------------------- Trustees' compensation 15,215 ---------------------------------------------------------------------------- Custodian fees and expenses 6,587 ---------------------------------------------------------------------------- Other 57,515 ------------ Total expenses 4,926,961 Less reduction to custodian expenses (392) Less reimbursement of management fees (1,335,442) Less voluntary waiver of transfer and shareholder servicing agent fees--Class A (152,350) Less voluntary waiver of transfer and shareholder servicing agent fees--Class B (37,422) Less voluntary waiver of transfer and shareholder servicing agent fees--Class C (70,269) Less voluntary waiver of transfer and shareholder servicing agent fees--Class Y (13) ------------ Net expenses 3,331,073 ---------------------------------------------------------------------------- Net Investment Income 6,214,999 ----------------------------------------------------------------------------Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments from affiliated companies 187,632 Closing of futures contracts (38,787) ------------ Net realized gain 148,845 ---------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments from affiliated companies 4,556,064 Futures contracts (43,577) Wrapper agreement (4,616,791) ------------ Net change in unrealized appreciation (104,304) ---------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $ 6,259,540 ============ See accompanying Notes to Financial Statements. 14 OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- Year Ended October 31, 2003 2002 ---------------------------------------------------------------------------- Operations Net investment income $ 6,214,999 $ 5,200,284 ---------------------------------------------------------------------------- Net realized gain (loss) 148,845 (686,530) ---------------------------------------------------------------------------- Net change in unrealized appreciation (104,304) 2,153,270 ---------------------------- Net increase in net assets resulting from operations 6,259,540 6,667,024 ----------------------------------------------------------------------------Dividends and/or Distributions to Shareholders Dividends from net investment income:
Class A (1,969,962) (2,422,826) Class B (104,775) (102,516) Class C (249,835) (205,654) Class N (3,927,405) (2,350,783) Class Y (7,561) (95) ----------------------------------------------------------------------------Tax return of capital distribution:
Class A -- (726,971) Class B -- (38,902) Class C -- (79,157) Class N -- (740,098) Class Y -- (23) ----------------------------------------------------------------------------Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions:
Class A 16,147,988 28,403,767 Class B 4,781,818 3,427,529 Class C 11,965,018 10,595,020 Class N 100,792,528 111,483,337 Class Y 722,428 120 ---------------------------------------------------------------------------- Net Assets Total increase 134,409,782 153,909,772 ---------------------------------------------------------------------------- Beginning of period 215,024,133 61,114,361 ---------------------------- End of period [including overdistributed net investment income of $10,216 and $6,233, respectively] $349,433,915 $215,024,133 ============================ See accompanying Notes to Financial Statements. 15 OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------Class A Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss)from investment operations: Net investment income .22 .42 .56 .57 .05 Net realized and unrealized gain -- .09 .02 .03 -- -------------------------------------------- Total from investment operations .22 .51 .58 .60 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.22) (.41) (.55) (.60) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.22) (.51) (.58) (.60) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 2.22% 5.25% 6.00% 6.18% 0.55% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $94,727 $78,552 $50,179 $10,431 $100 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $92,035 $62,359 $33,976 $ 7,171 $100 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 2.11% 3.90% 5.39% 5.55% 5.75% Total expenses 1.70% 1.71% 1.58% 1.96% 1.55% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.09% 1.18% 1.14% 1.51% 1.12% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 16 OPPENHEIMER CAPITAL PRESERVATION FUND
Class B Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .14 .37 .50 .51 .05 Net realized and unrealized gain -- .08 .02 .02 -- -------------------------------------------- Total from investment operations .14 .45 .52 .53 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.35) (.49) (.53) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.14) (.45) (.52) (.53) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 1.45% 4.59% 5.31% 5.43% 0.48% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $9,987 $5,205 $1,777 $331 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $8,055 $3,337 $ 676 $ 82 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.31% 3.15% 4.61% 4.55% 5.10% Total expenses 2.77% 2.37% 2.34% 2.71% 2.25% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.87% 1.84% 1.90% 2.26% 1.81% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 17 OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
Class C Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .14 .38 .51 .50 .05 Net realized and unrealized gain -- .07 .01 .03 -- -------------------------------------------- Total from investment operations .14 .45 .52 .53 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.35) (.49) (.53) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.14) (.45) (.52) (.53) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 1.43% 4.58% 5.31% 5.43% 0.48% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $24,405 $12,437 $1,845 $48 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $19,334 $6,790 $ 652 $25 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.31% 3.07% 4.54% 4.65% 5.10% Total expenses 2.67% 2.35% 2.36% 2.71% 2.25% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.87% 1.82% 1.92% 2.26% 1.81% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 18 OPPENHEIMER CAPITAL PRESERVATION FUND
Class N Year Ended October 31, 2003 2002 2001 1 -------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .23 .45 .38 Net realized and unrealized gain -- .07 -- 2 ----------------------------- Total from investment operations .23 .52 .38 -------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.23) (.42) (.36) Tax return of capital distribution -- (.10) (.02) ----------------------------- Total dividends and/or distributions to shareholders (.23) (.52) (.38) -------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 ============================= -------------------------------------------------------------------------------------- Total Return, at Net Asset Value 3 2.37% 5.29% 3.88% -------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $219,590 $118,829 $7,311 -------------------------------------------------------------------------------------- Average net assets (in thousands) $180,665 $ 63,485 $3,002 -------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 2.16% 3.86% 5.18% Total expenses 1.45% 1.52% 1.64% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.01% 0.99% 1.20% -------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 1. For the period from March 1, 2001 (inception of offering) to October 31, 2001 2. Less than $0.005 per share. 3. Assumes an 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 19 OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
Class Y Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .39 .41 .58 .59 .06 Net realized and unrealized gain (loss) (.08) .11 .03 .03 -- -------------------------------------------- Total from investment operations .31 .52 .61 .62 .06 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.31) (.42) (.58) (.62) (.06) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.31) (.52) (.61) (.62) (.06) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 3.15% 5.35% 6.25% 6.43% 0.57% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $725 $2 $2 $1 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $368 $2 $2 $1 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 2.53% 4.13% 5.73% 5.88% 6.19% Total expenses 0.96% 67.64% 43.02% 1.71% 1.15% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 0.52% 1.09% 0.82% 1.26% 0.72% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 20 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies
Oppenheimer Capital Preservation Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fundamp;#146;s investment objective is to seek high current income while seeking to maintain a stable value per share. The Fundamp;#146;s investment advisor is OppenheimerFunds, Inc. (the Manager). Shares of the Fund are offered solely to participant-directed qualified retirement plans and 403(b)(7) Custodial Plans meeting specified criteria (the Plans). Plan participant purchases of Fund shares are handled in accordance with each Planamp;#146;s specific provisions. Plan participants should contact their Plan administrator for details concerning how they may purchase shares of the Fund.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold with a front-end sales charge of 3.50%, and reduced for larger purchases. Class B, Class C and Class N shares are offered without a front-end sales charge, but may be subject to a contingent deferred-sales charge (CDSC) if redeemed within 5 years or 12 months or 18 months, respectively, of purchase. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are offered without front-end and contingent-deferred sales charges. Class Y shares are only available for plans that have special arrangements with OppenheimerFunds Distributor, Inc. (the Distributor). All classes of shares have identical rights and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses associated with the Underlying Funds. Classes A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. The Fund assesses a 2% fee on the proceeds of fund shares that are redeemed (either by selling or exchanging to another Oppenheimer fund) on less than 12 months prior notice. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;The following is a summary of significant accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------Securities Valuation. The Fund will, under normal circumstances, invest in Class Y shares of Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund, and in shares of Oppenheimer Money Market Fund, Inc. (collectively referred to as the amp;#147;underlying fundsamp;#148;). The net asset values of the underlying funds are determined as of the close of The New York Stock Exchange, on each day the Exchange is open for trading. The net asset value per share is determined by dividing the value of the Fundamp;#146;s net assets attributable to a class by the number of shares of that class that are outstanding.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;The Fund may invest in certain portfolio securities, as described in the Fundamp;#146;s pros-pectus. 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
21 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued 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 using consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer.amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;The Fund will, under normal circumstances, enter into wrapper agreements with insurance companies and banks. If an insurance wrap contract or a synthetic Guaranteed Investment Contract, collectively, amp;#147;wrapper agreementamp;#148; obligates the contract provider to maintain the book value of all or a portion of the Fundamp;#146;s investments up to a specified maximum dollar amount, such contract will be valued at its fair value. The book value of the covered assets is the price the Fund paid for such securities plus interest on those assets accrued at a rate calculated pursuant to a formula specified in the wrapper agreement (amp;#147;crediting rateamp;#148;). The crediting rate is normally reset monthly. However, if there is a significant event, such as a material change in interest rates, the crediting rate may be reset more frequently. The fair value of the contract generally will be equal to the difference between the book value, and the market value of the Fundamp;#146;s portfolio investments subject to the contract. If the market value of the Fundamp;#146;s portfolio investments is greater than its Book Value, the contract value will be reflected as a liability of the Fund in the amount of the difference, i.e. a negative value. If the market value of the Fundamp;#146;s portfolio investments is less than its Book Value, the contract value will be reflected as an asset of the Fund in the amount of the difference, i.e. a positive value, reflecting the potential liability of the contract provider to the Fund. In performing its fair value determination, the Board of Trustees will take into consideration the creditworthiness of the contract provider and the ability and willingness of the contract provider to pay amounts under the contract. As of October 31, 2003, the Fund has entered into one wrapper agreement, with the Bank of America, NA. Total fees paid for the year ended October 31, 2003, to Bank of America, NA, for this agreement were $489,897.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;The staff of the Securities and Exchange Commission (amp;#147;SECamp;#148;) has inquired of registered amp;#147;stable valueamp;#148; mutual funds, including this Fund, as to the valuation methodology used by such funds to value their wrapper agreements. At the present time, the Fund has not received any indication whether or when the SEC will take any action as a result of their review of this matter. If the SEC determines that the valuation method currently used by amp;#147;stable valueamp;#148; mutual funds is no longer acceptable, the Fund may be required
22 OPPENHEIMER CAPITAL PRESERVATION FUNDto use a different accounting methodology under which the fair value of the Fundamp;#146;s wrapper agreements could fluctuate daily, and if that were to occur, the Fund would probably not be able to maintain a stable net asset value per share. As a result, the Fundamp;#146;s net asset value could be greater or less than $10 per share on a daily basis.
- --------------------------------------------------------------------------------Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required.
The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
Net Unrealized Appreciation Undistributed Undistributed Accumulated Based on Cost of Net Investment Long-Term Loss Securities for Federal Income Gain Carryforward 1 Income Tax Purposes ------------------------------------------------------------------------- $-- $47,002 $-- $1,585,134 1. During the fiscal year October 31, 2003, the Fund did not utilize any capital loss carryforwards. During the fiscal year October 31, 2002, the Fund utilized $61,232 of capital loss carryforward to offset capital gains realized in that fiscal year.Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund. Accordingly, the following amounts have been reclassified for October 31, 2003. Net assets of the Fund were unaffected by the reclassifications.
From To Net Ordinary Capital Tax Return Investment Loss Loss 2 of Capital Loss ------------------------------------------------------------------------- $40,556 $151,416 $-- $-- 2. $41,142, all of which was long-term capital gain, was distributed in connection with Fund share redemptions. 23 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued The tax character of distributions paid during the years ended October 31, 2003 and October 31, 2002 was as follows: Year Ended Year Ended October 31, 2003 October 31, 2002 ---------------------------------------------------------------------- Distributions paid from: Ordinary income $6,259,538 $5,081,874 Return of capital -- 1,585,151 ---------------------------------------- Total $6,259,538 $6,667,025 ========================================The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of October 31, 2003 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities and other investments $349,819,340 ============ Gross unrealized appreciation $ 5,030,538 Gross unrealized depreciation (3,445,404) ------------ Net unrealized appreciation $ 1,585,134 ============ - --------------------------------------------------------------------------------Trusteesamp;#146; Compensation. The Fund has adopted an unfunded retirement plan for the Fundamp;#146;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 October 31, 2003, the Fundamp;#146;s projected benefit obligations were increased by $4,341 and payments of $357 were made to retired trustees, resulting in an accumulated liability of $10,216 as of October 31, 2003.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;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 the annual compensation they are entitled to receive from the Fund. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or are invested in other Oppenheimer funds selected by the Trustee. Deferral of trusteesamp;#146; fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fundamp;#146;s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. The Board of Trustees, in an effort to maintain a stable net asset value per share in the event of an additional distribution, may declare, effective on the ex-dividend date of an additional distribution, a reverse split of the shares of the Fund in an amount that will cause the total number of shares held by each shareholder, including shares acquired on reinvestment of that distribution, to remain the same as before that distribution was paid. Also, in an effort to maintain a stable net asset value per share, the
24 OPPENHEIMER CAPITAL PRESERVATION FUNDFund may distribute return of capital dividends. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually.
- --------------------------------------------------------------------------------Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.
- -------------------------------------------------------------------------------- Expense Offset Arrangement. The reduction of custodian fees represents earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 InterestThe Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
Year Ended October 31, 2003 Year Ended October 31, 2002 Shares Amount Shares Amount - ---------------------------------------------------------------------------------------------- Class A Sold 5,635,142 $ 56,351,417 4,777,641 $ 47,776,413 Dividends and/or distributions reinvested 197,233 1,972,335 315,148 3,151,481 Redeemed (4,217,576) (42,175,764) (2,252,412) (22,524,127) ------------------------------------------------------------------ Net increase 1,614,799 $ 16,147,988 2,840,377 $ 28,403,767 ================================================================== - ---------------------------------------------------------------------------------------------- Class B Sold 788,002 $ 7,880,026 502,556 $ 5,025,559 Dividends and/or distributions reinvested 10,502 105,024 14,387 143,871 Redeemed (320,322) (3,203,232) (174,190) (1,741,901) ------------------------------------------------------------------ Net increase 478,182 $ 4,781,818 342,753 $ 3,427,529 ================================================================== - ---------------------------------------------------------------------------------------------- Class C Sold 2,013,047 $ 20,130,482 1,306,242 $ 13,062,427 Dividends and/or distributions reinvested 24,997 249,971 28,550 285,500 Redeemed (841,543) (8,415,435) (275,290) (2,752,907) ------------------------------------------------------------------ Net increase 1,196,501 $ 11,965,018 1,059,502 $ 10,595,020 ==================================================================25 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2. Shares of Beneficial Interest Continued
Year Ended October 31, 2003 Year Ended October 31, 2002 Shares Amount Shares Amount - ---------------------------------------------------------------------------------------------- Class N Sold 18,082,527 $180,825,268 13,543,716 $135,437,153 Dividends and/or distributions reinvested 394,329 3,943,292 308,954 3,089,545 Redeemed (8,397,603) (83,976,032) (2,704,336) (27,043,361) ------------------------------------------------------------------ Net increase 10,079,253 $100,792,528 11,148,334 $111,483,337 ================================================================== - ---------------------------------------------------------------------------------------------- Class Y Sold 71,476 $ 714,766 -- $ -- Dividends and/or distributions reinvested 766 7,662 12 120 Redeemed -- -- -- -- ------------------------------------------------------------------ Net increase 72,242 $ 722,428 12 $ 120 ==================================================================- -------------------------------------------------------------------------------- 3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended October 31, 2003, were $193,715,002 and $57,941,972, respectively.
- -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. The management fees payable by the Fund are reduced by the management fees paid by the underlying Oppenheimer funds on assets representing investments by the Fund in shares of those underlying funds. That is done so that shareholders of the Fund do not pay direct and indirect management fees in excess of 0.75%. - --------------------------------------------------------------------------------Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended October 31, 2003, the Fund paid $815,738 to OFS for services to the Fund.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;Additionally, Class Y shares are subject to minimum fees of $5,000 for assets of less than $10 million and $10,000 for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees up to an annual rate of 0.35% of average annual net assets for all classes. This undertaking may be amended or withdrawn at any time.
26 OPPENHEIMER CAPITAL PRESERVATION FUND - -------------------------------------------------------------------------------- Distribution and Service Plan (12b-1) Fees. Under its General Distributor's Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the different classes of shares of the Fund.The compensation paid to (or retained by) the Distributor from the sale of shares or on the redemption of shares is shown in the table below for the period indicated.
Aggregate Class A Concessions Concessions Concessions Concessions Front-End Front-End on Class A on Class B on Class C on Class N Sales Charges Sales Charges Shares Shares Shares Shares on Class A Retained by Advanced by Advanced by Advanced by Advanced by Year Ended Shares Distributor Distributor 1 Distributor 1 Distributor 1 Distributor 1 - ------------------------------------------------------------------------------------------------------------------------ October 31, 2003 $58,328 $4,626 $57,446 $192,916 $174,510 $338,576 1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales of Class B, Class C and Class N shares from its own resources at the time of sale.
Class A Class B Class C Class N Contingent Contingent Contingent Contingent Deferred Deferred Deferred Deferred Sales Charges Sales Charges Sales Charges Sales Charges Retained by Retained by Retained by Retained by Year Ended Distributor Distributor Distributor Distributor - ---------------------------------------------------------------------------------------- October 31, 2003 $964 $65,558 $26,968 $325,198- --------------------------------------------------------------------------------
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. For the year ended October 31, 2003, expense under the Class A Plan totaled $228,125, all of which were paid by the Distributor to recipients, which included $73 retained by the Distributor and $8,208 which was paid to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares. The Distributor also receives a service fee of 0.25% per year under each plan.
Distribution fees paid to the Distributor for the year ended October 31, 2003, were as follows:
Distributor's Distributor's Aggregate Aggregate Uncompensated Uncompensated Expenses as % Total Expenses Amount Retained Expenses of Net Assets Under Plan by Distributor Under Plan of Class - ---------------------------------------------------------------------------------------- Class B Plan $ 80,423 $ 68,734 $ 272,489 2.73% Class C Plan 193,012 131,105 331,686 1.36 Class N Plan 450,965 -- 1,008,962 0.4627 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 5. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices amp;#147;financial futuresamp;#148; or debt securities amp;#147;interest rate futuresamp;#148; in order to gain exposure to or protection from changes in market value of stock and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;The Fund generally sells futures contracts as a hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying fixed income securities.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or has expired.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported on the Statement of Operations as closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported on the Statement of Operations.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities.
As of October 31, 2003, the Fund had outstanding futures contracts as follows:
Unrealized Expiration Number of Valuation as of Appreciation Contract Description Dates Contracts Oct. 31, 2003 (Depreciation) - -------------------------------------------------------------------------------------------------- Contracts to Purchase U.S. Treasury Nts., 2 yr. 12/29/03 6 $1,286,813 $ 10,665 ----------- Contracts to Sell U.S. Treasury Nts., 5 yr. 12/19/03 25 2,795,313 (54,242) ----------- $ (43,577) ===========28 OPPENHEIMER CAPITAL PRESERVATION FUND - -------------------------------------------------------------------------------- 6. Illiquid or Restricted Securities
As of October 31, 2003, 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. A Wrapper Agreement is considered to be an illiquid security. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities.
- -------------------------------------------------------------------------------- 7. Borrowing and Lending ArrangementsThe Fund entered into an amp;#147;interfund borrowing and lending arrangementamp;#148; with other funds in the Oppenheimer funds complex, to allow funds to borrow for liquidity purposes. The arrangement was initiated pursuant to exemptive relief granted by the Securities and Exchange Commission to allow these affiliated funds to lend money to, and borrow money from, each other, in an attempt to reduce borrowing costs below those of bank loan facilities. Under the arrangement the Fund may lend money to other Oppenheimer funds and may borrow from other Oppenheimer funds at a rate set by the Fundamp;#146;s Board of Trustees, based upon a recommendation by the Manager. The Fundamp;#146;s borrowings, if any, are subject to asset coverage requirements under the Investment Company Act and the provisions of the SEC order and other applicable regulations. If the Fund borrows money, there is a risk that the loan could be called on one dayamp;#146;s notice, in which case the Fund might have to borrow from a bank at higher rates if a loan were not available from another Oppenheimer fund. If the Fund lends money to another fund, it will be subject to the risk that the other fund might not repay the loan in a timely manner, or at all.
amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;amp;nbsp;The Fund had no interfund borrowings or loans outstanding during the year ended or at October 31, 2003.
Appendix A Industry Classifications Aerospace & Defense Household Products Air Freight & Couriers Industrial Conglomerates Airlines Insurance Auto Components Internet & Catalog Retail Automobiles Internet Software & Services Beverages IT Services Biotechnology Leisure Equipment & Products Building Products Machinery Chemicals Marine Consumer Finance Media Commercial Banks Metals & Mining Commercial Services & Supplies Multiline Retail Communications Equipment Multi-Utilities Computers & Peripherals Office Electronics Construction & Engineering Oil & Gas Construction Materials Paper & Forest Products Containers & Packaging Personal Products Distributors Pharmaceuticals Diversified Financial Services Real Estate Diversified Telecommunication Services Road & Rail Electric Utilities Semiconductors and Semiconductor Equipment Electrical Equipment Software Electronic Equipment & Instruments Specialty Retail Energy Equipment & Services Textiles, Apparel & Luxury Goods Food & Staples Retailing Thrifts & Mortgage Finance Food Products Tobacco Gas Utilities Trading Companies & Distributors Health Care Equipment & Supplies Transportation Infrastructure Health Care Providers & Services Water Utilities Hotels Restaurants & Leisure Wireless Telecommunication Services Household Durables B-13 Appendix B OppenheimerFunds Special Sales Charge Arrangements and - ------------------------------------------------------- Waivers - ------- In certain cases, the initial sales charge that applies to purchases of Class A shares1 of the Oppenheimer funds or the contingent deferred sales charge that may apply to Class A, Class B or Class C shares may be waived.2 That is because of the economies of sales efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as the "Distributor"), or by dealers or other financial institutions that offer those shares to certain classes of investors. Not all waivers apply to all funds. For example, waivers relating to Retirement Plans do not apply to Oppenheimer municipal funds, because shares of those funds are not available for purchase by or on behalf of retirement plans. Other waivers apply only to shareholders of certain funds. For the purposes of some of the waivers described below and in the Prospectus and Statement of Additional Information of the applicable Oppenheimer funds, the term "Retirement Plan" refers to the following types of plans: 1) plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, 2) non-qualified deferred compensation plans, 3) employee benefit plans3 4) Group Retirement Plans4 5) 403(b)(7) custodial plan accounts 6) Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans The interpretation of these provisions as to the applicability of a special arrangement or waiver in a particular case is in the sole discretion of the Distributor or the transfer agent (referred to in this document as the "Transfer Agent") of the particular Oppenheimer fund. These waivers and special arrangements may be amended or terminated at any time by a particular fund, the Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the "Manager"). Waivers that apply at the time shares are redeemed must be requested by the shareholder and/or dealer in the redemption request. I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases - ------------------------------------------------------------- Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge (unless a waiver applies). There is no initial sales charge on purchases of Class A shares of any of the Oppenheimer funds in the cases listed below. However, these purchases may be subject to the Class A contingent deferred sales charge if redeemed within 18 months (24 months in the case of Oppenheimer Rochester National Municipals and Rochester Fund Municipals) of the beginning of the calendar month of their purchase, as described in the Prospectus (unless a waiver described elsewhere in this Appendix applies to the redemption). Additionally, on shares purchased under these waivers that are subject to the Class A contingent deferred sales charge, the Distributor will pay the applicable concession described in the Prospectus under "Class A Contingent Deferred Sales Charge."5 This waiver provision applies to: |_| Purchases of Class A shares aggregating $1 million or more. |_| Purchases of Class A shares by a Retirement Plan that was permitted to purchase such shares at net asset value but subject to a contingent deferred sales charge prior to March 1, 2001. That included plans (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares costing $500,000 or more, 2) had at the time of purchase 100 or more eligible employees or total plan assets of $500,000 or more, or 3) certified to the Distributor that it projects to have annual plan purchases of $200,000 or more. |_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases are made: 1) through a broker, dealer, bank or registered investment adviser that has made special arrangements with the Distributor for those purchases, or 2) by a direct rollover of a distribution from a qualified Retirement Plan if the administrator of that Plan has made special arrangements with the Distributor for those purchases. |_| Purchases of Class A shares by Retirement Plans that have any of the following record-keeping arrangements: 1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan. On the date the plan sponsor signs the record-keeping service agreement with Merrill Lynch, the Plan must have $3 million or more of its assets invested in (a) mutual funds, other than those advised or managed by Merrill Lynch Investment Management, L.P. ("MLIM"), that are made available under a Service Agreement between Merrill Lynch and the mutual fund's principal underwriter or distributor, and (b) funds advised or managed by MLIM (the funds described in (a) and (b) are referred to as "Applicable Investments"). 2) The record keeping for the Retirement Plan is performed on a daily valuation basis by a 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 record keeping service agreement with Merrill Lynch, the Plan must have $3 million or more of its assets (excluding assets invested in money market funds) invested in Applicable Investments. 3) The record keeping for a Retirement Plan is handled under a service agreement with Merrill Lynch and on the date the plan sponsor signs that agreement, the Plan has 500 or more eligible employees (as determined by the Merrill Lynch plan conversion manager). II. Waivers of Class A Sales Charges of Oppenheimer Funds - ------------------------------------------------------------- A. 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 (and no concessions are paid by the Distributor on such purchases): |_| The Manager or its affiliates. |_| Present or former officers, directors, trustees and employees (and their "immediate families") of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees. The term "immediate family" refers to one's spouse, children, grandchildren, grandparents, parents, parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by virtue of a remarriage (step-children, step-parents, etc.) are included. |_| 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 which are identified as such 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 advisors that have entered into an agreement with the Distributor providing specifically for the use of shares of the Fund in particular investment products made available to their clients. Those clients may be charged a transaction fee by their dealer, broker, bank or advisor for the purchase or sale of Fund shares. |_| 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. |_| "Rabbi trusts" that buy shares for their own accounts, if the purchases are made through a broker or agent or other financial intermediary that has made special arrangements with the Distributor for those purchases. |_| Clients of investment advisors or financial planners (that 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 (or its successor) is the investment advisor (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. |_| A unit investment trust that has entered into an appropriate agreement with the Distributor. |_| Dealers, brokers, banks, or registered investment advisers that have entered into an agreement with the Distributor to sell shares to defined contribution employee retirement plans for which the dealer, broker or investment adviser provides administration services. |_| Retirement Plans and deferred compensation plans and trusts used to fund those plans (including, for example, plans qualified or created under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code), in each case if those purchases are made through a broker, agent or other financial intermediary that has made special arrangements with the Distributor for those purchases. |_| 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. |_| A qualified Retirement Plan 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, if that arrangement was consummated and share purchases commenced by December 31, 1996. B. 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 sales charges (and no concessions are paid by the Distributor on such purchases): |_| 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 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 through a broker-dealer that has entered into a special agreement with the Distributor to allow the broker's customers to purchase and pay for shares of Oppenheimer funds using 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 shares of the Fund, and the Distributor may require evidence of qualification for this waiver. |_| Shares purchased with the proceeds of maturing principal units of any Qualified Unit Investment Liquid Trust Series. |_| Shares purchased by the reinvestment of loan repayments by a participant in a Retirement Plan for which the Manager or an affiliate acts as sponsor. C. 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 account value adjusted annually. |_| Involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (please refer to "Shareholder Account Rules and Policies," in the applicable fund Prospectus). |_| 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.6 5) Under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code, or, in the case of an IRA, a divorce or separation agreement described in Section 71(b) of the Internal Revenue Code. 6) To meet the minimum distribution requirements of the Internal Revenue Code. 7) To make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code. 8) For loans to participants or beneficiaries. 9) Separation from service.7 10) Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed by the Manager or a subsidiary of the Manager) if the plan has made special arrangements with the Distributor. 11) Plan termination or "in-service distributions," if the redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA. |_| For distributions from 401(k) plans sponsored by broker-dealers that have entered into a special agreement with the Distributor allowing this waiver. |_| For distributions from retirement plans that have $10 million or more in plan assets and that have entered into a special agreement with the Distributor. |_| For distributions from retirement plans which are part of a retirement plan product or platform offered by certain banks, broker-dealers, financial advisors, insurance companies or record keepers which have entered into a special agreement with the Distributor. III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds - --------------------------------------------------------------- The Class B, Class C and Class N contingent deferred sales charges will not be applied to shares purchased in certain types of transactions or redeemed in certain circumstances described below. A. Waivers for Redemptions in Certain Cases. The Class B, Class C and Class N contingent deferred sales charges will be waived for redemptions of shares in the following cases: |_| Shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," in the applicable Prospectus. |_| Redemptions from accounts other than Retirement Plans following the death or disability of the last surviving shareholder. 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. |_| The contingent deferred sales charges are generally not waived following the death or disability of a grantor or trustee for a trust account. The contingent deferred sales charges will only be waived in the limited case of the death of the 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. |_| Distributions from accounts for which the broker-dealer of record has entered into a special agreement with the Distributor allowing this waiver. |_| Redemptions of Class B shares 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. |_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of clients of financial institutions that have entered into a special arrangement with the Distributor for this purpose. |_| Redemptions requested in writing by a Retirement Plan sponsor of Class C shares of an Oppenheimer fund in amounts of $500,000 or more and made more than 12 months after the Retirement Plan's first purchase of Class C shares, if the redemption proceeds are invested in Class N shares of one or more Oppenheimer funds. |_| Distributions8 from Retirement 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 in an Oppenheimer fund. 2) To return excess contributions made to a participant's account. 3) To return contributions made due to a mistake of fact. 4) To make hardship withdrawals, as defined in the plan.9 5) To make distributions required under a Qualified Domestic Relations Order or, in the case of an IRA, a divorce or separation agreement described in Section 71(b) of the Internal Revenue Code. 6) To meet the minimum distribution requirements of the Internal Revenue Code. 7) To make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code. 8) For loans to participants or beneficiaries.10 9) On account of the participant's separation from service.11 10) Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed by the Manager or a subsidiary of the Manager) offered as an investment option in a Retirement Plan if the plan has made special arrangements with the Distributor. 11) Distributions made on account of a plan termination or "in-service" distributions, if the redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA. 12) For distributions from a participant's account under an Automatic Withdrawal Plan after the participant reaches age 59 1/2, as long as the aggregate value of the distributions does not exceed 10% of the account's value, adjusted annually. 13) Redemptions of Class B shares under an Automatic Withdrawal Plan for an account other than a Retirement Plan, if the aggregate value of the redeemed shares does not exceed 10% of the account's value, adjusted annually. 14) For distributions from 401(k) plans sponsored by broker-dealers that have entered into a special arrangement with the Distributor allowing this waiver. |_| Redemptions of Class B shares or Class C shares under an Automatic Withdrawal Plan from an account other than a Retirement Plan if the aggregate value of the redeemed shares does not exceed 10% of the account's value annually. B. 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. |_| Shares issued in plans of reorganization to which the Fund is a party. |_| Shares sold to present or former officers, directors, trustees or employees (and their "immediate families" as defined above in Section I.A.) of the Fund, the Manager and its affiliates and retirement plans established by them for their employees. IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds - ------------------------------------------------------------- The initial and contingent deferred sales charge rates and waivers for Class A, Class B and Class C shares described in the Prospectus or Statement of Additional Information of the Oppenheimer funds are modified as described below for certain persons who were shareholders of the former Quest for Value Funds. To be eligible, those persons must have been shareholders on November 24, 1995, when OppenheimerFunds, Inc. became the investment advisor to those former Quest for Value Funds. Those funds include: Oppenheimer Quest Value Fund, Inc. Oppenheimer Small Cap Value Fund Oppenheimer Quest Balanced Value Fund Oppenheimer Quest International Value Fund, Inc. Oppenheimer Quest Opportunity Value Fund These arrangements also apply to shareholders of the following funds when they merged (were reorganized) into various Oppenheimer funds on November 24, 1995: Quest for Value U.S. Government Income Fund Quest for Value New York Tax-Exempt Fund Quest for Value Investment Quality Income Fund Quest for Value National Tax-Exempt Fund Quest for Value Global Income Fund Quest for Value California Tax-Exempt Fund All of the funds listed above are referred to in this Appendix as the "Former Quest for Value Funds." The waivers of initial and contingent deferred sales charges described in this Appendix apply to shares of an Oppenheimer fund that are either: |_| acquired by such shareholder pursuant to an exchange of shares of an Oppenheimer fund that was one of the Former Quest for Value Funds, or |_| purchased by such shareholder by exchange of shares of another Oppenheimer fund that were acquired pursuant to the merger of any of the Former Quest for Value Funds into that other Oppenheimer fund on November 24, 1995. A. Reductions or Waivers of Class A Sales Charges. |X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for Value Funds Shareholders. Purchases by Groups and Associations. The following table sets forth the initial sales charge rates for Class A shares purchased by members of "Associations" formed for any purpose other than the purchase of securities. The rates in the table apply if 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. - -------------------------------------------------------------------------------- Initial Sales Initial Sales Charge Concession as Number of Eligible Charge as a % of as a % of Net Amount % of Offering Employees or Members Offering Price Invested 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 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 in the applicable fund's Prospectus. Purchases made under this arrangement qualify for the lower of either the sales charge rate in the table based on the number of members of an Association, or the sales charge rate that applies under the Right of Accumulation described in the applicable fund's Prospectus and Statement of Additional Information. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Distributor. |X| Waiver of Class A Sales Charges for Certain Shareholders. Class A shares purchased by the following investors are not subject to any Class A initial or contingent deferred sales charges: o Shareholders who were shareholders of the AMA Family of Funds on February 28, 1991 and who acquired shares of any of the Former Quest for Value Funds by merger of a portfolio of the AMA Family of Funds. o Shareholders 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 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 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. B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers. |X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The shares must have been acquired by the 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. Those shares must have been purchased prior to March 6, 1995 in connection with: o withdrawals under an automatic withdrawal plan holding only either Class B or Class C shares if the annual withdrawal does not exceed 10% of the initial value of the account value, adjusted annually, and o 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, Class B or Class C shares of an Oppenheimer fund. The shares must have been acquired by the 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 Former Quest for Value Fund merged. Those shares must have been purchased on or after March 6, 1995, but prior to November 24, 1995: o redemptions following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by the U.S. Social Security Administration); o withdrawals under an automatic withdrawal plan (but only for Class B or Class C shares) where the annual withdrawals do not exceed 10% of the initial value of the account value; adjusted annually, and o 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, Class B or Class C shares of the Oppenheimer fund described in this section if the proceeds are invested in the same Class of shares in that fund or another Oppenheimer fund within 90 days after redemption. V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc. - ---------------------------------------------------------- The initial and contingent deferred sale charge rates and waivers for Class A and Class B shares described in the respective Prospectus (or this Appendix) of the following Oppenheimer funds (each is referred to as a "Fund" in this section): Oppenheimer U. S. Government Trust, Oppenheimer Bond Fund, Oppenheimer Value Fund and Oppenheimer Disciplined Allocation Fund are modified as described below for those Fund shareholders who were shareholders of the following funds (referred to as the "Former Connecticut Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the investment adviser to the Former Connecticut Mutual Funds: Connecticut Mutual Liquid Account Connecticut Mutual Total Return Account Connecticut Mutual Government Securities Account CMIA LifeSpan Capital Appreciation Account Connecticut Mutual Income Account CMIA LifeSpan Balanced Account Connecticut Mutual Growth Account CMIA Diversified Income Account A. Prior Class A CDSC and Class A Sales Charge Waivers. |X| Class A Contingent Deferred Sales Charge. Certain shareholders of a Fund and the other Former Connecticut Mutual Funds are entitled to continue to make additional purchases of Class A shares at net asset value without a Class A initial sales charge, but subject to the Class A contingent deferred sales charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC"). Under the prior Class A CDSC, if any of those shares are redeemed within one year of purchase, they will be assessed a 1% contingent deferred sales charge on an amount equal to the current market value or the original purchase price of the shares sold, whichever is smaller (in such redemptions, any shares not subject to the prior Class A CDSC will be redeemed first). Those shareholders who are eligible for the prior Class A CDSC are: 1) persons whose purchases of Class A shares of a Fund and other Former Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a result of direct purchases or purchases pursuant to the Fund's policies on Combined Purchases or Rights of Accumulation, who still hold those shares in that Fund or other Former Connecticut Mutual Funds, and 2) persons whose intended purchases under a Statement of Intention entered into prior to March 18, 1996, with the former general distributor of the Former Connecticut Mutual Funds to purchase shares valued at $500,000 or more over a 13-month period entitled those persons to purchase shares at net asset value without being subject to the Class A initial sales charge Any of the Class A shares of a Fund and the other Former Connecticut Mutual Funds that were purchased at net asset value prior to March 18, 1996, remain subject to the prior Class A CDSC, or if any additional shares are purchased by those shareholders at net asset value pursuant to this arrangement they will be subject to the prior Class A CDSC. |X| Class A Sales Charge Waivers. Additional Class A shares of a Fund may be purchased without a sales charge, by a person who was in one (or more) of the categories below and acquired Class A shares prior to March 18, 1996, and still holds Class A shares: 1) any purchaser, provided the total initial amount invested in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more, including investments made pursuant to the Combined Purchases, Statement of Intention and Rights of Accumulation features available at the time of the initial purchase and such investment is still held in one or more of the Former Connecticut Mutual Funds or a Fund into which such Fund merged; 2) any participant in a qualified plan, provided that the total initial amount invested by the plan in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more; 3) Directors of the Fund or any one or more of the Former Connecticut Mutual Funds and members of their immediate families; 4) employee benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C. ("CMFS"), the prior distributor of the Former Connecticut Mutual Funds, and its affiliated companies; 5) one or more members of a group of at least 1,000 persons (and persons who are retirees from such group) engaged in a common business, profession, civic or charitable endeavor or other activity, and the spouses and minor dependent children of such persons, pursuant to a marketing program between CMFS and such group; and 6) an institution acting as a fiduciary on behalf of an individual or individuals, if such institution was directly compensated by the individual(s) for recommending the purchase of the shares of the Fund or any one or more of the Former Connecticut Mutual Funds, provided the institution had an agreement with CMFS. Purchases of Class A shares made pursuant to (1) and (2) above may be subject to the Class A CDSC of the Former Connecticut Mutual Funds described above. Additionally, Class A shares of a Fund may be purchased without a sales charge by any holder of a variable annuity contract issued in New York State by Connecticut Mutual Life Insurance Company through the Panorama Separate Account which is beyond the applicable surrender charge period and which was used to fund a qualified plan, if that holder exchanges the variable annuity contract proceeds to buy Class A shares of the Fund. B. Class A and Class B Contingent Deferred Sales Charge Waivers. In addition to the waivers set forth in the Prospectus and in this Appendix, above, the contingent deferred sales charge will be waived for redemptions of Class A and Class B shares of a Fund and exchanges of Class A or Class B shares of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund provided that the Class A or Class B shares of the Fund to be redeemed or exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund. Additionally, the shares of such Former Connecticut Mutual Fund must have been purchased prior to March 18, 1996: 1) by the estate of a deceased shareholder; 2) upon the disability of a shareholder, as defined in Section 72(m)(7) of the Internal Revenue Code; 3) for retirement distributions (or loans) to participants or beneficiaries from retirement plans qualified under Sections 401(a) or 403(b)(7)of the Code, or from IRAs, deferred compensation plans created under Section 457 of the Code, or other employee benefit plans; 4) as tax-free returns of excess contributions to such retirement or employee benefit plans; 5) in whole or in part, in connection with shares sold to any state, county, or city, or any instrumentality, department, authority, or agency thereof, that is prohibited by applicable investment laws from paying a sales charge or concession in connection with the purchase of shares of any registered investment management company; 6) in connection with the redemption of shares of the Fund due to a combination with another investment company by virtue of a merger, acquisition or similar reorganization transaction; 7) in connection with the Fund's right to involuntarily redeem or liquidate the Fund; 8) in connection with automatic redemptions of Class A shares and Class B shares in certain retirement plan accounts pursuant to an Automatic Withdrawal Plan but limited to no more than 12% of the original value annually; or 9) as involuntary redemptions of shares by operation of law, or under procedures set forth in the Fund's Articles of Incorporation, or as adopted by the Board of Directors of the Fund. VI. Special Reduced Sales Charge for Former Shareholders of Advance America Funds, Inc. - ------------------------------------------------------------- Shareholders of Oppenheimer AMT Free Municipals, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund who acquired (and still hold) shares of those funds as a result of the reorganization of series of Advance America Funds, Inc. into those Oppenheimer funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a maximum sales charge rate of 4.50%. VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer Convertible Securities Fund - ------------------------------------------------------------- Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this section) may sell Class M shares at net asset value without any initial sales charge to the classes of investors listed below who, prior to March 11, 1996, owned shares of the Fund's then-existing Class A and were permitted to purchase those shares at net asset value without sales charge: |_| the Manager and its affiliates, |_| present or former officers, directors, trustees and employees (and their "immediate families" as defined in the Fund's Statement of Additional Information) of the Fund, the Manager and its affiliates, and retirement plans established by them or the prior investment advisor of the Fund for their employees, |_| registered management investment companies or separate accounts of insurance companies that had an agreement with the Fund's prior investment advisor or 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 in the preceding section or financial institutions that have entered into sales arrangements with those dealers or brokers (and whose identity is made known to the Distributor) or with the Distributor, but only if the purchaser certifies to the Distributor at the time of purchase that the purchaser meets these qualifications, |_| dealers, brokers, or registered investment advisors that had entered into an agreement with the Distributor or the prior distributor of the Fund specifically providing for the use of Class M shares of the Fund in specific investment products made available to their clients, and |_| dealers, brokers or registered investment advisors that had entered into an agreement with the Distributor or prior distributor of the Fund's shares to sell shares to defined contribution employee retirement plans for which the dealer, broker, or investment advisor provides administrative services. Oppenheimer Capital Preservation Fund Internet Website: www.oppenheimerfunds.com ------------------------ Investment Advisor OppenheimerFunds, Inc. Two World Financial Center 225 Liberty Street, 11th Floor New York, New York 10281-1008 Distributor OppenheimerFunds Distributor, Inc. Two World Financial Center 225 Liberty Street, 11th Floor New York, New York 10281-1008 Transfer Agent OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1.800.CALL OPP (225.5677) Custodian Bank Citibank, N.A. 111 Wall Street New York, New York 10005 Independent Auditors KPMG LLP 707 Seventeenth Street Denver, Colorado 80202 Legal Counsel Mayer, Brown, Rowe & Maw LLP 1675 Broadway New York, New York 10019-5820 1234 PX0755.001.1203 1 In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent Trustees" in this Statement of Additional Information, refers to those Trustees who are not "interested persons" of the Fund and who do not have any direct or indirect financial interest in the operation of the distribution plan or any agreement under the plan. 1 Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund. 2 In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered closed-end fund, references to contingent deferred sales charges mean the Fund's Early Withdrawal Charges and references to "redemptions" mean "repurchases" of shares. 3 An "employee benefit plan" means any plan or arrangement, whether or not it is "qualified" under the Internal Revenue Code, under which Class N shares of an Oppenheimer fund or funds are purchased by a fiduciary or other administrator for the account of participants who are employees of a single employer or of affiliated employers. These may include, for example, medical savings accounts, payroll deduction plans or similar plans. The fund accounts must be registered in the name of the fiduciary or administrator purchasing the shares for the benefit of participants in the plan. 4 The term "Group Retirement Plan" means any qualified or non-qualified retirement plan for employees of a corporation or 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 (or who are eligible to participate in) the plan purchase shares of an Oppenheimer fund or funds through a single investment dealer, broker or other financial institution designated by the group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans other than plans for public school employees. The term "Group Retirement Plan" also includes qualified retirement plans and non-qualified deferred compensation plans and IRAs that purchase shares of an Oppenheimer fund or funds through a single investment dealer, broker or other financial institution that has made special arrangements with the Distributor. 5 However, that concession will not be paid on purchases of shares in amounts of $1 million or more (including any right of accumulation) by a Retirement Plan that pays for the purchase with the redemption proceeds of Class C shares of one or more Oppenheimer funds held by the Plan for more than one year. 6 This provision does not apply to IRAs. 7 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs. 8 The distribution must be requested prior to Plan termination or the elimination of the Oppenheimer funds as an investment option under the Plan. 9 This provision does not apply to IRAs. 10 This provision does not apply to loans from 403(b)(7) custodial plans and loans from the OppenheimerFunds-sponsored Single K retirement plan. 11 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.
OPPENHEIMER CAPITAL PRESERVATION FUND Supplement dated December 29, 2003 to the Statement of Additional Information dated December 23, 2003 The Statement of Additional Information is changed as follows: The first sentence of the third paragraph under the section entitled "Classes of Shares" on page 66 is deleted in its entirety and replaced with the following: "The Distributor will not accept any order in the amount of $250,000 or more for Class B shares (and effective February 2, 2004, the Distributor will not accept purchase orders of $250,000 or more of Class B shares) or $1 million or more for Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts)." December 29, 2003 PX0755.008
Limited Term New York Municipal Fund Oppenheimer AMT-Free Municipals Oppenheimer AMT-Free New York Municipals Oppenheimer Balanced Fund Oppenheimer Bond Fund Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation Fund Oppenheimer Capital Income Fund Oppenheimer Capital Preservation Fund Oppenheimer Cash Reserves Oppenheimer Champion Income Fund Oppenheimer Convertible Securities Fund Oppenheimer Developing Markets Fund Oppenheimer Disciplined Allocation Fund Oppenheimer Discovery Fund Oppenheimer Emerging Growth Fund Oppenheimer Emerging Technologies Fund Oppenheimer Enterprise Fund Oppenheimer Equity Fund, Inc. Oppenheimer Global Fund Oppenheimer Global Opportunities Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer High Yield Fund Oppenheimer International Bond Fund Oppenheimer International Growth Fund Oppenheimer International Large-Cap Core Fund Oppenheimer International Small Company Fund Oppenheimer International Value Fund Oppenheimer Limited Term California Municipal Fund Oppenheimer Limited Term Municipal Fund Oppenheimer Limited-Term Government Fund Oppenheimer Main Street Fund Oppenheimer Main Street Opportunity Fund Oppenheimer Main Street Small Cap Fund Oppenheimer MidCap Fund Oppenheimer Money Market Fund, Inc. Oppenheimer New Jersey Municipal Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer Principal Protected Main Street Fund Oppenheimer Principal Protected Main Street Fund II Oppenheimer Quest Balanced Fund Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Quest International Value Fund, Inc. Oppenheimer Quest Opportunity Value Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Real Asset Fund Oppenheimer Real Estate Fund Oppenheimer Rochester National Municipals Oppenheimer Select Value Fund Oppenheimer Senior Floating Rate Fund Oppenheimer Small Cap Value Fund Oppenheimer Strategic Income Fund Oppenheimer Total Return Bond Fund Oppenheimer U.S. Government Trust Oppenheimer Value Fund Rochester Fund Municipals This supplement amends the Statement of Additional Information ("SAI") of each of the above referenced Funds as described below and is in addition to any existing supplements of the Funds. 1. The second paragraph for each SAI, except for Cash Reserves and Money Market Fund, Inc., under "Brokerage Policies of the Fund - Brokerage Provisions of the Investment Advisory Agreement" is deleted and replaced by the following paragraphs: Under the investment advisory agreement, in choosing brokers to execute portfolio transactions for the Fund, the Manager may select brokers (other than affiliates) that provide brokerage and/or research services to the Fund and/or the other accounts over which the Manager or its affiliates have investment discretion. The concessions paid to those brokers may be higher than another qualified broker would charge, if the Manager makes a good faith determination that the concession is fair and reasonable in relation to the services provided. Subject to those considerations, as a factor in selecting brokers for the Fund's portfolio transactions, the investment advisory agreement also permits the Manager to consider sales of shares of the Fund and other investment companies for which the Manager or an affiliate serves as investment adviser. Notwithstanding that authority, and with the concurrence of the Fund's Board, the Manager has determined not to consider sales of shares of the Fund and other investment companies for which the Manager or an affiliate serves as investment adviser as a factor in selecting brokers for the Fund's portfolio transactions. However, the Manager may continue to effect portfolio transactions through brokers who sell shares of the Fund. 2. The paragraph under "Distribution and Service Plans - Distribution and Service Plans", with the exception of Money Market Fund, beginning with the following sentence "Under the plans, the Manager and the Distributor may make payments to affiliates and in their sole discretion,...." is deleted in its entirety and replaced with the following paragraphs: Under the Plans, the Manager and the Distributor may make payments to affiliates. In their sole discretion, they may also from time to time make substantial payments from their own resources, which include the profits the Manager derives from the advisory fees it receives from the Fund, to compensate brokers, dealers, financial institutions and other intermediaries for providing distribution assistance and/or administrative services or that otherwise promote sales of the Fund's shares. These payments, some of which may be referred to as "revenue sharing," may relate to the Fund's inclusion on a financial intermediary's preferred list of funds offered to its clients. Financial intermediaries, brokers and dealers may receive other payments from the Distributor or the Manager from their own resources in connection with the promotion and/or sale of shares of the Fund, including payments to defray expenses incurred in connection with educational seminars and meetings. The Manager or Distributor may share expenses incurred by financial intermediaries in conducting training and educational meetings about aspects of the Fund for employees of the intermediaries or for hosting client seminars or meetings at which the Fund is discussed. In their sole discretion, the Manager and/or the Distributor may increase or decrease the amount of payments they make from their own resources for these purposes. 3. The fifth paragraph under "Distribution and Service Plans - Class B, Class C and Class N Service and Distribution Plans" or under "Distribution and Service -------- Plans - Class B, Class C (add "Class M" for Convertible Securities Fund only) and Class N Service and Distribution Plan Fees" in each SAI, for the Capital Preservation Fund, Convertible Securities Fund, Developing Markets Fund, High Yield Fund, International Small Company Fund, Main Street Opportunity Fund, Main Street Small Cap Fund, Quest Balanced Fund, Quest Opportunity Value Fund, Small Cap Fund, Quest International Value Fund and Select Value Fund is deleted and replaced by the following paragraph: Class B, Class C or Class N shares may not be purchased by an investor directly from the Distributor without the investor designating another broker-dealer of record. If the investor no longer has another broker-dealer of record for an existing account, the Distributor is automatically designated as the broker-dealer of record, but solely for the purpose of acting as the investor's agent to purchase the shares. In those cases, the Distributor retains the asset-based sales charge paid on Class B, Class C and Class N shares, but does not retain any service fees as to the assets represented by that account. 4. The second paragraph under "Distribution and Service Plans - Class B, Class C and Class N Service and Distribution Plans" or under -------- "Distribution and Service Plans - Class B, Class C and Class N Service and Distribution Plan Fees" for the Balanced Fund, Bond Fund, Capital Appreciation Fund, Capital Income Fund, Champion Income Fund, Discovery Fund, Disciplined Allocation Fund, Emerging Growth Fund, Emerging Technologies Fund, Enterprise Fund, Equity Fund, Inc., Global Fund, Global Opportunity Fund, Gold & Special Minerals Fund, Growth Fund, International Bond Fund, International Growth Fund, International Value Fund, Limited Term Government Fund, Main Street Fund, MidCap Fund, Quest Capital Value Fund, Inc., Quest Value Fund, Inc., Real Asset Fund, Real Estate Fund, Strategic Income Fund, Total Return Bond Fund, U.S. Government Trust and Value Fund is amended by deleting the last sentence and replacing it with the following: Class B, Class C or Class N shares may not be purchased by an investor directly from the Distributor without the investor designating another broker-dealer of record. If the investor no longer has another broker-dealer of record for an existing account, the Distributor is automatically designated as the broker-dealer of record, but solely for the purpose of acting as the investor's agent to purchase the shares. In those cases, the Distributor retains the asset-based sales charge paid on Class B, Class C and Class N shares, but does not retain any service fees as to the assets represented by that account. 5. The fifth paragraph under "Distribution and Service Plans - Class B and Class C Service and Distribution Plans" or under "Distribution and Service Plans - Class B and - -------- Class C Service and Distribution Plan Fees" for the AMT-Free Municipals, AMT-Free New York Municipals, California Municipal Fund, Cash Reserves, International Large-Cap Core Fund, Limited Term Municipal Fund, New Jersey Municipal Fund, Pennsylvania Municipal Fund, Rochester National Municipals and Senior Floating Rate Fund is deleted and replaced by the following paragraph: Class B or Class C shares may not be purchased by an investor directly from the Distributor without the investor designating another broker-dealer of record. If the investor no longer has another broker-dealer of record for an existing account, the Distributor is automatically designated as the broker-dealer of record, but solely for the purpose of acting as the investor's agent to purchase the shares. In those cases, the Distributor retains the asset-based sales charge paid on Class B and Class C shares, but does not retain any service fees as to the assets represented by that account. 6. The second paragraph under "Distribution and Service Plans - Class B, and Class C Service and Distribution Plans" or under "Distribution -------- and Service Plans - Class B and Class C Service and Distribution Plan Fees" for the Limited Term California Municipal Fund, Limited Term New York Municipal Fund and Rochester Fund Municipals is amended by deleting the last sentence and replacing it with the following: Class B or Class C shares may not be purchased by an investor directly from the Distributor without the investor designating another broker-dealer of record. If the investor no longer has another broker-dealer of record for an existing account, the Distributor is automatically designated as the broker-dealer of record, but solely for the purpose of acting as the investor's agent to purchase the shares. In those cases, the Distributor retains the asset-based sales charge paid on Class B and Class C shares, but does not retain any service fees as to the assets represented by that account. 7. The following paragraph is added before the section titled "AccountLink" under "How to Buy Shares", except for the Principal Protected Main Street Fund and Principal Protected Main Street Fund II: When you purchase shares of the Fund, your ownership interest in the shares of the Fund will be recorded as a book entry on the records of the Fund. The Fund will not issue or re-register physical share certificates. 8. The first paragraph under "About Your Account - How to Buy Shares - Retirement Plans," with the exception of the following funds: AMT-Free Municipals, AMT-Free New York Municipals, California Municipal Fund, Cash Reserves, Limited Term California Municipal Fund, Limited Term Municipal Fund, Limited Term New York Municipal Fund, Money Market Fund, Inc., New Jersey Municipal Fund, Pennsylvania Municipal Fund, Principal Protected Main Street Fund, Principal Protected Main Street Fund II, Rochester Fund Municipals, Rochester National Municipals and Senior Floating Rate Fund, is deleted and replaced with the following: Retirement Plans. Certain types of retirement plans are entitled to purchase shares of the Fund without sales charges or at reduced sales charge rates, as described in an Appendix to this Statement of Additional Information. Certain special sales charge arrangements described in that Appendix apply to retirement plans whose records are maintained on a daily valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent record keeper that has a contract or special arrangement with Merrill Lynch. If on the date the plan sponsor signed the Merrill Lynch record keeping service agreement the plan has less than $1 million in assets invested in applicable investments (other than assets invested in money market funds), then the retirement plan may purchase only Class C shares of the Oppenheimer funds. If on the date the plan sponsor signed the Merrill Lynch record keeping service agreement the plan has $1 million or more in assets but less than $5 million in assets invested in applicable investments (other than assets invested in money market funds), then the retirement plan may purchase only Class N shares of the Oppenheimer funds. If on the date the plan sponsor signed the Merrill Lynch record keeping service agreement the plan has $5 million or more in assets invested in applicable investments (other than assets invested in money market funds), then the retirement plan may purchase only Class A shares of the Oppenheimer funds. 9. The last paragraph under "About Your Account - How to Buy Shares - Classes of Shares" with the exception of Cash Reserves, Money Market Fund, Inc., Principal Protected Main Street Fund, Principal Protected Main Street Fund II and Senior Floating Rate Fund, is deleted and replaced by the following paragraph: The Distributor will not accept an order in an amount greater than $250,000 to purchase Class B shares or more than $1 million to purchase Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts). Effective July 15, 2004, the Distributor will not accept an order in an amount greater than $100,000 to purchase Class B shares on behalf of a single investor (not including dealer "street name" or omnibus accounts). 10. For Cash Reserves the last paragraph under "How to Buy Shares - Classes of Shares - Alternative Sales Arrangements" is deleted and replaced by the following paragraph: The Distributor will not accept an order in an amount greater than $250,000 to purchase Class B shares or more than $1 million to purchase Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts). Effective July 15, 2004, the Distributor will not accept an order in an amount greater than $100,000 to purchase Class B shares on behalf of a single investor (not including dealer "street name" or omnibus accounts). 11. For the Senior Floating Rate Fund, the section titled "About Your Account - Classes of Shares" is deleted in its entirety and replaced with the following paragraphs: Classes of Shares. The Fund's multiple class structure is available because the Fund has obtained from the Securities and Exchange Commission an exemptive order (discussed in "Distribution Plans") permitting it to offer more than one class of shares. The availability of the Fund's share classes is contingent upon the continued availability of the relief under that order. Each class of shares of the Fund represents an interest in the same portfolio of investments of the Fund. However, each class has different shareholder privileges and features. The net income attributable to Class B or Class C shares and the dividends payable on Class B or Class C shares will be reduced by incremental expenses borne solely by that class. Those expenses include the asset-based sales charges to which Class B and Class C shares are subject. The availability of different classes of shares permits an investor to choose the method of purchasing shares that is more appropriate for the investor. That may depend on the amount of the purchase, the length of time the investor expects to hold shares, and other relevant circumstances. Class A shares normally are sold subject to an initial sales charge. While Class B and Class C shares have no initial sales charge, the purpose of the early withdrawal charge and asset-based sales charge on Class B and Class C shares is the same as that of the initial sales charge on Class A shares -to compensate the Distributor and brokers, dealers and financial institutions that sell shares of the Fund. A salesperson who is entitled to receive compensation from his or her firm for selling Fund shares may receive different levels of compensation for selling one class of shares rather than another. The Distributor will not accept an order in an amount greater than $250,000 to purchase Class B shares or more than $1 million to purchase Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts). Effective July 15, 2004, the Distributor will not accept an order in an amount greater than $100,000 to purchase Class B shares on behalf of a single investor (not including dealer "street name" or omnibus accounts) 12. The entire section under "About Your Account - How to Buy Shares - Account Fees" with the exception of the Principal Protected Main Street Fund and Principal Protected Main Street Fund II, is deleted in its entirety and replaced with the following: Fund Account Fees. As stated in the Prospectus, a $12 annual "Minimum Balance Fee" is assessed on each Fund account with a share balance valued under $500. The Low Balance Fee is automatically deducted from each such Fund account on or about the second to last business day of September. Listed below are certain cases in which the Fund has elected, in its discretion, not to assess the Fund Account Fees. These exceptions are subject to change: o A fund account whose shares were acquired after September 30th of the prior year; o A fund account that has a balance below $500 due to the automatic conversion of shares from Class B to Class A shares. However, once all Class B shares held in the account have been converted to Class A shares the new account balance may become subject to the Minimum Balance Fee; o Accounts of shareholders who elect to access their account documents electronically via eDoc Direct; o A fund account that has only certificated shares and, has a balance below $500 and is being escheated; o Accounts of shareholders that are held by broker-dealers under the NSCC Fund/SERV system; o Accounts held under the Oppenheimer Legacy Program and/or holding certain Oppenheimer Variable Account Funds; o Omnibus accounts holding shares pursuant to the Pinnacle, Ascender, Custom Plus, Recordkeeper Pro and Pension Alliance Retirement Plan programs; and o A fund account that falls below the $500 minimum solely due to market fluctuations within the 12-month period preceding the date the fee is deducted. To access account documents electronically via eDocs Direct, please visit the Service Center on our website at www.oppenheimerfunds.com or ------------------------ call 1.888.470.0862 for instructions. The Fund reserves the authority to modify Fund Account Fees in its discretion. 13. The Appendix to each SAI, with the exception of Money Market Fund, Inc., titled "OppenheimerFunds Special Sales Charge Arrangements and Waivers" is amended by deleting the third bullet point under "Waivers of Class A Sales Charges of Oppenheimer Funds - Waivers of Initial and Contingent Deferred Sales Charges in Certain Transactions." 14. The Appendix to each SAI, with the exception of Money Market Fund, Inc., titled "OppenheimerFunds Special Sales Charge Arrangements and Waivers" is amended by deleting the seventh bullet point under the section "Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds - Waivers for Redemptions in Certain Cases" and replacing it with the following bullet point: o Redemptions of Class C shares of an Oppenheimer fund in amounts of $1 million or more requested in writing by a Retirement Plan sponsor and submitted more than 12 months after the Retirement Plan's first purchase of Class C shares, if the redemption proceeds are invested to purchase Class N shares of one or more Oppenheimer funds. July 6, 2004 PX0000.012UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-8799 Oppenheimer Capital Preservation Fund (Exact name of registrant as specified in charter) 6803 South Tucson Way, Centennial, Colorado 80112-3924 (Address of principal executive offices) (Zip code) Robert G. Zack, Esq. OppenheimerFunds, Inc. Two World Financial Center, New York, New York 10281-1008 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 -------------- Date of fiscal year end: October 31 Date of reporting period: November 1, 2002 - October 31, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. FUND PERFORMANCE DISCUSSION - --------------------------------------------------------------------------------
How has the Fund performed? Below is a discussion by OppenheimerFunds, Inc., of the Fund’s performance during its fiscal year ended October 31, 2003, followed by a graphical comparison of the Fund’s performance to an appropriate broad-based market index.
Management’s Discussion of Fund Performance. One of the most significant market events that occurred during the Fund’s fiscal year was the fact that corporate bonds enjoyed a sustained rally and yield “spreads”--the difference between yields of Treasury and non-Treasury bonds--narrowed as a result. That being said, the Fund’s exposure to these types of bonds--primarily through our allocations to both Oppenheimer Bond Fund and Oppenheimer Strategic Income Fund--provided the strongest boost to Fund performance. Through these exposures, we enjoyed the best of both worlds, so to speak, since Oppenheimer Bond Fund emphasizes investment-grade corporates and Oppenheimer Strategic Income Fund invests mainly in below investment-grade issues. Individually, each of these Funds delivered strong performance for the period, and our overweighted exposure to these Funds greatly added to Oppenheimer Capital Preservation Fund’s performance for its fiscal year.
Specifically, it was the solid price appreciation of many of the underlying Funds’ corporate holdings that contributed significantly to the Fund’s performance. This was largely due to our decision to purchase many of these same securities earlier at depressed levels, when their yields were much higher. As yield spreads narrowed, the Fund’s portfolio enjoyed gains as many of these bonds’ prices rose.
Another positive influence to returns was our mortgage positioning through the Fund’s investment in shares of Oppenheimer Limited-Term Government Fund, which we maintained at roughly 69% of Oppenheimer Capital Preservation Fund’s assets throughout the period. Oppenheimer Limited-Term Government Fund maintained an overweighted exposure to higher-coupon mortgage securities through the end of the period, which boosted performance of Oppenheimer Limited-Term Government Fund and consequently supported Oppenheimer Capital Preservation Fund’s performance.
During the reporting period interest rates began to increase causing the mortgage market to significantly underperform other non-Treasury securities. However, within the mortgage market, higher-coupon mortgages fared much better in these market conditions than did lower-coupon mortgages. Lower-coupon mortgages did not perform as well because in a rising rate environment lower-coupon securities prepay much slower, than anticipated by the market, forcing these securities’ durations to be extended and increasing their interest rate risk. All of these factors made lower-coupon mortgages unattractive to investors and higher-coupon mortgages more appealing. Demand increased for higher-coupon mortgages, helping them outperform their lower-coupon counterparts.
In regard to the Fund’s interest rate sensitivity, or duration, performance for the Fund was rather bifurcated for the year. For example, throughout the period, the Fund’s
5 OPPENHEIMER CAPITAL PRESERVATION FUND FUND PERFORMANCE DISCUSSION - --------------------------------------------------------------------------------underlying funds were positioned to have less duration than many of their peers. In the first several months of the fiscal year, this decision hurt relative performance significantly, particularly in May, as interest rates held steady at low levels. However, once rates backed up significantly in June, the very same decision to maintain less duration greatly benefited performance. The positive impact this decision had on performance in the last few months of the fiscal year generally evenly compensated for losses suffered during the first six or seven months of the period.
In general, the Fund’s diverse mix of fixed-income holdings served us well, particularly during the first half of the year. Since spread products, or non-Treasury securities, outperformed Treasuries throughout most of the period, our exposure to these types of bonds was a clear contributor to performance.
In terms of managing the Fund’s allocations, we see great potential to harvest gains for the Fund’s portfolio in the coming months as the corporate bond rally seemingly nears its peak. If yield spreads remain narrow, we plan to sell off some of these corporate holdings, such as shares of Oppenheimer Bond Fund, and reallocate those assets into the shorter-term Oppenheimer Limited-Term Government Fund, which stresses mortgage-related securities. Currently, we believe mortgages represent good value given the rise in interest rates, and will likely continue to do so as rates continue to move upward and as the rate of prepayments or refinancings continues to abate.
Comparing the Fund’s Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in each class of shares of the Fund held until October 31, 2003. In the case of Class A, Class B, Class C and Class Y shares, performance is measured from inception of the Classes on September 27, 1999. In the case of Class N shares, performance is measured from inception of the Class on March 1, 2001. The Fund’s performance reflects the deduction of the maximum initial sales charge on Class A shares, the applicable contingent deferred sales charge on Class B, Class C and Class N shares, and reinvestments of all dividends and capital gains distributions.
The Fund’s performance is compared to that of the Lehman Brothers 1-3 Year Government Bond Index, which is an unmanaged sector index of U.S. Treasury issues, publicly-issued debt of U.S. Government agencies and quasi-public corporations and corporate debt guaranteed by the U.S. Government with maturities of one to three years.
Index performance reflects the reinvestment of dividends but does not consider the effect of capital gains or transaction costs, and none of the data in the graphs shows the effect of taxes. The Fund’s performance reflects the effects of Fund business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund’s performance, it must be noted that the Fund’s investments are not limited to the securities in the index.
6 OPPENHEIMER CAPITAL PRESERVATION FUND Class A Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [GRAPHIC] Oppenheimer Capital Preservation Fund (Class A) [GRAPHIC] Lehman Brothers 1-3 Year Government Bond Index [GRAPHIC] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Oppenheimer Capital Preservation Fund Lehman Bros 1-3 Year Date (Class A) Gov't Bond Index 09/27/1999 $ 9,650 $10,000 10/31/1999 9,703 10,027 01/31/2000 9,851 10,053 04/30/2000 9,998 10,208 07/31/2000 10,146 10,423 10/31/2000 10,302 10,642 01/31/2001 10,464 11,021 04/30/2001 10,621 11,214 07/31/2001 10,777 11,449 10/31/2001 10,921 11,831 01/31/2002 11,083 11,833 04/30/2002 11,236 11,951 07/31/2002 11,368 12,251 10/31/2002 11,494 12,431 01/31/2003 11,584 12,517 04/30/2003 11,659 12,624 07/31/2003 11,710 12,614 10/31/2003 11,749 12,695Average Annual Total Returns of Class A Shares of the Fund at 10/31/03* 1-Year -1.36% Since Inception 4.02%
Class B Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [GRAPHIC] Oppenheimer Capital Preservation Fund (Class B) [GRAPHIC] Lehman Brothers 1-3 Year Government Bond Index [GRAPHIC] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Oppenheimer Capital Preservation Fund Lehman Bros 1-3 Year Date (Class B) Gov't Bond Index 09/27/1999 $10,000 $10,000 10/31/1999 10,048 10,027 01/31/2000 10,183 10,053 04/30/2000 10,317 10,208 07/31/2000 10,451 10,423 10/31/2000 10,593 10,642 01/31/2001 10,741 11,021 04/30/2001 10,884 11,214 07/31/2001 11,026 11,449 10/31/2001 11,156 11,831 01/31/2002 11,304 11,833 04/30/2002 11,440 11,951 07/31/2002 11,554 12,251 10/31/2002 11,667 12,431 01/31/2003 11,740 12,517 04/30/2003 11,791 12,624 07/31/2003 11,821 12,614 10/31/2003 11,737 12,695Average Annual Total Returns of Class B Shares of the Fund at 10/31/03* 1-Year -2.55% Since Inception 3.99%
*See Notes on page 10 for further details.
The performance information for the Lehman Brothers 1-3 Year Government Bond Index in the graphs begins on 9/30/99 for Class A, Class B, Class C and Class Y and on 2/28/01 for Class N shares.
Past performance cannot guarantee future results. Graphs are not drawn to same scale.
7 OPPENHEIMER CAPITAL PRESERVATION FUND FUND PERFORMANCE DISCUSSION - -------------------------------------------------------------------------------- Class C Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [GRAPHIC] Oppenheimer Capital Preservation Fund (Class C) [GRAPHIC] Lehman Brothers 1-3 Year Government Bond Index [GRAPHIC] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Oppenheimer Capital Preservation Fund Lehman Bros 1-3 Year Date (Class C) Gov't Bond Index 09/27/1999 $10,000 $10,000 10/31/1999 10,048 10,027 01/31/2000 10,183 10,053 04/30/2000 10,317 10,208 07/31/2000 10,451 10,423 10/31/2000 10,593 10,642 01/31/2001 10,741 11,021 04/30/2001 10,884 11,214 07/31/2001 11,026 11,449 10/31/2001 11,156 11,831 01/31/2002 11,304 11,833 04/30/2002 11,440 11,951 07/31/2002 11,553 12,251 10/31/2002 11,667 12,431 01/31/2003 11,737 12,517 04/30/2003 11,788 12,624 07/31/2003 11,818 12,614 10/31/2003 11,834 12,695Average Annual Total Returns of Class C Shares of the Fund at 10/31/03* 1-Year 0.43% Since Inception 4.20%
Class N Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [GRAPHIC] Oppenheimer Capital Preservation Fund (Class N) [GRAPHIC] Lehman Brothers 1-3 Year Government Bond Index [GRAPHIC] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Oppenheimer Capital Preservation Fund Lehman Bros 1-3 Year Date (Class N) Gov't Bond Index 03/01/2001 $10,000 $10,000 04/30/2001 10,103 10,110 07/31/2001 10,251 10,322 10/31/2001 10,387 10,666 01/31/2002 10,542 10,668 04/30/2002 10,685 10,774 07/31/2002 10,810 11,045 10/31/2002 10,937 11,207 01/31/2003 11,031 11,284 04/30/2003 11,109 11,381 07/31/2003 11,158 11,372 10/31/2003 11,195 11,445Average Annual Total Returns of Class N Shares of the Fund at 10/31/03* 1-Year 1.37% Since Inception 4.32%
*See Notes on page 10 for further details.
8 OPPENHEIMER CAPITAL PRESERVATION FUND Class Y Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: [GRAPHIC] Oppenheimer Capital Preservation Fund (Class Y) [GRAPHIC] Lehman Brothers 1-3 Year Government Bond Index [GRAPHIC] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Oppenheimer Capital Preservation Fund Lehman Bros 1-3 Year Date (Class Y) Gov't Bond Index 09/27/1999 $10,000 $10,000 10/31/1999 10,057 10,027 01/31/2000 10,217 10,053 04/30/2000 10,375 10,208 07/31/2000 10,535 10,423 10/31/2000 10,703 10,642 01/31/2001 10,878 11,021 04/30/2001 11,048 11,214 07/31/2001 11,216 11,449 10/31/2001 11,373 11,831 01/31/2002 11,549 11,833 04/30/2002 11,708 11,951 07/31/2002 11,842 12,251 10/31/2002 11,980 12,431 01/31/2003 12,087 12,517 04/30/2003 12,229 12,624 07/31/2003 12,300 12,614 10/31/2003 12,358 12,695Average Annual Total Returns of Class Y Shares of the Fund at 10/31/03* 1-Year 3.15% Since Inception 5.31%
The performance information for the Lehman Brothers 1-3 Year Government Bond Index in the graphs begins on 9/30/99 for Class A, Class B, Class C and Class Y and on 2/28/01 for Class N shares.
Past performance cannot guarantee future results. Graphs are not drawn to same scale.
9 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES - -------------------------------------------------------------------------------- | In reviewing performance, please remember that past performance cannot guarantee future results. Investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Because of ongoing market volatility, the Fund’s performance may be subject to substantial fluctuations, and current performance may be more or less than the results shown. For updates on the Fund’s performance, visit our website at www.oppenheimerfunds.com. |
| Total returns and the ending account values in the graphs include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns shown do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. For more complete information about the Fund, including charges, expenses and risks, please refer to the prospectus. To obtain a copy, call your financial advisor, call OppenheimerFunds Distributor, Inc. at 1.800.CALL OPP (1.800.225.5677) or visit the OppenheimerFunds website at www.oppenheimerfunds.com. Read the prospectus carefully before you invest or send money. |
| Class A shares of the Fund were first publicly offered on 9/27/99. Class A returns include the current maximum initial sales charge of 3.50%. |
| Class B shares of the Fund were first publicly offered on 9/27/99. Class B returns include the applicable contingent deferred sales charges of 4% (1-year) and 2% (since inception). Class B shares are subject to an annual 0.75% asset-based sales charge. |
| Class C shares of the Fund were first publicly offered on 9/27/99. Class C returns include the contingent deferred sales charge of 1% for the one-year period. Class C shares are subject to an annual 0.75% asset-based sales charge. |
| Class N shares of the Fund were first publicly offered on 3/1/01. Class N shares are offered only through retirement plans. Unless otherwise noted, Class N returns include the contingent deferred sales charge of 1% for the one-year period. |
| Class Y shares of the Fund were first publicly offered on 9/27/99. Class Y shares are offered only to certain institutional investors under special agreement with the Distributor. |
| An explanation of the calculation of performance is in the Fund’s Statement of Additional Information. |
10 OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENT OF INVESTMENTS October 31, 2003 - -------------------------------------------------------------------------------- Market Value Shares See Note 1 ---------------------------------------------------------------------------- Investments in Affiliated Companies--101.1% ---------------------------------------------------------------------------- Fixed Income Funds--96.0% Oppenheimer Bond Fund, Cl. Y 3,443,783 $ 35,298,772 ---------------------------------------------------------------------------- Oppenheimer Limited-Term Government Fund, Cl. Y 23,457,985 240,678,927 ---------------------------------------------------------------------------- Oppenheimer Strategic Income Fund, Cl. Y 14,510,240 59,346,883 ------------- 335,324,582 ---------------------------------------------------------------------------- Money Market Fund--5.1% Oppenheimer Money Market Fund, Inc. 18,006,131 18,006,131 ---------------------------------------------------------------------------- Total Investments, at Value (Cost $347,576,825) 101.1% 353,330,713 ---------------------------------------------------------------------------- Liabilities in Excess of Other Assets (1.1) (3,896,798) -------------------------- Net Assets 100.0% $349,433,915 ========================== See accompanying Notes to Financial Statements. 11 OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 - -------------------------------------------------------------------------------- ---------------------------------------------------------------------------- Assets
Investments, at value--see accompanying statement:
Affiliated companies (cost $347,576,825) $353,330,713 ---------------------------------------------------------------------------- Cash used for collateral on futures 25,000 ---------------------------------------------------------------------------- Receivables and other assets: Shares of beneficial interest sold 713,959 Interest and dividends 702,087 Other 1,159 ------------- Total assets 354,772,918 ---------------------------------------------------------------------------- Liabilities Bank overdraft 378,513 ---------------------------------------------------------------------------- Payables and other liabilities: Wrapper agreement 3,434,739 Shares of beneficial interest redeemed 1,072,770 Wrapper fee payable 191,750 Transfer and shareholder servicing agent fees 86,752 Distribution and service plan fees 74,051 Shareholder reports 34,146 Trustees' compensation 11,390 Futures margins 3,734 Other 51,158 ------------- Total liabilities 5,339,003 ---------------------------------------------------------------------------- Net Assets $349,433,915 ============= ---------------------------------------------------------------------------- Composition of Net Assets Paid-in capital $347,811,995 ---------------------------------------------------------------------------- Overdistributed net investment income (10,216) ---------------------------------------------------------------------------- Accumulated net realized loss on investment transactions (643,436) ---------------------------------------------------------------------------- Net unrealized appreciation on investments and wrapper agreement 2,275,572 ------------- Net Assets $349,433,915 ============= 12 OPPENHEIMER CAPITAL PRESERVATION FUND ---------------------------------------------------------------------------- Net Asset Value Per Share Class A Shares:Net asset value and redemption price per share (based on net assets of $94,727,427 and 9,473,122 shares of beneficial interest outstanding) $10.00 Maximum offering price per share (net asset value plus sales charge of 3.50% of offering price) $10.36
---------------------------------------------------------------------------- Class B Shares:Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $9,986,747 and 998,663 shares of beneficial
interest outstanding) $10.00 ---------------------------------------------------------------------------- Class C Shares:Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $24,404,533 and 2,440,518 shares of beneficial
interest outstanding) $10.00 ---------------------------------------------------------------------------- Class N Shares:Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $219,590,275 and 21,958,614 shares of beneficial
interest outstanding) $10.00 ---------------------------------------------------------------------------- Class Y Shares:Net asset value, redemption price and offering price per share (based on net assets of $724,933 and 72,473 shares of beneficial interest
outstanding) $10.00 See accompanying Notes to Financial Statements. 13 OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENT OF OPERATIONS For the Year Ended October 31, 2003 - -------------------------------------------------------------------------------- ---------------------------------------------------------------------------- Investment Income Dividends from affiliated companies $ 9,469,836 ---------------------------------------------------------------------------- Interest 76,236 ------------ Total investment income 9,546,072 ---------------------------------------------------------------------------- Expenses Management fees 2,220,602 ----------------------------------------------------------------------------Distribution and service plan fees:
Class A 228,125 Class B 80,423 Class C 193,012 Class N 450,965 ----------------------------------------------------------------------------Transfer and shareholder servicing agent fees:
Class A 456,802 Class B 65,890 Class C 139,907 Class N 457,882 Class Y 30 ---------------------------------------------------------------------------- Wrapper fees 489,897 ---------------------------------------------------------------------------- Shareholder reports 64,109 ---------------------------------------------------------------------------- Trustees' compensation 15,215 ---------------------------------------------------------------------------- Custodian fees and expenses 6,587 ---------------------------------------------------------------------------- Other 57,515 ------------ Total expenses 4,926,961 Less reduction to custodian expenses (392) Less reimbursement of management fees (1,335,442) Less voluntary waiver of transfer and shareholder servicing agent fees--Class A (152,350) Less voluntary waiver of transfer and shareholder servicing agent fees--Class B (37,422) Less voluntary waiver of transfer and shareholder servicing agent fees--Class C (70,269) Less voluntary waiver of transfer and shareholder servicing agent fees--Class Y (13) ------------ Net expenses 3,331,073 ---------------------------------------------------------------------------- Net Investment Income 6,214,999 ----------------------------------------------------------------------------Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments from affiliated companies 187,632 Closing of futures contracts (38,787) ------------ Net realized gain 148,845 ---------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) on: Investments from affiliated companies 4,556,064 Futures contracts (43,577) Wrapper agreement (4,616,791) ------------ Net change in unrealized appreciation (104,304) ---------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $ 6,259,540 ============ See accompanying Notes to Financial Statements. 14 OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- Year Ended October 31, 2003 2002 ---------------------------------------------------------------------------- Operations Net investment income $ 6,214,999 $ 5,200,284 ---------------------------------------------------------------------------- Net realized gain (loss) 148,845 (686,530) ---------------------------------------------------------------------------- Net change in unrealized appreciation (104,304) 2,153,270 ---------------------------- Net increase in net assets resulting from operations 6,259,540 6,667,024 ----------------------------------------------------------------------------Dividends and/or Distributions to Shareholders Dividends from net investment income:
Class A (1,969,962) (2,422,826) Class B (104,775) (102,516) Class C (249,835) (205,654) Class N (3,927,405) (2,350,783) Class Y (7,561) (95) ----------------------------------------------------------------------------Tax return of capital distribution:
Class A -- (726,971) Class B -- (38,902) Class C -- (79,157) Class N -- (740,098) Class Y -- (23) ----------------------------------------------------------------------------Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions:
Class A 16,147,988 28,403,767 Class B 4,781,818 3,427,529 Class C 11,965,018 10,595,020 Class N 100,792,528 111,483,337 Class Y 722,428 120 ---------------------------------------------------------------------------- Net Assets Total increase 134,409,782 153,909,772 ---------------------------------------------------------------------------- Beginning of period 215,024,133 61,114,361 ---------------------------- End of period [including overdistributed net investment income of $10,216 and $6,233, respectively] $349,433,915 $215,024,133 ============================ See accompanying Notes to Financial Statements. 15 OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------Class A Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss)from investment operations: Net investment income .22 .42 .56 .57 .05 Net realized and unrealized gain -- .09 .02 .03 -- -------------------------------------------- Total from investment operations .22 .51 .58 .60 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.22) (.41) (.55) (.60) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.22) (.51) (.58) (.60) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 2.22% 5.25% 6.00% 6.18% 0.55% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $94,727 $78,552 $50,179 $10,431 $100 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $92,035 $62,359 $33,976 $ 7,171 $100 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 2.11% 3.90% 5.39% 5.55% 5.75% Total expenses 1.70% 1.71% 1.58% 1.96% 1.55% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.09% 1.18% 1.14% 1.51% 1.12% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 16 OPPENHEIMER CAPITAL PRESERVATION FUND
Class B Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .14 .37 .50 .51 .05 Net realized and unrealized gain -- .08 .02 .02 -- -------------------------------------------- Total from investment operations .14 .45 .52 .53 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.35) (.49) (.53) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.14) (.45) (.52) (.53) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 1.45% 4.59% 5.31% 5.43% 0.48% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $9,987 $5,205 $1,777 $331 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $8,055 $3,337 $ 676 $ 82 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.31% 3.15% 4.61% 4.55% 5.10% Total expenses 2.77% 2.37% 2.34% 2.71% 2.25% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.87% 1.84% 1.90% 2.26% 1.81% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 17 OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
Class C Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .14 .38 .51 .50 .05 Net realized and unrealized gain -- .07 .01 .03 -- -------------------------------------------- Total from investment operations .14 .45 .52 .53 .05 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.14) (.35) (.49) (.53) (.05) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.14) (.45) (.52) (.53) (.05) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 1.43% 4.58% 5.31% 5.43% 0.48% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $24,405 $12,437 $1,845 $48 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $19,334 $6,790 $ 652 $25 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 1.31% 3.07% 4.54% 4.65% 5.10% Total expenses 2.67% 2.35% 2.36% 2.71% 2.25% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.87% 1.82% 1.92% 2.26% 1.81% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 18 OPPENHEIMER CAPITAL PRESERVATION FUND
Class N Year Ended October 31, 2003 2002 2001 1 -------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .23 .45 .38 Net realized and unrealized gain -- .07 -- 2 ----------------------------- Total from investment operations .23 .52 .38 -------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.23) (.42) (.36) Tax return of capital distribution -- (.10) (.02) ----------------------------- Total dividends and/or distributions to shareholders (.23) (.52) (.38) -------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 ============================= -------------------------------------------------------------------------------------- Total Return, at Net Asset Value 3 2.37% 5.29% 3.88% -------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $219,590 $118,829 $7,311 -------------------------------------------------------------------------------------- Average net assets (in thousands) $180,665 $ 63,485 $3,002 -------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 2.16% 3.86% 5.18% Total expenses 1.45% 1.52% 1.64% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.01% 0.99% 1.20% -------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 1. For the period from March 1, 2001 (inception of offering) to October 31, 2001 2. Less than $0.005 per share. 3. Assumes an 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 19 OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
Class Y Year Ended October 31, 2003 2002 2001 2000 1999 1 -------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .39 .41 .58 .59 .06 Net realized and unrealized gain (loss) (.08) .11 .03 .03 -- -------------------------------------------- Total from investment operations .31 .52 .61 .62 .06 -------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.31) (.42) (.58) (.62) (.06) Tax return of capital distribution -- (.10) (.03) -- -- -------------------------------------------- Total dividends and/or distributions to shareholders (.31) (.52) (.61) (.62) (.06) -------------------------------------------------------------------------------------------------- Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 ============================================ -------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 3.15% 5.35% 6.25% 6.43% 0.57% -------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $725 $2 $2 $1 $1 -------------------------------------------------------------------------------------------------- Average net assets (in thousands) $368 $2 $2 $1 $1 -------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 2.53% 4.13% 5.73% 5.88% 6.19% Total expenses 0.96% 67.64% 43.02% 1.71% 1.15% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 0.52% 1.09% 0.82% 1.26% 0.72% -------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 47% 36% 89% 0% 1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Assumes an investment on the business day before the first day of the fiscal period (or commencement of operations), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year.See accompanying Notes to Financial Statements. 20 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies
Oppenheimer Capital Preservation Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund’s investment objective is to seek high current income while seeking to maintain a stable value per share. The Fund’s investment advisor is OppenheimerFunds, Inc. (the Manager). Shares of the Fund are offered solely to participant-directed qualified retirement plans and 403(b)(7) Custodial Plans meeting specified criteria (the Plans). Plan participant purchases of Fund shares are handled in accordance with each Plan’s specific provisions. Plan participants should contact their Plan administrator for details concerning how they may purchase shares of the Fund.
The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold with a front-end sales charge of 3.50%, and reduced for larger purchases. Class B, Class C and Class N shares are offered without a front-end sales charge, but may be subject to a contingent deferred-sales charge (CDSC) if redeemed within 5 years or 12 months or 18 months, respectively, of purchase. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are offered without front-end and contingent-deferred sales charges. Class Y shares are only available for plans that have special arrangements with OppenheimerFunds Distributor, Inc. (the Distributor). All classes of shares have identical rights and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses associated with the Underlying Funds. Classes A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. The Fund assesses a 2% fee on the proceeds of fund shares that are redeemed (either by selling or exchanging to another Oppenheimer fund) on less than 12 months prior notice. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital.
The following is a summary of significant accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------Securities Valuation. The Fund will, under normal circumstances, invest in Class Y shares of Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund, and in shares of Oppenheimer Money Market Fund, Inc. (collectively referred to as the “underlying funds”). The net asset values of the underlying funds are determined as of the close of The New York Stock Exchange, on each day the Exchange is open for trading. The net asset value per share is determined 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 may invest in certain portfolio securities, as described in the Fund’s pros-pectus. 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
21 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued 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 using consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Foreign currency exchange contracts are valued based on the closing prices of the foreign currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer.The Fund will, under normal circumstances, enter into wrapper agreements with insurance companies and banks. If an insurance wrap contract or a synthetic Guaranteed Investment Contract, collectively, “wrapper agreement” obligates the contract provider to maintain the book value of all or a portion of the Fund’s investments up to a specified maximum dollar amount, such contract will be valued at its fair value. The book value of the covered assets is the price the Fund paid for such securities plus interest on those assets accrued at a rate calculated pursuant to a formula specified in the wrapper agreement (“crediting rate”). The crediting rate is normally reset monthly. However, if there is a significant event, such as a material change in interest rates, the crediting rate may be reset more frequently. The fair value of the contract generally will be equal to the difference between the book value, and the market value of the Fund’s portfolio investments subject to the contract. If the market value of the Fund’s portfolio investments is greater than its Book Value, the contract value will be reflected as a liability of the Fund in the amount of the difference, i.e. a negative value. If the market value of the Fund’s portfolio investments is less than its Book Value, the contract value will be reflected as an asset of the Fund in the amount of the difference, i.e. a positive value, reflecting the potential liability of the contract provider to the Fund. In performing its fair value determination, the Board of Trustees will take into consideration the creditworthiness of the contract provider and the ability and willingness of the contract provider to pay amounts under the contract. As of October 31, 2003, the Fund has entered into one wrapper agreement, with the Bank of America, NA. Total fees paid for the year ended October 31, 2003, to Bank of America, NA, for this agreement were $489,897.
The staff of the Securities and Exchange Commission (“SEC”) has inquired of registered “stable value” mutual funds, including this Fund, as to the valuation methodology used by such funds to value their wrapper agreements. At the present time, the Fund has not received any indication whether or when the SEC will take any action as a result of their review of this matter. If the SEC determines that the valuation method currently used by “stable value” mutual funds is no longer acceptable, the Fund may be required
22 OPPENHEIMER CAPITAL PRESERVATION FUNDto use a different accounting methodology under which the fair value of the Fund’s wrapper agreements could fluctuate daily, and if that were to occur, the Fund would probably not be able to maintain a stable net asset value per share. As a result, the Fund’s net asset value could be greater or less than $10 per share on a daily basis.
- --------------------------------------------------------------------------------Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------Federal Taxes. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required.
The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
Net Unrealized Appreciation Undistributed Undistributed Accumulated Based on Cost of Net Investment Long-Term Loss Securities for Federal Income Gain Carryforward 1 Income Tax Purposes ------------------------------------------------------------------------- $-- $47,002 $-- $1,585,134 1. During the fiscal year October 31, 2003, the Fund did not utilize any capital loss carryforwards. During the fiscal year October 31, 2002, the Fund utilized $61,232 of capital loss carryforward to offset capital gains realized in that fiscal year.Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund. Accordingly, the following amounts have been reclassified for October 31, 2003. Net assets of the Fund were unaffected by the reclassifications.
From To Net Ordinary Capital Tax Return Investment Loss Loss 2 of Capital Loss ------------------------------------------------------------------------- $40,556 $151,416 $-- $-- 2. $41,142, all of which was long-term capital gain, was distributed in connection with Fund share redemptions. 23 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued The tax character of distributions paid during the years ended October 31, 2003 and October 31, 2002 was as follows: Year Ended Year Ended October 31, 2003 October 31, 2002 ---------------------------------------------------------------------- Distributions paid from: Ordinary income $6,259,538 $5,081,874 Return of capital -- 1,585,151 ---------------------------------------- Total $6,259,538 $6,667,025 ========================================The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of October 31, 2003 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities and other investments $349,819,340 ============ Gross unrealized appreciation $ 5,030,538 Gross unrealized depreciation (3,445,404) ------------ Net unrealized appreciation $ 1,585,134 ============ - --------------------------------------------------------------------------------Trustees’ Compensation. The Fund has adopted an unfunded 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 October 31, 2003, the Fund’s projected benefit obligations were increased by $4,341 and payments of $357 were made to retired trustees, resulting in an accumulated liability of $10,216 as of October 31, 2003.
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 the annual compensation they are entitled to receive from the Fund. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or are invested in other Oppenheimer funds selected by the Trustee. 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 investment income per share. Amounts will be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. The Board of Trustees, in an effort to maintain a stable net asset value per share in the event of an additional distribution, may declare, effective on the ex-dividend date of an additional distribution, a reverse split of the shares of the Fund in an amount that will cause the total number of shares held by each shareholder, including shares acquired on reinvestment of that distribution, to remain the same as before that distribution was paid. Also, in an effort to maintain a stable net asset value per share, the
24 OPPENHEIMER CAPITAL PRESERVATION FUNDFund may distribute return of capital dividends. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually.
- --------------------------------------------------------------------------------Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.
- -------------------------------------------------------------------------------- Expense Offset Arrangement. The reduction of custodian fees represents earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 InterestThe Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
Year Ended October 31, 2003 Year Ended October 31, 2002 Shares Amount Shares Amount - ---------------------------------------------------------------------------------------------- Class A Sold 5,635,142 $ 56,351,417 4,777,641 $ 47,776,413 Dividends and/or distributions reinvested 197,233 1,972,335 315,148 3,151,481 Redeemed (4,217,576) (42,175,764) (2,252,412) (22,524,127) ------------------------------------------------------------------ Net increase 1,614,799 $ 16,147,988 2,840,377 $ 28,403,767 ================================================================== - ---------------------------------------------------------------------------------------------- Class B Sold 788,002 $ 7,880,026 502,556 $ 5,025,559 Dividends and/or distributions reinvested 10,502 105,024 14,387 143,871 Redeemed (320,322) (3,203,232) (174,190) (1,741,901) ------------------------------------------------------------------ Net increase 478,182 $ 4,781,818 342,753 $ 3,427,529 ================================================================== - ---------------------------------------------------------------------------------------------- Class C Sold 2,013,047 $ 20,130,482 1,306,242 $ 13,062,427 Dividends and/or distributions reinvested 24,997 249,971 28,550 285,500 Redeemed (841,543) (8,415,435) (275,290) (2,752,907) ------------------------------------------------------------------ Net increase 1,196,501 $ 11,965,018 1,059,502 $ 10,595,020 ==================================================================25 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2. Shares of Beneficial Interest Continued
Year Ended October 31, 2003 Year Ended October 31, 2002 Shares Amount Shares Amount - ---------------------------------------------------------------------------------------------- Class N Sold 18,082,527 $180,825,268 13,543,716 $135,437,153 Dividends and/or distributions reinvested 394,329 3,943,292 308,954 3,089,545 Redeemed (8,397,603) (83,976,032) (2,704,336) (27,043,361) ------------------------------------------------------------------ Net increase 10,079,253 $100,792,528 11,148,334 $111,483,337 ================================================================== - ---------------------------------------------------------------------------------------------- Class Y Sold 71,476 $ 714,766 -- $ -- Dividends and/or distributions reinvested 766 7,662 12 120 Redeemed -- -- -- -- ------------------------------------------------------------------ Net increase 72,242 $ 722,428 12 $ 120 ==================================================================- -------------------------------------------------------------------------------- 3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended October 31, 2003, were $193,715,002 and $57,941,972, respectively.
- -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. The management fees payable by the Fund are reduced by the management fees paid by the underlying Oppenheimer funds on assets representing investments by the Fund in shares of those underlying funds. That is done so that shareholders of the Fund do not pay direct and indirect management fees in excess of 0.75%. - --------------------------------------------------------------------------------Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended October 31, 2003, the Fund paid $815,738 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $5,000 for assets of less than $10 million and $10,000 for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees up to an annual rate of 0.35% of average annual net assets for all classes. This undertaking may be amended or withdrawn at any time.
26 OPPENHEIMER CAPITAL PRESERVATION FUND - -------------------------------------------------------------------------------- Distribution and Service Plan (12b-1) Fees. Under its General Distributor's Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the different classes of shares of the Fund.The compensation paid to (or retained by) the Distributor from the sale of shares or on the redemption of shares is shown in the table below for the period indicated.
Aggregate Class A Concessions Concessions Concessions Concessions Front-End Front-End on Class A on Class B on Class C on Class N Sales Charges Sales Charges Shares Shares Shares Shares on Class A Retained by Advanced by Advanced by Advanced by Advanced by Year Ended Shares Distributor Distributor 1 Distributor 1 Distributor 1 Distributor 1 - ------------------------------------------------------------------------------------------------------------------------ October 31, 2003 $58,328 $4,626 $57,446 $192,916 $174,510 $338,576 1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales of Class B, Class C and Class N shares from its own resources at the time of sale.
Class A Class B Class C Class N Contingent Contingent Contingent Contingent Deferred Deferred Deferred Deferred Sales Charges Sales Charges Sales Charges Sales Charges Retained by Retained by Retained by Retained by Year Ended Distributor Distributor Distributor Distributor - ---------------------------------------------------------------------------------------- October 31, 2003 $964 $65,558 $26,968 $325,198- --------------------------------------------------------------------------------
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. For the year ended October 31, 2003, expense under the Class A Plan totaled $228,125, all of which were paid by the Distributor to recipients, which included $73 retained by the Distributor and $8,208 which was paid to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares. The Distributor also receives a service fee of 0.25% per year under each plan.
Distribution fees paid to the Distributor for the year ended October 31, 2003, were as follows:
Distributor's Distributor's Aggregate Aggregate Uncompensated Uncompensated Expenses as % Total Expenses Amount Retained Expenses of Net Assets Under Plan by Distributor Under Plan of Class - ---------------------------------------------------------------------------------------- Class B Plan $ 80,423 $ 68,734 $ 272,489 2.73% Class C Plan 193,012 131,105 331,686 1.36 Class N Plan 450,965 -- 1,008,962 0.4627 OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 5. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices “financial futures” or debt securities “interest rate futures” in order to gain exposure to or protection from changes in market value of stock and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts as a hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or has expired.
Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported on the Statement of Operations as closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported on the Statement of Operations.
Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities.
As of October 31, 2003, the Fund had outstanding futures contracts as follows:
Unrealized Expiration Number of Valuation as of Appreciation Contract Description Dates Contracts Oct. 31, 2003 (Depreciation) - -------------------------------------------------------------------------------------------------- Contracts to Purchase U.S. Treasury Nts., 2 yr. 12/29/03 6 $1,286,813 $ 10,665 ----------- Contracts to Sell U.S. Treasury Nts., 5 yr. 12/19/03 25 2,795,313 (54,242) ----------- $ (43,577) ===========28 OPPENHEIMER CAPITAL PRESERVATION FUND - -------------------------------------------------------------------------------- 6. Illiquid or Restricted Securities
As of October 31, 2003, 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. A Wrapper Agreement is considered to be an illiquid security. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities.
- -------------------------------------------------------------------------------- 7. Borrowing and Lending ArrangementsThe Fund entered into an “interfund borrowing and lending arrangement” with other funds in the Oppenheimer funds complex, to allow funds to borrow for liquidity purposes. The arrangement was initiated pursuant to exemptive relief granted by the Securities and Exchange Commission to allow these affiliated funds to lend money to, and borrow money from, each other, in an attempt to reduce borrowing costs below those of bank loan facilities. Under the arrangement the Fund may lend money to other Oppenheimer funds and may borrow from other Oppenheimer funds at a rate set by the Fund’s Board of Trustees, based upon a recommendation by the Manager. The Fund’s borrowings, if any, are subject to asset coverage requirements under the Investment Company Act and the provisions of the SEC order and other applicable regulations. If the Fund borrows money, there is a risk that the loan could be called on one day’s notice, in which case the Fund might have to borrow from a bank at higher rates if a loan were not available from another Oppenheimer fund. If the Fund lends money to another fund, it will be subject to the risk that the other fund might not repay the loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the year ended or at October 31, 2003.
29 OPPENHEIMER CAPITAL PRESERVATION FUND INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Oppenheimer Capital Preservation Fund:We have audited the accompanying statement of assets and liabilities of Oppenheimer Capital Preservation Fund, including the statement of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, and the period from September 27, 1999 (commencement of operations) to October 31, 1999. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Capital Preservation Fund as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, and the period from September 27, 1999 (commencement of operations) to October 31, 1999, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP Denver, Colorado November 21, 2003 30 OPPENHEIMER CAPITAL PRESERVATION FUND FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------In early 2004, if applicable, shareholders of record will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 2003. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
None of the dividends paid by the Fund during the year ended October 31, 2003 are eligible for the corporate dividend-received deduction.
$151,417 has been designated as a “capital gain distribution” for federal income tax purposes during the current year. Whether received in stock or in cash, the capital gain distribution should be treated by shareholders as a gain from the sale of capital assets held for more than one year (long-term capital gains).
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
- -------------------------------------------------------------------------------- Portfolio Proxy Voting Policies and Procedures Unaudited - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.225.5677, (ii) on the Fund’s website at www.oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund will be required to file new Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The first such filing is due no later than August 31, 2004, for the twelve months ended June 30, 2004. Once filed, the Fund’s Form N-PX filing will be available (i) without charge, upon request, by calling the Fund toll-free at 1.800.225.5677, and (ii) on the SEC’s website at www.sec.gov.
31 OPPENHEIMER CAPITAL PRESERVATION FUND TRUSTEES AND OFFICERS Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name, Position(s) Held with Principal Occupation(s) During Past 5 Years; Fund, Length of Service, Age Other Trusteeships/Directorships Held by Trustee; Number of Portfolios in Fund Complex Currently Overseen by Trustee INDEPENDENT The address of each Trustee in the chart TRUSTEES below is 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until his or her resignation, retirement, death or removal. Mr. Motley was elected as Trustee to the Board I funds effective October 10, 2002 and did not hold shares of Board I funds during the calendar year ended December 31, 2002. Clayton K. Yeutter, Of Counsel (since 1993), Hogan & Hartson (a Chairman of the Board law firm). Other directorships: Weyerhaeuser of Trustees (since 2003), Corp. (since 1999) and Danielson Holding Trustee (since 1999) Corp. (since 2002); formerly a director of Age: 72 Caterpillar, Inc. (1993-December 2002). Oversees 25 portfolios in the Oppenheimer Funds complex. Robert G. Galli, A trustee or director of other Oppenheimer Trustee (since 1999) funds. Oversees 35 portfolios in the Age: 70 OppenheimerFunds complex. Phillip A. Griffiths, A director (since 1991) of the Institute for Trustee (since 1999) Advanced Study, Princeton, N.J., a director Age: 65 (since 2001) of GSI Lumonics, a trustee (since 1983) of Woodward Academy, a Senior Advisor (since 2001) of The Andrew W. Mellon Foundation. A member of: the National Academy of Sciences (since 1979), American Academy of Arts and Sciences (since 1995), American Philosophical Society (since 1996) and Council on Foreign Relations (since 2002). Formerly a director of Bankers Trust New York Corporation (1994-1999). Oversees 25 portfolios in the OppenheimerFunds complex. Joel W. Motley, Director (since 2002) Columbia Equity Trustee (since 2002) Financial Corp. (privately-held financial Age: 51 adviser); Managing Director (since 2002) Carmona Motley, Inc. (privately-held financial adviser); Formerly he held the following positions: Managing Director (January 1998-December 2001), Carmona Motley Hoffman Inc. (privately-held financial adviser); Managing Director (January 1992- December 1997), Carmona Motley & Co. (privately-held financial adviser). Oversees 25 portfolios in the OppenheimerFunds complex. Kenneth A. Randall, A director of Dominion Resources, Inc. Trustee (since 1999) (electric utility holding company) and Prime Age: 76 Retail, Inc. (real estate investment trust); formerly a director of Dominion Energy, Inc. (electric power and oil & gas producer), 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. Oversees 25 portfolios in the OppenheimerFunds complex. Edward V. Regan, President, Baruch College, CUNY; a director Trustee (since 1999) of RBAsset (real estate manager); a director Age: 73 of OffitBank; formerly Trustee, Financial | Accounting Foundation (FASB and GASB), Senior Fellow of Jerome Levy Economics Institute, Bard College, Chairman of Municipal Assistance Corporation for the City of New York, New York State Comptroller and Trustee of New York State and Local Retirement Fund. Oversees 25 investment companies in the OppenheimerFunds complex. |
32 OPPENHEIMER CAPITAL PRESERVATION FUND Russell S. Reynolds, Jr., Chairman (since 1993) of The Directorship Trustee (since 1999) Search Group, Inc. (corporate governance Age: 71 consulting and executive recruiting); a life
| trustee of International House (non-profit educational organization), and a trustee (since 1996) of the Greenwich Historical Society. Oversees 25 portfolios in the OppenheimerFunds complex. |
Donald W. Spiro, Chairman Emeritus (since January 1991) of the Vice Chairman of Manager. Formerly a director (January 1969- the Board of Trustees, August 1999) of the Manager. Oversees 25 Trustee (since 1999) portfolios in the OppenheimerFunds complex. Age: 77 - -------------------------------------------------------------------------------- INTERESTED TRUSTEE The address of Mr. Murphy in the chart below AND OFFICER is Two World Financial Center, 225 Liberty St., New York, NY 10281-1008. Mr. Murphy serves for an indefinite term, until his resignation, death or removal. John V. Murphy, Chairman, Chief Executive Officer and President and Trustee, director (since June 2001) and President Trustee (since 2001) (since September 2000) of the Manager; Age: 54 President and a director or trustee of other
| Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. (the Manager’s parent holding company) and of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager); President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc. and Centennial Asset Management Corporation (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager); Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager’s parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company that owns the shares of David L. Babson & Company, Inc.); formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 72 portfolios as Trustee/Officer and 10 portfolios as Officer in the OppenheimerFunds complex. |
33 OPPENHEIMER CAPITAL PRESERVATION FUND TRUSTEES AND OFFICERS Unaudited / Continued - -------------------------------------------------------------------------------- OFFICERS The address of the Officers in the chart below is as follows: for Messrs. Manioudakis and Zack, Two World Financial Center, 225 Liberty St., New York, NY 10281-1008, for Mr. Wixted, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until his or her earlier resignation, death or removal. Angelo Manioudakis, Senior Vice President of the Manager (since Vice President (since 2002) April 2002); formerly Executive Director and Age: 36 portfolio manager for Miller, Anderson &
| Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April 2002). An officer of 9 portfolios in the OppenheimerFunds complex. |
Brian W. Wixted, Senior Vice President and Treasurer (since Treasurer (since 1999) March 1999) of the Manager; Treasurer (since Age: 44 March 1999) of HarbourView Asset Management Corporation, Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000) and OFI Institutional Asset Management, Inc. (since November 2000) (offshore fund management subsidiaries of the Manager); Treasurer and Chief Financial Officer (since May 2000) of Oppenheimer Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief Operating Officer (March 1995-March 1999), Bankers Trust Company-Mutual Fund Services Division. An officer of 82 portfolios in the OppenheimerFunds complex. Robert G. Zack, Senior Vice President (since May 1985) and Secretary (since 2001) General Counsel (since February 2002) of the Age: 55 Manager; General Counsel and a director
| (since November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Vice President and a director (since November 2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset Management, Inc.; General Counsel (since November 2001) of Centennial Asset Management Corporation; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director (since November 2001) of OppenheimerFunds International Ltd.; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Secretary (since November 2001) of Oppenheimer Acquisition Corp.; formerly Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); OppenheimerFunds International Ltd. and OppenheimerFunds plc (October 1997-November 2001). An officer of 82 portfolios in the OppenheimerFunds complex. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is available without charge upon request.
34 OPPENHEIMER CAPITAL PRESERVATION FUND ITEM 2. CODE OF ETHICS ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The Board of Trustees of the Fund has determined that Edward V. Regan, the Chairman of the Board’s Audit Committee, possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an “audit committee financial expert,” and has designated Mr. Regan as the Audit Committee’s financial expert. Mr. Regan is an “independent” Trustee pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES - NOT REQUIRED ITEM 5. NOT APPLICABLE ITEM 6. RESERVED ITEM 7. NOT APPLICABLE ITEM 8. RESERVED ITEM 9. CONTROLS AND PROCEDURES (a) Based on their evaluation of registrant's disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940 (17 CFR 270.30a-2(c)) as of October 31, 2003, registrant's principal executive officer and principal financial officer found registrant's disclosure controls and procedures to be appropriately designed to ensure that information required to be disclosed by registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. (b) There have been no significant changes in registrant's internal controls or in other factors that could significantly affect registrant's internal controls subsequent to the date of the most recent evaluation as indicated, including no significant deficiencies or material weaknesses that required corrective action. ITEM 10. EXHIBITS. (A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT) (B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS) NOTES - --------------------------------------------------------------------------------AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
THE FUND’S INVESTMENT STRATEGY, ALLOCATIONS, AND FOCUS CAN CHANGE OVER TIME. THE MENTION OF SPECIFIC FUND HOLDINGS DOES NOT CONSTITUTE A RECOMMENDATION BY OPPENHEIMERFUNDS, INC.
INVESTORS SHOULD CONSIDER THE FUND’S INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND’S PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
8 | OPPENHEIMER CASH RESERVES FUND EXPENSES - --------------------------------------------------------------------------------FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended July 31, 2004.
ACTUAL EXPENSES. The “actual” lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the “actual” line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The “hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or contingent deferred sales charges (loads), or a $12.00 fee imposed annually on accounts valued at less than $500.00 (subject to exceptions described in
9 | OPPENHEIMER CASH RESERVES FUND EXPENSES - --------------------------------------------------------------------------------the Statement of Additional Information). Therefore, the “hypothetical” lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT ACCOUNT DURING 6-MONTHS VALUE (2/1/04) VALUE (7/31/04) ENDED 7/31/04 - -------------------------------------------------------------------------------- Class A Actual $1,000.00 $1,000.80 $5.02 - -------------------------------------------------------------------------------- Class A Hypothetical 1,000.00 1,019.84 5.07 - -------------------------------------------------------------------------------- Class B Actual 1,000.00 1,000.60 5.27 - -------------------------------------------------------------------------------- Class B Hypothetical 1,000.00 1,019.59 5.32 - -------------------------------------------------------------------------------- Class C Actual 1,000.00 1,000.50 5.37 - -------------------------------------------------------------------------------- Class C Hypothetical 1,000.00 1,019.49 5.42 - -------------------------------------------------------------------------------- Class N Actual 1,000.00 1,000.50 5.32 - -------------------------------------------------------------------------------- Class N Hypothetical 1,000.00 1,019.54 5.37Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). Those expense ratios for the 6-month period ended July 31, 2004 are as follows:
CLASS EXPENSE RATIOS__________ Class A 1.01%
__________ Class B 1.06
__________ Class C 1.08
__________ Class N 1.07
The expense ratios reflect voluntary reimbursements of expenses by the Fund’s Manager that can be terminated at any time, without advance notice. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such reimbursements.
10 | OPPENHEIMER CASH RESERVES STATEMENT OF INVESTMENTS July 31, 2004 - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT--16.3% - -------------------------------------------------------------------------------- DOMESTIC CERTIFICATES OF DEPOSIT--2.6% Wells Fargo Bank NA, 1.30%, 8/6/04 $ 20,000,000 $ 20,000,000 - -------------------------------------------------------------------------------- YANKEE CERTIFICATES OF DEPOSIT--13.7% BNP Paribas, New York: 1.341%, 6/22/05 1 10,000,000 9,995,967 1.39%, 8/5/04 10,000,000 10,000,297 - -------------------------------------------------------------------------------- Calyon, New York, 1.37%, 9/10/04 10,000,000 10,000,000 - -------------------------------------------------------------------------------- Canadian Imperial Bank of Commerce NY, 1.39%, 6/28/05 1 20,000,000 19,994,524 - -------------------------------------------------------------------------------- HBOS Treasury Services, New York, 1.285%, 9/17/04 4,000,000 4,000,000 - -------------------------------------------------------------------------------- Lloyds TSB Bank plc, New York, 1.39%, 9/24/04 15,000,000 15,000,000 - -------------------------------------------------------------------------------- Nordea Bank Finland plc, New York Branch, 1.395%, 6/29/05 1 7,000,000 6,997,758 - -------------------------------------------------------------------------------- Societe Generale, New York, 1.31%, 6/14/05 1 20,000,000 19,994,753 - -------------------------------------------------------------------------------- UBS AG Stamford CT, 1.26%, 9/16/04 10,000,000 10,000,064 ------------ 105,983,363 ------------ Total Certificates of Deposit (Cost $125,983,363) 125,983,363 - -------------------------------------------------------------------------------- DIRECT BANK OBLIGATIONS--12.1% - -------------------------------------------------------------------------------- AB SPINTAB, 1.26%, 9/9/04 10,000,000 9,986,350 - -------------------------------------------------------------------------------- Calyon North America, Inc., 1.40%, 9/9/04 4,000,000 3,993,933 - -------------------------------------------------------------------------------- Danske Corp., Series A, 1.33%, 9/15/04 4,000,000 3,993,350 - -------------------------------------------------------------------------------- Deutsche Bank Financial LLC, 1.12%, 8/19/04 5,000,000 4,997,200 - -------------------------------------------------------------------------------- DnB NOR Bank ASA, 1.315%, 9/2/04 8,000,000 7,990,649 PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- DIRECT BANK OBLIGATIONS Continued - -------------------------------------------------------------------------------- Fortis Funding LLC, 1.27%, 9/15/04 2 $ 10,000,000 $ 9,984,125 - -------------------------------------------------------------------------------- Governor & Co. of the Bank of Ireland, 1.11%, 8/2/04 2 7,300,000 7,299,775 - -------------------------------------------------------------------------------- HBOS Treasury Services: 1.095%, 8/6/04 5,000,000 4,999,240 1.10%, 8/4/04 5,000,000 4,999,542 1.51%, 10/14/04 3,500,000 3,489,136 - -------------------------------------------------------------------------------- Nationwide Building Society, 1.32%, 8/20/04 5,000,000 4,996,517 - -------------------------------------------------------------------------------- Nordea North America, Inc., 1.60%, 10/14/04 6,000,000 5,980,267 - -------------------------------------------------------------------------------- Toronto Dominion Holdings, Inc., 1.42%, 9/22/04 5,000,000 4,989,744 - -------------------------------------------------------------------------------- UBS Finance (Delaware) LLC, 1.28%, 9/13/04 15,163,000 15,139,455 ------------ Total Direct Bank Obligations (Cost $92,839,283) 92,839,283 - -------------------------------------------------------------------------------- SHORT-TERM NOTES--68.7% - --------------------------------------------------------------------------------ASSET-BACKED--24.6% Eiffel Funding LLC:
1.34%, 8/16/04 2 5,000,000 4,997,208 1.61%, 10/25/04 2 5,750,000 5,728,142 - -------------------------------------------------------------------------------- FCAR Owner Trust I: 1.61%, 10/15/04 13,000,000 12,957,396 1.61%, 10/18/04 5,000,000 4,982,558 - -------------------------------------------------------------------------------- Gotham Funding Corp.: 1.37%, 8/11/04 2 5,000,000 4,998,097 1.45%, 8/26/04 2 5,698,000 5,692,302 - -------------------------------------------------------------------------------- GOVCO Inc.: 1.55%, 10/19/04 2 4,300,000 4,285,374 1.59%, 10/25/04 2 10,000,000 9,962,458 - -------------------------------------------------------------------------------- Legacy Capital LLC: 1.14%, 8/18/04 2 5,000,000 4,997,308 1.36%, 9/2/042 15,000,000 14,981,422 - -------------------------------------------------------------------------------- Lexington Parker Capital Co. LLC, 1.16%, 8/3/04 2 12,000,000 11,999,234 - -------------------------------------------------------------------------------- 11 | OPPENHEIMER CASH RESERVES STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- ASSET-BACKED Continued Neptune Funding Corp.: 1.23%, 8/12/04 2 $ 4,650,000 $ 4,648,068 1.40%, 8/16/04 2 6,000,000 5,996,500 1.40%, 8/19/04 2 2,000,000 1,998,600 1.59%, 10/22/04 2 10,000,000 9,963,783 - -------------------------------------------------------------------------------- New Center Asset Trust, 1.60%, 10/7/04 12,000,000 11,964,267 - -------------------------------------------------------------------------------- Perry Global Funding LLC, Series A: 1.55%, 10/21/04 2 5,000,000 4,982,563 1.56%, 10/19/04 2 12,500,000 12,457,208 - -------------------------------------------------------------------------------- Regency Markets No. 1 LLC, 1.28%, 8/20/04 2 15,000,000 14,989,497 - -------------------------------------------------------------------------------- Solitaire Funding LLC, 1.30%, 8/26/04 2 7,900,000 7,893,033 - -------------------------------------------------------------------------------- Thornburg Mortgage Capital Resources, 1.685%, 11/1/04 2 17,500,000 17,432,834 - -------------------------------------------------------------------------------- Victory Receivables Corp.: 1.35%, 9/2/04 2 2,000,000 1,997,600 1.55%, 10/12/04 2 10,000,000 9,969,000 ------------ 189,874,452 - -------------------------------------------------------------------------------- CAPITAL MARKETS--14.4% Banc of America Securities LLC, 1.40%, 8/2/04 1 15,000,000 15,000,000 - -------------------------------------------------------------------------------- Bear Stearns Cos., Inc., 1.29%, 8/10/04 10,000,000 9,996,775 - -------------------------------------------------------------------------------- Citigroup Global Markets Holdings, Inc.: 1.30%, 8/13/04 6,000,000 5,997,400 1.34%, 8/19/04 10,000,000 9,993,300 1.52%, 10/18/04 10,000,000 9,967,067 - -------------------------------------------------------------------------------- Goldman Sachs Group, Inc.: 1.25%, 10/20/04 3 10,000,000 10,000,000 1.68%, 10/18/04 3 3,000,000 3,000,000 - -------------------------------------------------------------------------------- Lehman Brothers, Inc., 1.38%, 12/15/04 1 18,000,000 18,000,000 - -------------------------------------------------------------------------------- Morgan Stanley, 1.25%, 8/27/04 1 10,000,000 10,000,000 PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- CAPITAL MARKETS Continued Wachovia Securities LLC, 1.47%, 12/22/04 1 $ 19,000,000 $ 19,000,000 ------------ 110,954,542 - -------------------------------------------------------------------------------- COMMERCIAL BANKS--2.5% Bank of America Corp., 1.60%, 10/26/04 10,000,000 9,961,778 - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co., 1.31%, 8/17/04 9,000,000 8,994,760 ------------ 18,956,538 - -------------------------------------------------------------------------------- COMMERCIAL FINANCE--0.2% Countrywide Home Loans, 1.37%, 8/2/04 1,850,000 1,849,928 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--7.7% General Electric Capital Corp.: 1.08%, 8/5/04 9,000,000 8,998,920 1.29%, 9/8/04 10,000,000 9,986,383 1.34%, 9/7/04 5,000,000 4,993,114 - -------------------------------------------------------------------------------- Household Finance Corp.: 1.51%, 10/8/04 7,500,000 7,478,608 1.54%, 10/22/04 5,000,000 4,982,461 1.60%, 10/13/04 10,000,000 9,967,556 - -------------------------------------------------------------------------------- Prudential Funding LLC: 1.12%, 8/4/04 12,000,000 11,998,880 1.62%, 10/28/04 1,000,000 996,040 ------------ 59,401,962 - -------------------------------------------------------------------------------- INSURANCE--7.6% ING America Insurance Holdings, Inc., 1.72%, 11/29/04 10,000,000 9,942,667 - -------------------------------------------------------------------------------- Jackson National Life Global Funding, Series 2004-6, 1.38%, 8/16/04 1,4 5,000,000 5,000,000 - -------------------------------------------------------------------------------- Metropolitan Life Global Funding I, Series 2003-5, 1.39%, 8/15/04 1,3 8,600,000 8,600,000 12 | OPPENHEIMER CASH RESERVES PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- INSURANCE Continued Prudential Insurance Co. of America, 1.65%, 1/31/05 1 $ 10,000,000 $ 10,000,000 - -------------------------------------------------------------------------------- Security Life of Denver Insurance Co.: 1.31%, 8/18/041 10,000,000 10,000,000 1.46%, 10/27/04 1 10,000,000 10,000,000 - -------------------------------------------------------------------------------- United of Omaha Life Insurance Co., 1.46%, 8/2/04 1,3 5,000,000 5,000,000 ------------ 58,542,667 - -------------------------------------------------------------------------------- SPECIAL PURPOSE FINANCIAL--11.7% Blue Spice LLC, 1.54%, 10/12/04 2 6,800,000 6,779,056 - -------------------------------------------------------------------------------- Cooperative Assn of Tractor Dealers, Inc., Series A, 1.35%, 8/13/04 5,100,000 5,097,705 - -------------------------------------------------------------------------------- Cooperative Assn. of Tractor Dealers, Inc., Series B: 1.16%, 8/2/04 3,000,000 2,999,903 1.60%, 10/19/04 2,000,000 1,992,979 - -------------------------------------------------------------------------------- K2 (USA) LLC: 1.30%, 8/25/04 2 4,900,000 4,895,753 1.44%, 6/30/05 1,4 13,000,000 12,997,588 - -------------------------------------------------------------------------------- LINKS Finance LLC: 1.35%, 10/15/04 1,4 5,000,000 5,000,000 1.41%, 8/25/04 1,4 10,000,000 9,999,868 1.41%, 9/30/04 1,4 10,000,000 9,999,672 - -------------------------------------------------------------------------------- Parkland (USA) LLC, 1.36%, 1/14/05 1,4 5,000,000 4,999,773 - -------------------------------------------------------------------------------- RACERS Trust, Series 2004-6-MM, 1.426%, 8/23/04 1,4 2,500,000 2,500,000 - -------------------------------------------------------------------------------- Sigma Finance, Inc.: 1.34%, 9/16/04 2 10,000,000 9,982,878 1.42%, 11/26/04 1,4 10,000,000 9,999,522 1.63%, 10/28/04 2 3,000,000 2,988,047 ------------ 90,232,744 ------------ Total Short-Term Notes (Cost $529,812,833) 529,812,833 PRINCIPAL VALUE AMOUNT SEE NOTE 1 - -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES--2.6% - -------------------------------------------------------------------------------- Federal Home Loan Bank, 1.50%, 3/1/05 $ 5,000,000 $ 5,000,000 - -------------------------------------------------------------------------------- Federal National Mortgage Assn.: 1.375%, 2/18/05 5,000,000 5,000,000 1.55%, 5/4/05 5,000,000 5,000,000 1.60%, 5/13/05 5,000,000 5,000,000 ------------ Total U.S. Government Agencies (Cost $20,000,000) 20,000,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $768,635,479) 99.7% 768,635,479 - -------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 0.3 2,211,514 ------------------------------- NET ASSETS 100.0% $770,846,993 =============================== FOOTNOTES TO STATEMENT OF INVESTMENTSSHORT-TERM NOTES AND DIRECT BANK OBLIGATIONS ARE GENERALLY TRADED ON A DISCOUNT BASIS; THE INTEREST RATE SHOWN IS THE DISCOUNT RATE RECEIVED BY THE FUND AT THE TIME OF PURCHASE. OTHER SECURITIES NORMALLY BEAR INTEREST AT THE RATES SHOWN.
1. Represents the current interest rate for a variable or increasing rate security. 2. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $201,899,865, or 26.19% of the Fund's net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. 3. Illiquid security. See Note 4 of Notes to Financial Statements. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $60,496,423 or 7.85% of the Fund's net assets as of July 31, 2004. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 13 | OPPENHEIMER CASH RESERVES STATEMENT OF ASSETS AND LIABILITIES July 31, 2004 - --------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------------------------ Investments, at value (cost $768,635,479)--see accompanying statement of investments $768,635,479 - ------------------------------------------------------------------------------------------------------ Cash 2,250,865 - ------------------------------------------------------------------------------------------------------ Receivables and other assets: Shares of beneficial interest sold 5,088,485 Interest 501,411 Other 84,572 ------------ Total assets 776,560,812 - ------------------------------------------------------------------------------------------------------ LIABILITIES - ------------------------------------------------------------------------------------------------------ Payables and other liabilities: Shares of beneficial interest redeemed 5,190,869 Transfer and shareholder servicing agent fees 210,224 Shareholder communications 119,653 Dividends 78,092 Distribution and service plan fees 76,960 Trustees' compensation 3,935 Other 34,086 ------------ Total liabilities 5,713,819 - ------------------------------------------------------------------------------------------------------ NET ASSETS $770,846,993 ============ - ------------------------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS - ------------------------------------------------------------------------------------------------------ Par value of shares of beneficial interest $ 770,801 - ------------------------------------------------------------------------------------------------------ Additional paid-in capital 770,073,020 - ------------------------------------------------------------------------------------------------------ Accumulated net realized gain on investments 3,172 ------------ NET ASSETS $770,846,993 ============14 | OPPENHEIMER CASH RESERVES
- --------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE - --------------------------------------------------------------------------------------------------- Class A Shares: Net asset value and redemption price per share (based on net assets of $385,393,362 and 385,402,285 shares of beneficial interest outstanding) $1.00 - --------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $219,061,447 and 219,019,524 shares of beneficial interest outstanding) $1.00 - --------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $109,083,081 and 109,070,795 shares of beneficial interest outstanding) $1.00 - --------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $57,309,103 and 57,308,109 shares of beneficial interest outstanding) $1.00SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 15 | OPPENHEIMER CASH RESERVES STATEMENT OF OPERATIONS For the Year Ended July 31, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INVESTMENT INCOME Interest $ 9,290,537 - -------------------------------------------------------------------------------- EXPENSES Management fees 3,804,838 - --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 794,910 Class B 1,242,150 Class C 485,848 Class N 279,366 - --------------------------------------------------------------------------------Transfer and shareholder servicing agent fees:
Class A 1,893,652 Class B 772,890 Class C 353,735 Class N 204,775 - -------------------------------------------------------------------------------- Shareholder communications: Class A 170,569 Class B 55,705 Class C 20,478 Class N 5,085 - -------------------------------------------------------------------------------- Custodian fees and expenses 9,817 - -------------------------------------------------------------------------------- Trustees' compensation 7,733 - -------------------------------------------------------------------------------- Other 291,459 ------------- Total expenses 10,393,010 Less reduction to custodian expenses (1,613) Less payments and waivers of expenses (2,198,173) ------------- Net expenses 8,193,224 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 1,097,313 - -------------------------------------------------------------------------------- NET REALIZED GAIN ON INVESTMENTS 3,172 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,100,485 ============= SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 16 | OPPENHEIMER CASH RESERVES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------YEAR ENDED JULY 31, 2004 2003 - ---------------------------------------------------------------------------------------------- OPERATIONS - ---------------------------------------------------------------------------------------------- Net investment income $ 1,097,313 $ 3,924,750 - ---------------------------------------------------------------------------------------------- Net realized gain 3,172 73,568 ----------------------------------- Net increase in net assets resulting from operations 1,100,485 3,998,318 - ---------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income: Class A (685,870) (2,404,957) Class B (257,841) (1,044,894) Class C (98,460) (272,812) Class N (55,142) (202,087) - ---------------------------------------------------------------------------------------------- Distributions from net realized gain: Class A -- (32,551) Class B -- (28,468) Class C -- (8,440) Class N -- (3,523) - ---------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS Net increase (decrease) in net assets resulting from beneficial interest transactions: Class A (80,451,332) 25,949,775 Class B (97,689,917) (101,017,788) Class C 2,433,081 (16,470,114) Class N 4,958,877 9,589,171 - ---------------------------------------------------------------------------------------------- NET ASSETS - ---------------------------------------------------------------------------------------------- Total decrease (170,746,119) (81,948,370) - ---------------------------------------------------------------------------------------------- Beginning of period 941,593,112 1,023,541,482 ------------------------------------ End of period $ 770,846,993 $ 941,593,112 ====================================SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 17 | OPPENHEIMER CASH RESERVES FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
CLASS A YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ----------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 .01 .01 .05 .05 Net realized gain -- 1 --1 -- 1 -- -- ------------------------------------------------------------------------------ Total from investment operations -- 1 .01 .01 .05 .05 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 (.01) (.01) (.05) (.05) Distributions from net realized gain -- -- 1 -- 1 -- -- ------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders -- 1 (.01) (.01) (.05) (.05) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================== - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.17% 0.54% 1.31% 4.84% 5.10% - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 385,393 $ 465,843 $ 439,893 $ 395,898 $ 317,198 - ----------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 405,288 $ 451,634 $ 405,285 $ 351,490 $ 312,440 - ----------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:3 Net investment income 0.17% 0.53% 1.30% 4.67% 5.00% Total expenses 1.22% 1.16% 1.17% 1.15% 1.06% Expenses after payments and waivers and reduction to custodian expenses 0.99% 1.00% 1.16% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 | OPPENHEIMER CASH RESERVES
CLASS B YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ---------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 -- 1 .01 .04 .04 Net realized gain -- 1 -- 1 -- 1 -- -- ----------------------------------------------------------------------------- Total from investment operations -- 1 -- 1 .01 .04 .04 - ---------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 -- 1 (.01) (.04) (.04) Distributions from net realized gain -- -- 1 -- 1 -- -- ----------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 1 -- 1 (.01) (.04) (.04) - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================= - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.11% 0.27% 0.76% 4.25% 4.52% - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 219,061 $ 316,750 $ 417,768 $ 239,201 $ 172,345 - ---------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 247,836 $ 385,078 $ 288,676 $ 208,775 $ 225,824 - ---------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.10% 0.27% 0.75% 4.07% 4.40% Total expenses 1.34% 1.37% 1.71% 1.70% 1.61% Expenses after payments and waivers and reduction to custodian expenses 1.04% 1.27% 1.70% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER CASH RESERVES FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
CLASS C YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 -- 1 .01 .04 .04 Net realized gain -- 1 -- 1 -- 1 -- -- ---------------------------------------------------------------------------- Total from investment operations -- 1 -- 1 .01 .04 .04 - --------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 -- 1 (.01) (.04) (.04) Distributions from net realized gain -- -- 1 -- 1 -- -- ---------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 1 -- 1 (.01) (.04) (.04) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================ - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.10% 0.25% 0.76% 4.26% 4.52% - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 109,083 $ 106,650 $ 123,120 $ 85,076 $ 49,382 - --------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 97,058 $ 113,569 $ 85,893 $ 68,741 $ 59,556 - --------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.10% 0.24% 0.80% 4.07% 4.44% Total expenses 1.39% 1.41% 1.71% 1.70% 1.61% Expenses after payments and waivers and reduction to custodian expenses 1.05% 1.28% 1.70% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 | OPPENHEIMER CASH RESERVES
CLASS N YEAR ENDED JULY 31, 2004 2003 2002 2001 1 - -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 - -------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 2 -- 2 .01 .01 Net realized gain -- 2 -- 2 -- 2 -- ---------------------------------------------------------------- Total from investment operations -- 2 -- 2 .01 .01 - -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 2 -- 2 (.01) (.01) Distributions from net realized gain -- -- 2 -- 2 -- ---------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 2 -- 2 (.01) (.01) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ================================================================ - -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 3 0.10% 0.43% 1.08% 1.49% - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 57,309 $ 52,350 $ 42,761 $ 4,275 - -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 55,961 $ 49,145 $ 21,014 $ 737 - -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 0.10% 0.41% 0.68% 3.03% Total expenses 1.39% 1.24% 1.47% 1.19% Expenses after payments and waivers and reduction to custodian expenses 1.06% 1.11% 1.46% N/A 51. For the period from March 1, 2001 (inception of offering) to July 31, 2001. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 21 | OPPENHEIMER CASH RESERVES NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Cash Reserves (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund’s investment objective is to seek the maximum current income that is consistent with stability of principal. The Fund’s investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A shares are sold at their offering price, which is the net asset value per share without any initial sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. Class B shares will automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently followed by the Fund.
- -------------------------------------------------------------------------------- SECURITIES VALUATION. Portfolio securities are valued on the basis of amortized cost, which approximates market value. - --------------------------------------------------------------------------------JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income to shareholders, therefore, no federal income or excise tax provision is required.
22 | OPPENHEIMER CASH RESERVESThe tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years for federal income tax purposes.
UNDISTRIBUTED NET UNDISTRIBUTED ACCUMULATED INVESTMENT INCOME LONG-TERM GAIN LOSS CARRYFORWARD 1,2 ------------------------------------------------------------------- $84,664 $-- $-- 1. During the fiscal year ended July 31, 2004, the Fund did not utilize any capital loss carryforward. 2. During the fiscal year ended July 31, 2003, the Fund did not utilize any capital loss carryforward.Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
The tax character of distributions paid during the years ended July 31, 2004 and July 31, 2003 was as follows:
YEAR ENDED YEAR ENDED JULY 31, 2004 JULY 31, 2003 ------------------------------------------------------------------- Distributions paid from: Ordinary income $ 1,097,313 $ 3,924,750 Long-term capital gain -- 72,982 --------------------------------- Total $ 1,097,313 $ 3,997,732 ================================= - --------------------------------------------------------------------------------TRUSTEES’ COMPENSATION. 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 the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of 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 investment income per share. Amounts will be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually.
- -------------------------------------------------------------------------------- EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable, represents earnings on cash balances maintained by the Fund. 23 | OPPENHEIMER CASH RESERVES NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets 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 INTERESTThe Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
YEAR ENDED JULY 31, 2004 YEAR ENDED JULY 31, 2003 SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------ CLASS A Sold 488,619,859 $ 488,619,859 645,438,961 $ 645,438,961 Dividends and/or distributions reinvested 638,759 638,759 2,267,138 2,267,138 Redeemed (569,709,950) (569,709,950) (621,756,324) (621,756,324) ------------------------------------------------------------------------- Net increase (decrease) (80,451,332) $ (80,451,332) 25,949,775 $ 25,949,775 ========================================================================= - ------------------------------------------------------------------------------------------------------ CLASS B Sold 244,796,543 $ 244,796,543 387,633,392 $ 387,633,392 Dividends and/or distributions reinvested 223,924 223,924 989,218 989,218 Redeemed (342,710,384) (342,710,384) (489,640,398) (489,640,398) ------------------------------------------------------------------------- Net decrease (97,689,917) $ (97,689,917) (101,017,788) $(101,017,788) ========================================================================= - ------------------------------------------------------------------------------------------------------ CLASS C Sold 201,146,784 $ 201,146,784 236,359,515 $ 236,359,515 Dividends and/or distributions reinvested 86,278 86,278 256,705 256,705 Redeemed (198,799,981) (198,799,981) (253,086,334) (253,086,334) ------------------------------------------------------------------------- Net increase (decrease) 2,433,081 $ 2,433,081 (16,470,114) $ (16,470,114) ========================================================================= - ------------------------------------------------------------------------------------------------------ CLASS N Sold 97,262,364 $ 97,262,364 156,184,467 $ 156,184,467 Dividends and/or distributions reinvested 53,182 53,182 204,581 204,581 Redeemed (92,356,669) (92,356,669) (146,799,877) (146,799,877) ------------------------------------------------------------------------- Net increase 4,958,877 $ 4,958,877 9,589,171 $ 9,589,171 =========================================================================24 | OPPENHEIMER CASH RESERVES - -------------------------------------------------------------------------------- 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.50% of the first $250 million of average annual net assets, 0.475% of the next $250 million, 0.45% of the next $250 million, 0.425% of the next $250 million, and 0.40% of net assets in excess of $1 billion.
- -------------------------------------------------------------------------------- ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. - --------------------------------------------------------------------------------TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended July 31, 2004, the Fund paid $2,682,208 to OFS for services to the Fund.
- -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the Fund's classes of shares. - --------------------------------------------------------------------------------SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.20% of the average annual net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions quarterly for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services in connection with the distribution of those shares and servicing accounts. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B and Class C shares and 0.25% per year on Class N shares. Effective January 1, 2003, the Fund decreased the asset-based sales charge on Class B and Class C shares to 0.50% of average daily net assets per annum. The Distributor is entitled to receive a service fee of 0.25% per year under each plan, but the Board of Trustees has not authorized the Fund to pay the service fees on Class B and Class C shares at this time. If either the Class B, Class C or Class N plan is terminated by the Fund or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor’s aggregate uncompensated
25 | OPPENHEIMER CASH RESERVES NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continuedexpenses under the plan at July 31, 2004 for Class N shares were $3,587,557. Fees incurred by the Fund under the plans are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------SALES CHARGES. Contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N CONTINGENT CONTINGENT CONTINGENT CONTINGENT DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES RETAINED BY RETAINED BY RETAINED BY RETAINED BY YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - ---------------------------------------------------------------------------------------------- July 31, 2004 $192,874 $298,926 $94,152 $336,882- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Effective December 6, 2002, the Manager has agreed to limit the Fund’s management fee to 0.40% of the Fund’s average net assets for each class of shares. As a result of this limitation the Fund was reimbursed $574,382 for the year ended July 31, 2004. This expense limitation can be amended or terminated at any time without advance notice.
Prior to April 28, 2003, OFS had voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes, up to an annual rate of 0.35% of average net assets per class. Effective April 28, 2003, transfer agent fees for all classes are limited to the lesser of 0.35% of average daily net assets or to an amount (but not less than zero) necessary to allow each class of the Fund to maintain a 7-day yield of at least approximately 0.10%. During the year ended July 31, 2004, OFS waived $654,720, $562,778, $260,880 and $145,413 for Class A, Class B, Class C and Class N shares, respectively. Each of the above-mentioned voluntary undertakings may be further amended or withdrawn at any time.
- -------------------------------------------------------------------------------- 4. ILLIQUID SECURITIESAs of July 31, 2004, investments in securities included issues that are illiquid. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund will not invest more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. The aggregate value of illiquid securities subject to this limitation as of July 31, 2004 was $26,600,000, which represents 3.45% of the Fund’s net assets.
26 | OPPENHEIMER CASH RESERVES 5. SUBSEQUENT EVENTS - LITIGATIONThree complaints have been filed as putative derivative and class actions against the Manager, OFS and the Distributor (collectively, “OppenheimerFunds”), as well as 51 of the Oppenheimer funds (collectively, the “Funds”) excluding this Fund, and nine directors/trustees of certain of the Funds (collectively, the “Directors/Trustees”). The complaints allege that the Manager charged excessive fees for distribution and other costs, improperly used assets of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the Funds, and failed to properly disclose the use of Fund assets to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. The complaints further allege that by permitting and/or participating in those actions, the Directors/Trustees breached their fiduciary duties to Fund shareholders under the Investment Company Act of 1940 and at common law.
OppenheimerFunds believes that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them, the Funds or the Directors/Trustees and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. However, OppenheimerFunds, the Funds and the Directors/Trustees believe that the allegations contained in the complaints are without merit and intend to defend these lawsuits vigorously.
27 | OPPENHEIMER CASH RESERVES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER CASH RESERVES:We have audited the accompanying statement of assets and liabilities of Oppenheimer Cash Reserves, including the statement of investments, as of July 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2004, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Cash Reserves as of July 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP Denver, Colorado September 21, 2004 28 | OPPENHEIMER CASH RESERVES FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------In early 2005, if applicable, shareholders of record will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 2004. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service.
None of the dividends paid by the Fund during the year ended July 31, 2004 are qualified dividend income or eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES Unaudited - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, (ii) on the Fund’s website at www.oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file new Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s Form N-PX filing is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at http://www.sec.gov. Those forms may be reviewed and copied and the SEC’s Public Reference Room in Washington D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
29 | OPPENHEIMER CASH RESERVES TRUSTEES AND OFFICERS Unaudited - --------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER FUND, LENGTH OF SERVICE, AGE TRUSTEESHIPS/DIRECTORSHIPS HELD BY TRUSTEE; NUMBER OF PORTFOLIOS IN FUND COMPLEX CURRENTLY OVERSEEN BY TRUSTEE INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TRUSTEES TUCSON WAY, CENTENNIAL, CO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL. WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Vice Chairman (since 2003) Cherry Creek Mortgage Company (since 1991), Centennial State and Trustee (since 2000) Mortgage Company (since 1994), The El Paso Mortgage Company Age: 67 (since 1993), Transland Financial Services, Inc. (since 1997); Chairman of the following private companies: Great Frontier Insurance (insurance agency) (since 1995), Ambassador Media Corporation and Broadway Ventures (since 1984); a director of the following public companies: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992) and UNUMProvident (insurance company) (since 1991). Mr. Armstrong is also a Director/Trustee of Campus Crusade for Christ and the Bradley Foundation. Formerly a director of the following: Storage Technology Corporation (a publicly-held computer equipment company) (1991-February 2003), and International Family Entertainment (television channel) (1992-1997), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-1999), and Frontier Title (title insurance agency) (1995-June 1999); a U.S. Senator (January 1979-January 1991). Oversees 38 portfolios in the OppenheimerFunds complex. ROBERT G. AVIS, Formerly, Director and President of A.G. Edwards Capital, Inc. Trustee (since 1993) (General Partner of private equity funds) (until February Age: 73 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until March 2000); Vice Chairman and Director of A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons, Inc. (its brokerage company subsidiary) (until March 1999); Chairman of A.G. Edwards Trust Company and A.G.E. Asset Management (investment advisor) (until March 1999); and a Director (until March 2000) of A.G. Edwards & Sons and A.G. Edwards Trust Company. Oversees 38 portfolios in the OppenheimerFunds complex. GEORGE C. BOWEN, Formerly Assistant Secretary and a director (December Trustee (since 1998) 1991-April 1999) of Centennial Asset Management Corporation; Age: 67 President, Treasurer and a director (June 1989-April 1999) of Centennial Capital Corporation; Chief Executive Officer and a director of MultiSource Services, Inc. (March 1996-April 1999). Until April 1999 Mr. Bowen held several positions in subsidiary or affiliated companies of the Manager. Oversees 38 portfolios in the OppenheimerFunds complex. EDWARD L. CAMERON, A member of The Life Guard of Mount Vernon, George Trustee (since 2000) Washington's home (since June 2000). Formerly Director (March Age: 65 2001-May 2002) of Genetic ID, Inc. and its subsidiaries (a privately held biotech company); a partner (July 1974-June 1999) with PricewaterhouseCoopers LLP (an accounting firm); and Chairman (July 1994-June 1998) of Price Waterhouse LLP Global Investment Management Industry Services Group. Oversees 38 portfolios in the OppenheimerFunds complex. JON S. FOSSEL, Director (since February 1998) of Rocky Mountain Elk Trustee (since 1990) Foundation (a not-for-profit foundation); a director (since Age: 62 1997) of Putnam Lovell Finance (finance company); a director (since June 2002) of UNUMProvident (an insurance company). Formerly a director (October 1999-October 2003) of P.R. Pharmaceuticals (a privately held company); Chairman and a director (until October 1996) and President and Chief Executive Officer (until October 1995) of the Manager; President, Chief Executive Officer and a director (until October 1995) of30 | OPPENHEIMER CASH RESERVES TRUSTEES AND OFFICERS Unaudited / Continued - --------------------------------------------------------------------------------
JON S. FOSSEL, Oppenheimer Acquisition Corp., Shareholders Services Inc. and Continued Shareholder Financial Services, Inc. Oversees 38 portfolios in the OppenheimerFunds complex. SAM FREEDMAN, Director of Colorado Uplift (a non-profit charity) (since Trustee (since 1996) September 1984). Formerly (until October 1994) Mr. Freedman Age: 63 held several positions in subsidiary or affiliated companies of the Manager. Oversees 38 portfolios in the OppenheimerFunds complex. BEVERLY L. HAMILTON, Trustee of Monterey International Studies (an educational Trustee (since 2002) organization) (since February 2000); a director of The Age: 57 California Endowment (a philanthropic organization) (since April 2002) and of Community Hospital of Monterey Peninsula (educational organization) (since February 2002); a director of America Funds Emerging Markets Growth Fund (since October 1991) (an investment company); an advisor to Credit Suisse First Boston's Sprout venture capital unit. Mrs. Hamilton also is a member of the investment committees of the Rockefeller Foundation and of the University of Michigan. Formerly, Trustee of MassMutual Institutional Funds (open-end investment company) (1996-May 2004); a director of MML Series Investment Fund (April 1989-May 2004) and MML Services (April 1987-May 2004) (investment companies); member of the investment committee (2000-2003) of Hartford Hospital; an advisor (2000-2003) to Unilever (Holland)'s pension fund; and President (February 1991-April 2000) of ARCO Investment Management Company. Oversees 37 portfolios in the OppenheimerFunds complex. ROBERT J. MALONE, Chairman, Chief Executive Officer and Director of Steele Trustee (since 2002) Street State Bank (a commercial banking entity) (since August Age: 60 2003); director of Colorado UpLIFT (a non-profit organization) (since 1986); trustee (since 2000) of the Gallagher Family Foundation (non-profit organization). Formerly, Chairman of U.S. Bank-Colorado (a subsidiary of U.S. Bancorp and formerly Colorado National Bank,) (July 1996-April 1, 1999), a director of: Commercial Assets, Inc. (a REIT) (1993-2000), Jones Knowledge, Inc. (a privately held company) (2001-July 2004) and U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees 37 portfolios in the OppenheimerFunds complex. F. WILLIAM MARSHALL, JR., Trustee of MassMutual Institutional Funds (since 1996) and MML Trustee (since 2000) Series Investment Fund (since 1987) (both open-end investment Age: 62 companies) and the Springfield Library and Museum Association (since 1995) (museums) and the Community Music School of Springfield (music school) (since 1996); Trustee (since 1987), Chairman of the Board (since 2003) and Chairman of the investment committee (since 1994) for the Worcester Polytech Institute (private university); and President and Treasurer (since January 1999) of the SIS Fund (a private not for profit charitable fund). Formerly, member of the investment committee of the Community Foundation of Western Massachusetts (1998 - 2003); Chairman (January 1999-July 1999) of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank); and Executive Vice President (January 1999-July 1999) of Peoples Heritage Financial Group, Inc. (commercial bank). Oversees 38 portfolios in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IN THE CHART BELOW IS TWO WORLD AND OFFICER FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY 10281-1008. MR. MURPHY SERVES FOR AN INDEFINITE TERM, UNTIL HIS RESIGNATION, DEATH OR REMOVAL. JOHN V. MURPHY, Chairman, Chief Executive Officer and director (since June President and Trustee 2001) and President (since September 2000) of the Manager; (since 2001) President and a director or trustee of other Oppenheimer Age: 55 funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. (the Manager's parent holding company) and31 | OPPENHEIMER CASH RESERVES
JOHN V. MURPHY, of Oppenheimer Partnership Holdings, Inc. (a holding company Continued subsidiary of the Manager); a director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager); President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company that owns the shares of Babson Capital Management LLC); a member of the Investment Company Institute's Board of Governors (elected to serve from October 3, 2003 through September 30, 2006). Formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 73 portfolios as Trustee/Director and 10 portfolios as Officer in the OppenheimerFunds complex. - ------------------------------------------------------------------------------------------------------- OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MR. ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY 10281-1008, FOR MESSRS. VANDEHEY, WEISS, WIXTED, AND MS. WOLF, 6803 S. TUCSON WAY, CENTENNIAL, CO 80112-3924. EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS OR HER EARLIER RESIGNATION, DEATH OR REMOVAL. BARRY D. WEISS, Vice President of the Manager (since July 2001) and of Vice President (since 2001) HarbourView Asset Management Corporation (since June 2003); an Age: 40 officer of 6 portfolios in the OppenheimerFunds complex. Formerly Assistant Vice President and Senior Credit Analyst of the Manager (February 2000-June 2001). Prior to joining the Manager in February 2000, he was Associate Director, Structured Finance, Fitch IBCA Inc. (April 1998 - February 2000). CAROL E. WOLF, Senior Vice President of the Manager (since June 2000) and of Vice President (since 1998) HarbourView Asset Management Corporation (since June 2003); an Age: 52 officer of 6 portfolios in the OppenheimerFunds complex. Formerly Vice President of the Manager (June 1990 - June 2000). BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Treasurer (since 1999) Manager; Treasurer of HarbourView Asset Management Age: 44 Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private Investments, Inc. (since March 2000), of OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), of OFI Institutional Asset Management, Inc. (since November 2000), and of OppenheimerFunds Legacy Program (a Colorado non-profit corporation) (since June 2003); Treasurer and Chief Financial Officer (since May 2000) of OFI Trust Company (a trust32 | OPPENHEIMER CASH RESERVES TRUSTEES AND OFFICERS Unaudited / Continued - --------------------------------------------------------------------------------
BRIAN W. WIXTED, company subsidiary of the Manager); Assistant Treasurer (since Continued March 1999) of Oppenheimer Acquisition Corp. Formerly Assistant Treasurer of Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer (March 1995-March 1999) at Bankers Trust Company-Mutual Fund Services Division. An officer of 83 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Vice President and Secretary Counsel (since February 2002) of the Manager; General Counsel (since 2001) and a director (since November 2001) of the Distributor; Age: 56 General Counsel (since November 2001) of Centennial Asset Management Corporation; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Secretary and General Counsel (since November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a director (since October 1997) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and a director (since November 2001) of Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private Investments, Inc. and OFI Trust Company; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Senior Vice President and General Counsel (since November 2001) of OFI Institutional Asset Management, Inc.; a director (since June 2003) of OppenheimerFunds (Asia) Limited. Formerly Senior Vice President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); and OppenheimerFunds International Ltd. (October 1997-November 2001). An officer of 83 portfolios in the OppenheimerFunds complex. MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since Vice President and Chief March 2004) of the Manager; Vice President (since June 1983) Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset (since 2004) Management Corporation and Shareholder Services, Inc. Formerly Age: 53 (until February 2004) Vice President and Director of Internal Audit of OppenheimerFunds, Inc. An officer of 83 portfolios in the Oppenheimer funds complex.
THE FUND’S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND’S TRUSTEES AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST.
33 | OPPENHEIMER CASH RESERVES UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-8799 Oppenheimer Capital Preservation Fund (Exact name of registrant as specified in charter) 6803 South Tucson Way, Centennial, Colorado 80112-3924 (Address of principal executive offices) (Zip code) Robert G. Zack, Esq. OppenheimerFunds, Inc. Two World Financial Center, New York, New York 10281-1008 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 -------------- Date of fiscal year end: October 31 Date of reporting period: November 1, 2003 - April 30, 2004 Item 1. Reports to Stockholders. STATEMENT OF INVESTMENTS April 30, 2004 / Unaudited - -------------------------------------------------------------------------------- MARKET VALUE SHARES SEE NOTE 1 - -------------------------------------------------------------------------------- INVESTMENTS IN AFFILIATED COMPANIES--101.2% - -------------------------------------------------------------------------------- FIXED INCOME FUNDS--96.0% Oppenheimer Bond Fund, Cl. Y 3,566,568 $ 36,664,323 - -------------------------------------------------------------------------------- Oppenheimer Limited-Term Government Fund, Cl. Y 1 24,259,859 247,693,156 - -------------------------------------------------------------------------------- Oppenheimer Strategic Income Fund, Cl. Y 14,953,147 62,354,622 ------------- 346,712,101 - -------------------------------------------------------------------------------- MONEY MARKET FUND--5.2% Oppenheimer Money Market Fund, Inc. 18,654,328 18,654,328 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $359,427,181) 101.2% 365,366,429 - -------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (1.2) (4,400,666) -------------------------- NET ASSETS 100.0% $360,965,763 ========================== FOOTNOTE TO STATEMENT OF INVESTMENTS 1. Represents ownership of at least 5% of the issuer. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 9 | OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENT OF ASSETS AND LIABILITIES Unaudited - --------------------------------------------------------------------------------April 30, 2004 - ------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------ Investments, at value--affiliated companies (cost $359,427,181)--see accompanying statement of investments $365,366,429 - ------------------------------------------------------------------------------------ Cash used for collateral on futures 55,000 - ------------------------------------------------------------------------------------ Receivables and other assets: Interest and dividends 702,199 Shares of beneficial interest sold 610,169 Other 8,343 ------------- Total assets 366,742,140 - ------------------------------------------------------------------------------------ LIABILITIES - ------------------------------------------------------------------------------------ Bank overdraft 55,200 - ------------------------------------------------------------------------------------ Payables and other liabilities: Wrapper agreement 4,400,298 Shares of beneficial interest redeemed 1,093,190 Distribution and service plan fees 73,645 Transfer and shareholder servicing agent fees 66,316 Shareholder communications 32,470 Trustees' compensation 17,578 Futures margins 12,594 Dividends 186 Other 24,900 ------------- Total liabilities 5,776,377 - ------------------------------------------------------------------------------------ NET ASSETS $360,965,763 ============= - ------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS - ------------------------------------------------------------------------------------ Paid-in capital $359,343,843 - ------------------------------------------------------------------------------------ Accumulated net investment income 750,361 - ------------------------------------------------------------------------------------ Accumulated net realized loss on investments (977,960) - ------------------------------------------------------------------------------------ Net unrealized appreciation on investments and wrapper agreement 1,849,519 ------------- NET ASSETS $360,965,763 =============10 | OPPENHEIMER CAPITAL PRESERVATION FUND
- ----------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE - ----------------------------------------------------------------------------------------- Class A Shares: Net asset value and redemption price per share (based on net assets of $95,064,437 and 9,506,846 shares of beneficial interest outstanding) $10.00 Maximum offering price per share (net asset value plus sales charge of 3.50% of offering price) $10.36 - ----------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $11,050,455 and 1,105,192 shares of beneficial interest outstanding) $10.00 - ----------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $27,971,507 and 2,797,195 shares of beneficial interest outstanding) $10.00 - ----------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $226,550,979 and 22,654,513 shares of beneficial interest outstanding) $10.00 - ----------------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $328,385 and 32,829 shares of beneficial interest outstanding) $10.00SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 11 | OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENT OF OPERATIONS Unaudited - --------------------------------------------------------------------------------
For the Six Months Ended April 30, 2004 - ------------------------------------------------------------------------------------- INVESTMENT INCOME - ------------------------------------------------------------------------------------- Dividends from affiliated companies $5,825,910 - ------------------------------------------------------------------------------------- Interest 174,319 ----------- Total investment income 6,000,229 - ------------------------------------------------------------------------------------- EXPENSES - ------------------------------------------------------------------------------------- Management fees 1,303,364 - ------------------------------------------------------------------------------------- Distribution and service plan fees: Class A 118,925 Class B 51,886 Class C 132,029 Class N 275,952 - ------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 189,821 Class B 35,305 Class C 81,267 Class N 301,824 Class Y 24 - ------------------------------------------------------------------------------------- Shareholder communications: Class A 5,609 Class B 3,090 Class C 5,300 Class N 2,741 - ------------------------------------------------------------------------------------- Wrapper fees 290,165 - ------------------------------------------------------------------------------------- Trustees' compensation 9,053 - ------------------------------------------------------------------------------------- Custodian fees and expenses 4,844 - ------------------------------------------------------------------------------------- Other 58,758 ----------- Total expenses 2,869,957 Less reduction to custodian expenses (188) Less reimbursement of management fees (801,855) Less voluntary waiver of transfer and shareholder servicing agent fees: Class A (31,814) Class B (17,539) Class C (37,541) ----------- Net expenses 1,981,020 - ------------------------------------------------------------------------------------- NET INVESTMENT INCOME 4,019,20912 | OPPENHEIMER CAPITAL PRESERVATION FUND - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- Net realized loss on: Investments from affiliated companies $ (182,122) Closing of futures contracts (105,200) ----------- Net realized loss (287,322) - --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments from affiliated companies 185,361 Futures contracts 156,828 Wrapper agreement (768,242) ----------- Net change in unrealized appreciation (426,053) - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,305,834 =========== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 13 | OPPENHEIMER CAPITAL PRESERVATION FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------SIX MONTHS YEAR ENDED ENDED APRIL 30, 2004 OCTOBER 31, (UNAUDITED) 2003 - -------------------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------------------- Net investment income $ 4,019,209 $ 6,214,999 - -------------------------------------------------------------------------------------------- Net realized gain (loss) (287,322) 148,845 - -------------------------------------------------------------------------------------------- Net change in unrealized appreciation (426,053) (104,304) ----------------------------- Net increase in net assets resulting from operations 3,305,834 6,259,540 - -------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------------------- Dividends from net investment income: Class A (896,529) (1,969,962) Class B (57,317) (104,775) Class C (145,692) (249,835) Class N (2,151,829) (3,927,405) Class Y (7,265) (7,561) - -------------------------------------------------------------------------------------------- Distributions from net realized gain: Class A (12,791) -- Class B (1,362) -- Class C (3,513) -- Class N (29,437) -- Class Y (99) -- - -------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS - -------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from beneficial interest transactions: Class A 337,244 16,147,988 Class B 1,065,291 4,781,818 Class C 3,566,768 11,965,018 Class N 6,958,985 100,792,528 Class Y (396,440) 722,428 - -------------------------------------------------------------------------------------------- NET ASSETS - -------------------------------------------------------------------------------------------- Total increase 11,531,848 134,409,782 - -------------------------------------------------------------------------------------------- Beginning of period 349,433,915 215,024,133 ----------------------------- End of period (including accumulated net investment income (loss) of $750,361 and $(10,216), respectively) $360,965,763 $349,433,915 =============================SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 14 | OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED ENDED APRIL 30, 2004 OCT. 31, CLASS A (UNAUDITED) 2003 2002 2001 2000 1999 1 - ------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 - ------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .11 .22 .42 .56 .57 .05 Net realized and unrealized gain (loss) (.02) -- .09 .02 .03 -- ---------------------------------------------------------- Total from investment operations .09 .22 .51 .58 .60 .05 - ------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.09) (.22) (.41) (.55) (.60) (.05) Distributions from net realized gain -- 2 -- -- -- -- -- Tax return of capital distribution -- -- (.10) (.03) -- -- ---------------------------------------------------------- Total dividends and/or distributions to shareholders (.09) (.22) (.51) (.58) (.60) (.05) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 ========================================================== - ------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 0.95% 2.22% 5.25% 6.00% 6.18% 0.55% - ------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $95,064 $94,727 $78,552 $50,179 $10,431 $ 100 - ------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $95,808 $92,035 $62,359 $33,976 $ 7,171 $ 100 - ------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 2.31% 2.11% 3.90% 5.39% 5.55% 5.75% Total expenses 1.60% 1.70% 1.71% 1.58% 1.96% 1.55% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.08% 1.09% 1.18% 1.14% 1.51% 1.12% - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 20% 47% 36% 89% 0%1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 15 | OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED ENDED APRIL 30, 2004 OCT. 31, CLASS B (UNAUDITED) 2003 2002 2001 2000 1999 1 - ---------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ---------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $10.00 $10.00 $10.00 $10.00 $10.00 - ---------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .07 .14 .37 .50 .51 .05 Net realized and unrealized gain (loss) (.02) -- .08 .02 .02 -- ------------------------------------------------------- Total from investment operations .05 .14 .45 .52 .53 .05 - ---------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.05) (.14) (.35) (.49) (.53) (.05) Distributions from net realized gain -- 2 -- -- -- -- -- Tax return of capital distribution -- -- (.10) (.03) -- -- ------------------------------------------------------- Total dividends and/or distributions to shareholders (.05) (.14) (.45) (.52) (.53) (.05) - ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.00 $10.00 $10.00 $10.00 $10.00 $10.00 ======================================================= - ---------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 0.56% 1.45% 4.59% 5.31% 5.43% 0.48% - ---------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $11,050 $9,987 $5,205 $1,777 $ 331 $ 1 - ---------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $10,430 $8,055 $3,337 $ 676 $ 82 $ 1 - ---------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 1.50% 1.31% 3.15% 4.61% 4.55% 5.10% Total expenses 2.68% 2.77% 2.37% 2.34% 2.71% 2.25% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.89% 1.87% 1.84% 1.90% 2.26% 1.81% - ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 20% 47% 36% 89% 0%1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 16 | OPPENHEIMER CAPITAL PRESERVATION FUND
SIX MONTHS YEAR ENDED ENDED APRIL 30, 2004 OCT. 31, CLASS C (UNAUDITED) 2003 2002 2001 2000 1999 1 - ------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 - ------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .07 .14 .38 .51 .50 .05 Net realized and unrealized gain (loss) (.02) -- .07 .01 .03 -- ---------------------------------------------------------- Total from investment operations .05 .14 .45 .52 .53 .05 - ------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.05) (.14) (.35) (.49) (.53) (.05) Distributions from net realized gain -- 2 -- -- -- -- -- Tax return of capital distribution -- -- (.10) (.03) -- -- ---------------------------------------------------------- Total dividends and/or distributions to shareholders (.05) (.14) (.45) (.52) (.53) (.05) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 ========================================================== - ------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 0.56% 1.43% 4.58% 5.31% 5.43% 0.48% - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $27,972 $24,405 $12,437 $1,845 $ 48 $ 1 - ------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $26,547 $19,334 $ 6,790 $ 652 $ 25 $ 1 - ------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 1.53% 1.31% 3.07% 4.54% 4.65% 5.10% Total expenses 2.60% 2.67% 2.35% 2.36% 2.71% 2.25% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.87% 1.87% 1.82% 1.92% 2.26% 1.81% - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 20% 47% 36% 89% 0%1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 17 | OPPENHEIMER CAPITAL PRESERVATION FUND FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED ENDED APRIL 30, 2004 OCT. 31, CLASS N (UNAUDITED) 2003 2002 2001 1 - -------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - -------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $10.00 - -------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .12 .23 .45 .38 Net realized and unrealized gain (loss) (.02) -- .07 -- 2 ------------------------------------------- Total from investment operations .10 .23 .52 .38 - -------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.10) (.23) (.42) (.36) Distributions from net realized gain -- 2 -- -- -- Tax return of capital distribution -- -- (.10) (.02) ------------------------------------------- Total dividends and/or distributions to shareholders (.10) (.23) (.52) (.38) - -------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $10.00 =========================================== - -------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 0.98% 2.37% 5.29% 3.88% - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $226,551 $219,590 $118,829 $7,311 - -------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $222,032 $180,665 $ 63,485 $3,002 - -------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 2.37% 2.16% 3.86% 5.18% Total expenses 1.46% 1.45% 1.52% 1.64% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.01% 1.01% 0.99% 1.20% - -------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 20% 47% 36%1. For the period from March 1, 2001 (inception of offering) to October 31, 2001. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 | OPPENHEIMER CAPITAL PRESERVATION FUND
SIX MONTHS YEAR ENDED ENDED APRIL 30, 2004 OCT. 31, CLASS Y (UNAUDITED) 2003 2002 2001 2000 1999 1 - ----------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 $10.00 $10.00 $10.00 $10.00 $10.00 - ----------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .19 .39 .41 .58 .59 .06 Net realized and unrealized gain (loss) (.07) (.08) .11 .03 .03 -- -------------------------------------------------------- Total from investment operations .12 .31 .52 .61 .62 .06 - ----------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.12) (.31) (.42) (.58) (.62) (.06) Distributions from net realized gain -- 2 -- -- -- -- -- Tax return of capital distribution -- -- (.10) (.03) -- -- -------------------------------------------------------- Total dividends and/or distributions to shareholders (.12) (.31) (.52) (.61) (.62) (.06) - ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.00 $10.00 $10.00 $10.00 $10.00 $10.00 ======================================================== - ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 1.24% 3.15% 5.35% 6.25% 6.43% 0.57% - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 328 $ 725 $ 2 $ 2 $ 1 $ 1 - ----------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 586 $ 368 $ 2 $ 2 $ 1 $ 1 - ----------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 2.95% 2.53% 4.13% 5.73% 5.88% 6.19% Total expenses 0.95% 0.96% 67.64% 43.02% 1.71% 1.15% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 0.50% 0.52% 1.09% 0.82% 1.26% 0.72% - ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 20% 47% 36% 89% 0%1. For the period from September 27, 1999 (commencement of operations) to October 31, 1999. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Unaudited - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Capital Preservation Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund’s investment objective is to seek high current income while seeking to maintain a stable value per share. The Fund’s investment advisor is OppenheimerFunds, Inc. (the Manager). Shares of the Fund are offered solely to participant-directed qualified retirement plans and 403(b)(7) Custodial Plans meeting specified criteria (the Plans). Plan participant purchases of Fund shares are handled in accordance with each Plan’s specific provisions. Plan participants should contact their Plan administrator for details concerning how they may purchase shares of the Fund.
The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold with a front-end sales charge of 3.50%, and reduced for larger purchases. Class B, Class C and Class N shares are offered without a front-end sales charge, but may be subject to a contingent deferred-sales charge (CDSC) if redeemed within 5 years or 12 months or 18 months, respectively, of purchase. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are offered without front-end and contingent-deferred sales charges. Class Y shares are only available for plans that have special arrangements with OppenheimerFunds Distributor, Inc. (the Distributor). All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses associated with the Underlying Funds. Classes A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. The Fund assesses a 2% fee on the proceeds of fund shares that are redeemed (either by selling or exchanging to another Oppenheimer fund) on less than 12 months prior notice. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital.
The following is a summary of significant accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------WRAPPER AGREEMENT. The Fund will, under normal circumstances, enter into wrapper agreements with insurance companies and banks. If an insurance wrap contract or a synthetic Guaranteed Investment Contract, collectively, “wrapper agreement” obligates the contract provider to maintain the book value of all or a portion of the Fund’s investments up to a specified maximum dollar amount, such contract will be valued at its fair value. The book value of the covered assets is the price the Fund paid for such securities plus interest on those assets accrued at a rate calculated pursuant to a formula specified in the wrapper agreement (“crediting rate”). The crediting rate is normally reset monthly. However, if there is a significant event, such as a material change in interest rates, the crediting rate may be reset more frequently. The fair value of the contract generally will be equal to the difference between the book value and the market value of the Fund’s
20 | OPPENHEIMER CAPITAL PRESERVATION FUNDportfolio investments subject to the contract. If the market value of the Fund’s portfolio investments is greater than its Book Value, the contract value will be reflected as a liability of the Fund in the amount of the difference, i.e. a negative value. If the market value of the Fund’s portfolio investments is less than its Book Value, the contract value will be reflected as an asset of the Fund in the amount of the difference, i.e. a positive value, reflecting the potential liability of the contract provider to the Fund. In performing its fair value determination, the Board of Trustees will take into consideration the creditworthiness of the contract provider and the ability and willingness of the contract provider to pay amounts under the contract. As of April 30, 2004, the Fund has entered into one wrapper agreement, with the Bank of America, NA. Total fees paid for the six months ended April 30, 2004, to Bank of America, NA, for this agreement were $284,597.
The staff of the Securities and Exchange Commission (SEC) has inquired of registered “stable value” mutual funds, including this Fund, as to the valuation methodology used by such funds to value their wrapper agreements. At the present time, the Fund has not received any indication whether or when the SEC will take any action as a result of their review of this matter. If the SEC determines that the valuation method currently used by “stable value” mutual funds is no longer acceptable, the Fund may be required to use a different accounting methodology under which the fair value of the Fund’s wrapper agreements could fluctuate daily, and if that were to occur, the Fund would probably not be able to maintain a stable net asset value per share. As a result, the Fund’s net asset value could be greater or less than $10 per share on a daily basis.
- --------------------------------------------------------------------------------SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. The Fund will, under normal circumstances, invest in Class Y shares of Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund, and in shares of Oppenheimer Money Market Fund, Inc. (collectively referred to as the “underlying funds”). The net asset values of the underlying funds are determined as of the close of the New York Stock Exchange, on each day the Exchange is open for trading.
The Fund may invest in certain portfolio securities, as described in the Fund’s prospectus. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund’s assets are valued. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund’s assets are valued but after the close of their respective foreign exchanges will be fair
21 | OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Unaudited / Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - --------------------------------------------------------------------------------ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required.
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund.
As of April 30, 2004, the Fund had no estimated unused capital loss carryforward available for federal income tax purposes.
- --------------------------------------------------------------------------------TRUSTEES’ COMPENSATION. The Fund has adopted an unfunded 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 six months ended April 30, 2004, the Fund’s projected benefit obligations were increased by $3,677 and payments of $1,186 were made to retired trustees, resulting in an accumulated liability of $12,707 as of April 30, 2004.
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 the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund does purchase shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of 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 investment income per share. Amounts will be deferred until distributed in accordance to the Plan.
22 | OPPENHEIMER CAPITAL PRESERVATION FUND - --------------------------------------------------------------------------------DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. The Board of Trustees, in an effort to maintain a stable net asset value per share in the event of an additional distribution, may declare, effective on the ex-dividend date of an additional distribution, a reverse split of the shares of the Fund in an amount that will cause the total number of shares held by each shareholder, including shares acquired on reinvestment of that distribution, to remain the same as before that distribution was paid. Also, in an effort to maintain a stable net asset value per share, the Fund may distribute return of capital dividends. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually.
- --------------------------------------------------------------------------------INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.
- -------------------------------------------------------------------------------- EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable, represents earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets 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.In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
23 | OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Unaudited / Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTERESTThe Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED APRIL 30, 2004 YEAR ENDED OCTOBER 31, 2003 SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------ CLASS A Sold 2,367,429 $ 23,674,293 5,635,142 $ 56,351,417 Dividends and/or distributions reinvested 89,586 895,868 197,233 1,972,335 Redeemed (2,423,291) (24,232,917) (4,217,576) (42,175,764) --------------------------------------------------------- Net increase 33,724 $ 337,244 1,614,799 $ 16,147,988 ========================================================= - ------------------------------------------------------------------------------------------ CLASS B Sold 325,057 $ 3,250,570 788,002 $ 7,880,026 Dividends and/or distributions reinvested 5,820 58,204 10,502 105,024 Redeemed (224,348) (2,243,483) (320,322) (3,203,232) --------------------------------------------------------- Net increase 106,529 $ 1,065,291 478,182 $ 4,781,818 ========================================================= - ------------------------------------------------------------------------------------------ CLASS C Sold 1,004,876 $ 10,048,755 2,013,047 $ 20,130,482 Dividends and/or distributions reinvested 14,800 148,007 24,997 249,971 Redeemed (662,999) (6,629,994) (841,543) (8,415,435) --------------------------------------------------------- Net increase 356,677 $ 3,566,768 1,196,501 $ 11,965,018 ========================================================= - ------------------------------------------------------------------------------------------ CLASS N Sold 6,039,498 $ 60,394,978 18,082,527 $180,825,268 Dividends and/or distributions reinvested 215,458 2,154,583 394,329 3,943,292 Redeemed (5,559,057) (55,590,576) (8,397,603) (83,976,032) --------------------------------------------------------- Net increase 695,899 $ 6,958,985 10,079,253 $100,792,528 ========================================================= - ------------------------------------------------------------------------------------------ CLASS Y Sold 944 $ 9,440 71,476 $ 714,766 Dividends and/or distributions reinvested 724 7,243 766 7,662 Redeemed (41,312) (413,123) -- -- --------------------------------------------------------- Net increase (decrease) (39,644) $ (396,440) 72,242 $ 722,428 =========================================================- -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the six months ended April 30, 2004, were $46,356,274 and $34,324,256, respectively.
24 | OPPENHEIMER CAPITAL PRESERVATION FUND - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATESMANAGEMENT FEES. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets over $1 billion. The management fees payable by the Fund are reduced by the management fees paid by the underlying Oppenheimer funds on assets representing investments by the Fund in shares of those underlying funds. That is done so that shareholders of the Fund do not pay direct and indirect management fees in excess of 0.75%.
- --------------------------------------------------------------------------------TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the six months ended April 30, 2004, the Fund paid $541,778 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time.
- -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the Fund's classes of shares. - --------------------------------------------------------------------------------SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions quarterly for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services in connection with the distribution of those shares and servicing accounts. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares. The Distributor also receives a service fee of up to 0.25% per year under each plan. If either the Class B, Class C or Class N plan is terminated by the Fund or by the shareholders of
25 | OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Unaudited / Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continueda class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor’s aggregate uncompensated expenses under the plan at April 30, 2004 for Class B, Class C and Class N shares were $305,164, $404,805 and $899,579, respectively. Fees incurred by the Fund under the plans are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - --------------------------------------------------------------------------------------------- April 30, 2004 $126 $6,136 $28,937 $11,295 $94,648- -------------------------------------------------------------------------------- 5. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices (financial futures) or debt securities (interest rate futures) in order to gain exposure to or protection from changes in market value of stocks and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts as a hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or has expired.
26 | OPPENHEIMER CAPITAL PRESERVATION FUNDCash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported in the Statement of Operations as the closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported on the Statement of Operations.
Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities.
As of April 30, 2004, the Fund had outstanding futures contracts as follows:
UNREALIZED EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS APRIL 30, 2004 (DEPRECIATION) - ------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE U.S. Treasury Nts., 2 yr. 6/30/04 6 $1,275,281 $ (9,772) --------- CONTRACTS TO SELL U.S. Treasury Nts., 5 yr. 6/21/04 23 2,528,563 54,359 U.S. Treasury Nts., 10 yr. 6/21/04 27 2,983,500 68,664 --------- 123,023 --------- $113,251 =========- -------------------------------------------------------------------------------- 6. ILLIQUID OR RESTRICTED SECURITIES
As of April 30, 2004, 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. A Wrapper Agreement is considered to be an illiquid security. The Fund intends to invest no more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities.
- -------------------------------------------------------------------------------- 7. BORROWING AND LENDING ARRANGEMENTSThe Fund entered into an “interfund borrowing and lending arrangement” with other funds in the Oppenheimer funds complex, to allow funds to borrow for liquidity purposes. The arrangement was initiated pursuant to exemptive relief granted by the Securities and Exchange Commission (the SEC) to allow these affiliated funds to lend money to, and borrow money from, each other, in an attempt to reduce borrowing costs below those of bank loan facilities. The SEC’s order requires the Fund’s Board of Trustees to adopt operating policies and procedures to administer interfund borrowing and lending. Under
27 | OPPENHEIMER CAPITAL PRESERVATION FUND NOTES TO FINANCIAL STATEMENTS Unaudited / Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7. BORROWING AND LENDING ARRANGEMENTS Continuedthe arrangement the Fund may lend money to other Oppenheimer funds and may borrow from other Oppenheimer funds at a rate set by the Fund’s Board of Trustees, based upon a recommendation by the Manager. The Fund’s borrowings, if any, are subject to asset coverage requirements under the Investment Company Act and the provisions of the SEC order and other applicable regulations. If the Fund borrows money, there is a risk that the loan could be called on one day’s notice, in which case the Fund might have to borrow from a bank at higher rates if a loan were not available from another Oppenheimer fund. If the Fund lends money to another fund, it will be subject to the risk that the other fund might not repay the loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the six months ended or at April 30, 2004.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES Unaudited - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.225.5677, (ii) on the Fund’s website at www.oppenheimerfunds.com, and (iii) on the SEC’s website at WWW.sec.gov. In addition, the Fund will be required to file new Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The first such filing is due no later than August 31, 2004, for the twelve months ended June 30, 2004. Once filed, the Fund’s Form N-PX filing will be available (i) without charge, upon request, by calling the Fund toll-free at 1.800.225.5677, and (ii) on the SEC’s website at www.sec.gov.
28 | OPPENHEIMER CAPITAL PRESERVATION FUND Item 2. Code of EthicsThe registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.
Item 3. Audit Committee Financial ExpertThe Board of Trustees of the registrant has determined that the registrant does not have an audit committee financial expert serving on its Audit Committee. In this regard, no member of the Audit Committee was identified as having all of the technical attributes identified in Instruction 2(b) to Item 3 of Form N-CSR to qualify as an “audit committee financial expert,” whether through the type of specialized education or experience described in that Instruction. The Board has concluded that while the members of the Audit Committee collectively have the necessary attributes and experience required to serve effectively as an Audit Committee, no single member possesses all of the required technical attributes through the particular methods of education or experience set forth in the Instructions to be designated as an audit committee financial expert.
Item 4. Principal Accountant Fees and ServicesNot applicable to semiannual reports.
Item 5. Not applicable Item 6. Schedule of Investments Not applicable Item 7. Not applicable Item 8. Not applicable Item 9. Submission of Matters to a Vote of Security HoldersThe Board is responsible for approving nominees for election as trustees. To assist in this task, the Board has designated the Audit Committee as the nominating committee for the Board. It reviews and recommends nominees to the Board. The Committee is comprised entirely of disinterested trustees as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The Audit Committee charter describes the responsibilities of the Committee in nominating candidates for election as independent Trustees of the Registrant. The Registrant’s Board has adopted a written charter for the Committee. A current copy of the Audit Committee charter is available to shareholders on the OppenheimerFunds website at www.oppenheimerfunds.com.
        Under the current policy, if the Board determines that a vacancy exists or is likely to exist on the Board, the Audit Committee of the Board will consider candidates for Board membership including recommended by Registrant shareholders. The Audit Committee will consider nominees recommended by independent Board members or recommended by any other Board members including Board members affiliated with the Registrant’s investment advisors. The Committee may, upon Board approval, retain an executive search firm to assist in screening potential candidates. Upon Board approval, the Audit Committee may also use the services of legal, financial, or other external counsel that it deems necessary or desirable in the screening process. Shareholders wishing to submit a nominee for election to the Board may do so by mailing their submission to the offices of OppenheimerFunds, Inc., 6803 South Tucson Way, Centennial, CO 80112, to the attention of the Board of Trustees of the named Registrant, c/o the Secretary of the Registrant.
The Committee’s process for identifying and evaluating nominees for trustees includes a number of factors. In screening candidates for board membership, whether the candidate is suggested by Board members, shareholders or others, the Committee considers the candidate’s professional experience, soundness of judgment, integrity, ability to make independent, analytical inquiries, collegiality, willingness and ability to devote the time required to perform Board activities adequately, ability to represent the interests of all shareholders of the Registrant, and diversity relative to the board’s composition. Candidates are expected to provide a mix of attributes, experience, perspective and skills necessary to effectively advance the interests of shareholders.
Item 10. Controls and Procedures (a) Based on their evaluation of registrant's disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940 (17 CFR 270.30a-2(c)) as of April 30, 2004, registrant's principal executive officer and principal financial officer found registrant's disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. (b) There have been no significant changes in registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits. (a) Exhibit attached hereto. (Attach code of ethics as exhibit) (b) Exhibits attached hereto. (Attach certifications as exhibits)Pro Forma Combining Statements of Assets and Liabilities September 30, 2004 (Unaudited) Oppenheimer Cash Reserves Fund and Oppenheimer Capital Preservation Fund
Pro Forma Oppenheimer Combined Oppenheimer Capital Oppenheimer Cash Reserves Preservation ProForma Cash Reserves Fund Fund Adjustments Fund ----------------------------------------------------------------------- ASSETS: Investments, at value (cost * ) $755,055,182 $394,378,307 $1,149,433,489 Cash 1,775,493 194,177 $1,969,670 Receivables: Interest, dividends and principal paydowns 417,246 807,327 $1,224,573 Shares of beneficial interest or capital stock sold - 122,593 $122,593 Other 582,462 30,578 $613,040 ----------------------------------------------------------------------- Total assets $757,830,383 $395,532,982 1,153,363,365 ----------------------------------------------------------------------- LIABILITIES: . Payables and other liabilities: Wrapper agreement - 6,015,521 6,015,521 Dividends 129,420 417,318 546,738 Shares of beneficial interest or capital stock redeemed 855,256 228,657 1,083,913 Wrapper fee payable - 161,494 161,494 Custodian fees 2,457 2,739 5,196 Trustees' and Directors' fees 1,851 18,101 19,952 Distributions and service plan fees 230,467 239,155 469,622 Shareholder reports 154,253 38,464 192,717 Transfer and shareholder servicing agent fees 283,566 76,595 360,161 Other 26,372 43,695 70,067 ----------------------------------------------------------------------- Total liabilities 1,683,642 7,241,739 - 8,925,381 ----------------------------------------------------------------------- NET ASSETS $756,146,741 $388,291,243 - $1,144,437,984 ======================================================================= COMPOSITION OF NET ASSETS: Paid-in capital 386,907,707 (386,907,707)(1)(2) - Par value of shares of capital stock 756,858 - 386,908 (1)(2) 1,143,766 Additional paid-in capital 755,386,805 - 386,520,799 (1)(2) 1,141,907,604 Undistributed net investment income - 2,286,260 2,286,260 Accumulated net realized gain from investments and 3,078 3,078 foreign currency transactions - 4,507,718 4,507,718 Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies - (5,410,442) (5,410,442) ----------------------------------------------------------------------- NET ASSETS $756,146,741 $388,291,243 - $1,144,437,984 =======================================================================
Pro Forma Combining Statements of Assets and Liabilities September 30, 2004 (Unaudited) Oppenheimer Cash Reserves Fund and Oppenheimer Capital Preservation Fund Pro Forma Oppenheimer Combined Oppenheimer Capital Oppenheimer Cash Reserves Preservation ProForma Cash Reserves Fund Fund Adjustments Fund ----------------------------------------------------------------------- Net Asset Value Per Share Class A Shares: Net asset value and redemption price per share (based on net assets of $388,627,941, $99,059,407, and $487,687,348 and 388,634,425, 9,905,365, and 487,693,832 shares of beneficial interest or capital shares outstanding for Oppenheimer Cash Reserves Fund, Oppenheimer Capital Preservation Fund and combined Oppenheimer Cash Reserves, respectively) $1.00 $10.00 $1.00 Maximum offering price per share (net asset value plus sales charge of 3.50% for Oppenheimer Capital Preservation, of offering price) $1.00 $10.36 $1.00 Class B Shares: Net asset value and redemption price per share (based on net assets of $205,412,375, $11,394,641, and $216,807,016 and 205,370,414, 1,139,699 and 487,693,832 shares of beneficial interest or capital shares outstanding for Oppenheimer Cash Reserves Fund, Oppenheimer Capital Preservation Fund and combined Oppenheimer Cash Reserves, respectively) $1.00 $10.00 $1.00 Class C Shares: Net asset value and redemption price per share (based on net assets of $102,302,195, $3,098,367, and $133,270,321 and 102,290,462, 3,098,367 and 133,270,321 shares of beneficial interest or capital shares outstanding for Oppenheimer Cash Reserves Fund, Oppenheimer Capital Preservation Fund and combined Oppenheimer Cash Reserves, respectively) $1.00 $10.00 $1.00 Class N Shares: Net asset value and redemption price per share (based on net assets of $59,804,230, $24,648,426, and $306,316,010 and 59,803,233, 24,648,426 and 306,315,013 shares of beneficial interest or capital shares outstanding for Oppenheimer Cash Reserves Fund, Oppenheimer Capital Preservation Fund and combined Oppenheimer Cash Reserves, respectively) $1.00 $10.00 $1.00 *Cost $755,055,182 $393,773,228 $1,148,828,410(1) Oppenheimer Capital Preservation Fund Class A shares will be exchanged for Oppenheimer Cash Reserves Fund Class A shares. Oppenheimer Capital Preservation Fund Class B shares will be exchanged for Oppenheimer Cash Reserves Fund Class B shares.
| Oppenheimer Capital Preservation Fund Class C shares will be exchanged for Oppenheimer Cash Reserves Fund Class C shares. Oppenheimer Capital Preservation Fund Class N shares will be exchanged for Oppenheimer Cash Reserves Fund Class N shares. |
(2) Represents the conversion from par value shares to no par value shares.
Pro Forma Combining Statements of Operations For The Year Ended September 30, 2004 (Unaudited) Oppenheimer Cash Reserves Fund and Oppenheimer Capital Preservation Fund Pro Forma Oppenheimer Combined Oppenheimer Capital Oppenheimer Cash Reserves Preservation ProForma Cash Reserves Fund Fund Adjustments Fund ----------------------------------------------------------------------- INVESTMENT INCOME: Interest $9,535,737 $37,977 $9,573,714 Dividends from Affiliated Companies - 12,081,087 12,081,087 ----------------------------------------------------------------------- Total income 9,535,737 12,119,064 21,654,801 ----------------------------------------------------------------------- EXPENSES: Management fees 3,669,715 2,677,591 (1,144,557) (1) 5,202,749 Distribution and service plan fees: Class A 770,256 240,763 1,011,019 Class B 1,154,362 107,503 1,261,865 Class C 473,425 274,301 747,726 Class N 280,687 569,861 850,548 Transfer and shareholder servicing agent fees Class A 1,832,400 381,783 34,612 (2) 2,248,795 Class B 700,469 69,904 6,440 (2) 776,813 Class C 336,163 169,453 16,932 (2) 522,548 Class N 207,093 635,595 64,828 (2) 907,516 Class Y 77 77 Wrapper Fees - 597,302 (597,302) (3) - Shareholder reports - Class A 181,840 11,223 1,269 (5) 194,332 Class B 50,367 7,051 (759) (5) 56,659 Class C 18,840 12,727 (2,688) (5) 28,879 Class N 3,308 575 (1,667) (5) 2,216 Custodian fees and expenses 7,531 10,176 17,707 Legal and auditing fees 21,196 56,577 (20,000) (4) 57,773 Insurance expenses 6,177 5,861 (5,861) (4) 6,177 Trustees' or Directors' fees and expenses 7,597 17,216 (17,216) (6) 7,597 Registration and filing fees: 224,123 950 225,073 Other 40,086 31,399 71,485 ----------------------------------------------------------------------- Total Expenses 9,985,634 5,877,888 (1,665,969) 14,197,554 ----------------------------------------------------------------------- Less management fee waiver (566,402) (1,633,536) 1,517,025 (682,913) Less payments and waivers of expenses Class A (594,205) (53,160) (647,365) Class B (434,472) (32,588) (467,060) Class C (204,939) (75,729) (280,668) Class N (121,808) - (121,808) ----------------------------------------------------------------------- Net Expenses 8,063,808 4,082,876 (148,944) 11,997,740 -----------------------------------------------------------------------
Pro Forma Combining Statements of Operations For The Year Ended September 30, 2004 (Unaudited) Pro Forma Oppenheimer Combined Oppenheimer Capital Oppenheimer Cash Reserves Preservation ProForma Cash Reserves Fund Fund Adjustments Fund ----------------------------------------------------------------------- NET INVESTMENT INCOME 1,471,929 8,036,188 148,944 9,657,061 ----------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) from: Investments 2,939 5,103,597 5,106,536 Closing of futures contracts - 3,187 3,187 ----------------------------------------------------------------------- Net realized gain 2,939 5,106,784 5,109,723 ----------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: investments - (5,410,442) (5,410,442) ----------------------------------------------------------------------- Net realized and unrealized gain 2,939 (303,658) (300,719) ----------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,474,868 $7,732,530 $148,944 $9,356,342 =======================================================================(1) Calculated in accordance with the investment advisory agreement of Oppenheimer Cash Reserves Fund (0.50% on the first $250 million of average annual net assets, 0.475% of the next $250 million, 0.45% of the next $250 million, 0.425% of the next $250 million, 0.40% of of the average annual net assets over $1 billion). This assumes that the management fee structure had been in place for entire period the entire period. (2) Reflects a per account fee increase from $21.50 per account to $23.50 per account (3) Elimination of expense. (4) Reduction in expenses related to the decreased per report cost from $0.73-$0.96 to $0.11-$0.13 (5) Reduction in expenses related to the transition from the New York Board to the Denver Board. STATEMENT OF INVESTMENTS September 30, 2004 Unaudited
PRINCIPAL AMOUNT VALUE ------------------------------------------------------------------------------------- OPPENHEIMER OPPENHEIMER OPPENHEIMER CAPITAL OPPENHEIMER CAPITAL CASH PRESERVATION COMBINED CASH PRESERVATION COMBINED RESERVES FUND PROFORMA RESERVES FUND PROFORMA - ------------------------------------------------------------------------------------------------------------------------------------ Certificates of Deposit - 9.2% - ------------------------------------------------------------------------------------------------------------------------------------ Domestic Certificates of Deposit - 4.4% Citibank NA, 1.67%, 11/23/04 $10,000,000 $ $ 10,000,000 $ 10,000,000 $ $ 10,000,000 M&I Bank, 1.81%, 12/20/04 10,000,000 10,000,000 9,998,658 9,998,658 Societe Generale North America, 1.71%, 12/15/04 7,000,000 7,000,000 6,975,063 6,975,063 Societe Generale, New York, 1.688%, 6/14/05 1 20,000,000 20,000,000 19,995,762 19,995,762 Toronto Dominion Bank, New York, 1.74%, 12/2/04 4,000,000 4,000,000 4,000,000 4,000,000 ------------------------------------------- 50,969,483 50,969,483 - ------------------------------------------------------------------------------------------------------------------------------------ YANKEE CERTIFICATES OF DEPOSIT - 4.8% Canadian Imperial Bank of Commerce NY, 1.77%, 6/28/05 1 20,000,000 20,000,000 19,995,534 19,995,534 Fortis Bank SA/NV, New York, 1.75%, 12/7/04 8,400,000 8,400,000 8,400,000 8,400,000 HBOS Treasury Services, 1.51%, 10/14/04 3,500,000 3,500,000 3,498,092 3,498,092 HBOS Treasury Services, 1.635%, 11/2/04 5,000,000 5,000,000 4,992,733 4,992,733 HBOS Treasury Services, 1.84%, 12/3/04 10,000,000 10,000,000 9,970,950 9,970,950 HBOS Treasury Services, 1.70%, 12/9/04 1,250,000 1,250,000 1,245,903 1,245,903 Nordea Bank Finland plc, New York Branch, 1.765%, 6/29/05 1 7,000,000 7,000,000 6,998,170 6,998,170 ------------------------------------------- 55,101,382 55,101,382 ------------------------------------------- Total Certificates of Deposit (Cost $106,070,864, Cost $0, Cost $106,070,864) 106,070,864 106,070,864 - ------------------------------------------------------------------------------------------------------------------------------------ DIRECT BANK OBLIGATIONS - 7.5% - ------------------------------------------------------------------------------------------------------------------------------------ AB SPINTAB, 1.71%, 12/8/04 10,000,000 10,000,000 9,967,700 9,967,700 AB SPINTAB, 1.82%, 12/13/04 3,500,000 3,500,000 3,487,864 3,487,864 BNP Paribas, New York, 1.743%, 6/22/05 1 10,000,000 10,000,000 9,996,724 9,996,724 Calyon North America, Inc., 1.84%, 12/17/04 10,000,000 10,000,000 9,960,644 9,960,644 DnB NOR Bank ASA, 1.805%, 12/10/04 10,000,000 10,000,000 9,964,903 9,964,903 Governor & Co. of the Bank of Ireland, 2.08%, 3/29/05 2 10,000,000 10,000,000 9,896,578 9,896,578 Nationwide Building Society, 1.91%, 2/25/05 10,000,000 10,000,000 9,922,008 9,922,008 Nordea North America, Inc., 1.60%, 10/14/04 6,000,000 6,000,000 5,996,533 5,996,533 St. George Bank Ltd., 1.65%, 11/10/04 2 7,500,000 7,500,000 7,486,250 7,486,250 Svenska Handelsbanken NY, 1.72%, 12/20/04 10,000,000 10,000,000 10,000,000 10,000,000 ------------------------------------------- Total Direct Bank Obligations (Cost $86,679,204, Cost $0, Cost $86,679,204) 86,679,204 86,679,204 - ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM NOTES - 47.3% - ------------------------------------------------------------------------------------------------------------------------------------ Asset-Backed - 17.3% Crown Point Capital Co., 1.85%, 1/21/05 2 10,000,000 10,000,000 9,942,444 9,942,444 Eiffel Funding LLC, 1.61%, 10/25/04 2 5,750,000 5,750,000 5,743,828 5,743,828 Eiffel Funding LLC, 1.68%, 11/18/04 2 10,000,000 10,000,000 9,977,600 9,977,600 FCAR Owner Trust I, 1.61%, 10/15/04 13,000,000 13,000,000 12,992,047 12,992,047 FCAR Owner Trust I, 1.61%, 10/18/04 5,000,000 5,000,000 4,996,199 4,996,199 FCAR Owner Trust I, 1.74%, 12/14/04 5,000,000 5,000,000 4,982,117 4,982,117 GOVCO, Inc., 1.55%, 10/19/04 2 4,300,000 4,300,000 4,296,668 4,296,668 GOVCO, Inc., 1.59%, 10/25/04 2 10,000,000 10,000,000 9,989,400 9,989,400 GOVCO, Inc., 1.65%, 11/3/04 2 8,000,000 8,000,000 7,987,900 7,987,900 Gotham Funding Corp., 1.85%, 10/5/04 2 5,950,000 5,950,000 5,948,896 5,948,896 Legacy Capital LLC, 2.02%, 3/4/05 2 12,160,000 12,160,000 12,054,710 12,054,710 Neptune Funding Corp., 1.59%, 10/22/04 2 10,000,000 10,000,000 9,990,725 9,990,725 Neptune Funding Corp., 2.04%, 3/7/05 2 7,500,000 7,500,000 7,433,275 7,433,275 Neptune Funding Corp., 2.13%, 3/28/05 2 10,000,000 10,000,000 9,891,000 9,891,000 New Center Asset Trust, 1.75%, 10/7/04 12,000,000 12,000,000 11,996,800 11,996,800 Perry Global Funding LLC, Series A, 1.55%, 10/21/04 2 5,000,000 5,000,000 4,995,694 4,995,694 Perry Global Funding LLC, Series A, 1.56%, 10/19/04 2 12,500,000 12,500,000 12,490,250 12,490,250 Solitaire Funding LLC, 1.935%, 2/15/04 2 5,000,000 5,000,000 4,963,181 4,963,181 Thornburg Mortgage Capital Resources, 1.685%, 11/1/04 2 17,500,000 17,500,000 17,482,799 17,482,799 Victory Receivables Corp., 1.70%, 10/12/04 2 10,000,000 10,000,000 9,995,264 9,995,264 Victory Receivables Corp., 1.77%, 12/2/04 2 10,000,000 10,000,000 9,969,517 9,969,517 Victory Receivables Corp., 1.84%, 10/13/04 2 10,750,000 10,750,000 10,743,407 10,743,407 ------------------------------------------- 178,229,315 20,634,407 198,863,722 - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL MARKETS - 8.4% Banc of America Securities LLC, 1.86%, 10/1/01 15,000,000 15,000,000 15,000,000 15,000,000 Citigroup Global Markets Holdings, Inc., 1.78%, 10/18/04 10,000,000 10,000,000 9,992,822 9,992,822 First Clearing LLC, 1.93%, 6/6/05 1 19,000,000 19,000,000 19,000,000 19,000,000 Goldman Sachs Group, Inc., 1.67%, 10/20/04 3 10,000,000 10,000,000 10,000,000 10,000,000 Goldman Sachs Group, Inc., 1.68%, 10/18/04 3 3,000,000 3,000,000 3,000,000 3,000,000 Lehman Brothers, Inc., 2.13%, 12/15/04 1 18,000,000 18,000,000 18,000,000 18,000,000 Merrill Lynch & Co., Inc., 2.27%, 6/13/05 1 6,900,000 6,900,000 6,920,596 6,920,596 Morgan Stanley, 1.79%, 11/5/04 15,000,000 15,000,000 14,973,896 14,973,896 ------------------------------------------- 96,887,314 96,887,314 - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL BANKS - 3.9% Bank of America Corp., 1.60%, 10/26/04 10,000,000 10,000,000 9,988,889 9,988,889 Bank of America Corp., 1.64%, 11/3/04 10,000,000 10,000,000 9,984,967 9,984,967 Barclays US Funding Corp., 1.85%, 12/8/04 3,000,000 3,000,000 2,989,517 2,989,517 Citicorp, 1.745%, 12/3/04 1,400,000 1,400,000 1,395,725 1,395,725 HSBC USA, Inc., 1.635%, 11/1/04 20,000,000 20,000,000 19,971,842 19,971,842 ------------------------------------------- 44,330,940 44,330,940 - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL FINANCE - 0.9% Private Export Funding Corp., 1.73%, 12/22/04 2 10,000,000 10,000,000 9,960,594 9,960,594 - ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES - 4.0% General Electric Capital Corp., 1.80%, 12/9/04 8,500,000 8,500,000 8,472,304 8,472,304 General Electric Capital Corp., 1.80%, 12/10/04 14,000,000 14,000,000 13,951,000 13,951,000 Household Finance Corp., 1.51%, 10/8/04 7,500,000 7,500,000 7,497,798 7,497,798 Household Finance Corp., 1.541%, 10/22/04 5,000,000 5,000,000 4,995,508 4,995,508 Household Finance Corp., 1.60%, 10/13/04 10,000,000 10,000,000 9,994,667 9,994,667 Prudential Funding LLC, 1.62%, 10/28/04 1,000,000 1,000,000 998,785 998,785 ------------------------------------------- 45,910,062 45,910,062 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - 6.1% ING America Insurance Holdings, Inc., 1.64%, 11/2/04 4,000,000 4,000,000 3,994,169 3,994,169 ING America Insurance Holdings, Inc., 1.72%, 11/29/04 10,000,000 10,000,000 9,971,811 9,971,811 ING America Insurance Holdings, Inc., 1.74%, 12/13/04 7,500,000 7,500,000 7,473,538 7,473,538 ING USA Annuity & Life Insurance Co., 1.789%, 11/17/04 10,000,000 10,000,000 10,000,000 10,000,000 Jackson National Life Global Funding, Series 2004-6, 1.76%, 10/15/04 1,4 5,000,000 5,000,000 5,000,000 5,000,000 Metropolitan Life Global Funding I, Series 2003-5, 1.80%, 10/15/04 1,3 8,600,000 8,600,000 8,600,000 8,600,000 Prudential Insurance Co. of America, 1.65%, 1/31/05 1 10,000,000 10,000,000 10,000,000 10,000,000 Security Life of Denver Insurance Co., 1.75%, 10/27/04 1 10,000,000 10,000,000 10,000,000 10,000,000 United of Omaha Life Insurance Co., 1.75%, 11/17/05 1,3 5,000,000 5,000,000 5,000,000 5,000,000 ------------------------------------------- 70,039,518 70,039,518 - ------------------------------------------------------------------------------------------------------------------------------------ LEASING & FACTORING - 0.4% Toyota Motor Credit Corp., 1.64%, 11/4/04 2 5,000,000 5,000,000 4,992,256 4,992,256 - ------------------------------------------------------------------------------------------------------------------------------------ SPECIAL PURPOSE FINANCIAL - 6.3% Blue Spice LLC, 1.54%, 10/12/04 2 6,800,000 6,800,000 6,796,800 6,796,800 Cooperative Assn. of Tractor Dealers, Inc., Series A, 1.70%, 11/29/04 5,000,000 5,000,000 4,986,069 4,986,069 Cooperative Assn. of Tractor Dealers, Inc., Series A, 1.88%, 12/16/04 5,100,000 5,100,000 5,079,759 5,079,759 Cooperative Assn. of Tractor Dealers, Inc., Series A, 2.12%, 3/23/05 4,100,000 4,100,000 4,058,230 4,058,230 Cooperative Assn. of Tractor Dealers, Inc., Series B, 1.60%, 10/19/04 2,000,000 2,000,000 1,998,400 1,998,400 Cooperative Assn. of Tractor Dealers, Inc., Series B, 1.79%, 12/9/04 1,000,000 1,000,000 996,569 996,569 K2 (USA) LLC, 1.75%, 12/2/04 2 10,000,000 10,000,000 9,970,292 9,970,292 K2 (USA) LLC, 1.80%, 6/30/05 1,4 13,000,000 13,000,000 12,998,030 12,998,030 LINKS Finance LLC, 1.73%, 10/15/04 1,4 5,000,000 5,000,000 5,000,000 5,000,000 Parkland (USA) LLC, 1.74%, 1/14/05 1,4 5,000,000 5,000,000 4,999,856 4,999,856 RACERS Trust, Series 2004-6-MM, 1.828%, 10/22/04 1,4 2,500,000 2,500,000 2,500,000 2,500,000 Sigma Finance, Inc., 1.63%, 10/28/04 2 3,000,000 3,000,000 2,996,333 2,996,333 Sigma Finance, Inc., 1.81%, 11/26/04 1,4 10,000,000 10,000,000 9,999,771 9,999,771 ------------------------------------------- 72,380,109 72,380,109 ------------------------------------------- Total Short-Term Notes (Cost $522,730,106, Cost $20,638,090, Combined $543,368,196) 522,730,106 20,634,407 543,364,513 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCIES - 2.6% - ------------------------------------------------------------------------------------------------------------------------------------ FNMA Master Credit Facility, 1.77%, 12/1/04 10,000,000 10,000,000 9,970,008 9,970,008 Federal Home Loan Bank, 1.50%, 3/1/05 5,000,000 5,000,000 5,000,000 5,000,000 Federal National Mortgage Assn., 1.375%, 2/18/05 5,000,000 5,000,000 5,000,000 5,000,000 Federal National Mortgage Assn., 1.55%, 5/4/05 5,000,000 5,000,000 5,000,000 5,000,000 Federal National Mortgage Assn., 1.60%, 5/13/05 5,000,000 5,000,000 5,000,000 5,000,000 ------------------------------------------- Total U.S. Government Agencies (Cost $29,970,008, Cost $0, Cost $29,970,008) 29,970,008 29,970,008 - ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM TAX EXEMPT - 0.8% - ------------------------------------------------------------------------------------------------------------------------------------ AL Housing Finance Authority Revenue Refunding Bonds, 1.90%, 10/6/04 (Cost $9,355,000, Cost $0, Combined $9,355,000) 1 9,355,000 9,355,000 9,355,000 9,355,000 SHARES - ------------------------------------------------------------------------------------------------------------------------------------ Investments in Affliliated Companies - 31.3% - ------------------------------------------------------------------------------------------------------------------------------------ FIXED INCOME FUNDS - 22.4% Oppenheimer Bond Fund, Cl. Y -- 3,134,211 3,134,211 -- 32,783,850 32,783,850 Oppenheimer Limited-Term Government Fund, Cl. Y -- 22,103,740 22,103,740 -- 224,795,032 224,795,032 ------------------------------------------- -- 257,578,882 257,578,882 - ------------------------------------------------------------------------------------------------------------------------------------ MONEY MARKET FUND - 8.9% Oppenheimer Money Market Fund, Inc. -- 102,279,018 102,279,018 -- 102,279,018 102,279,018 ------------------------------------------ Total Investments in Affiliated Companies (Cost $0, Cost $359,249,138, Combined $359,249,138) -- 359,857,900 359,857,900 PRINCIPAL AMOUNT - ------------------------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENTS - 1.2% - ------------------------------------------------------------------------------------------------------------------------------------ Undivided interest of 0.125% in joint repurchase agreement (Principal Amount/ Value $200,000,000, with a maturity value of $200,010,500) with Bear Stearns & Co., Inc., 1.89%, dated 9/30/04, to be repurchased at $250,013 on 10/1/04, collateralized by Federal National Mortgage Assn., 5%--5.50%, 7/1/33--9/1/34, with a value of $205,464,103 (Cost $250,000) 250,000 250,000 250,000 250,000 - ------------------------------------------------------------------------------------------------------------------------------------ Undivided interest of 1.903% in joint repurchase agreement (Principal Amount/ Value $729,739,000, with a maturity value of $729,775,487) with UBS Warburg LLC, 1.80%, dated 9/30/04, to be repurchased at $13,886,694 on 10/1/04, collateralized by Federal National Mortgage Assn., 5%, 3/1/34, with a value of $745,857,878 (Cost $13,886,000) -- 13,886,000 13,886,000 -- 13,886,000 13,886,000 ------------------------------------------- Total Repurchase Agreements (Cost $250,000, Cost $13,886,000, Combined $14,136,000) 250,000 13,886,000 14,136,000 ------------------------------------------------------------------------------------ Total Investments, at Value (Cost $755,055,182, Cost $393,773,228, Combined $1,148,828,410) 99.9% 100.0% 99.9% 755,055,182 394,378,307 1,149,433,489 - ------------------------------------------------------------------------------------------------------------------------------------ Other Assets Net of Liabilities 0.1 0.0 0.1 1,091,559 (6,087,064) (4,995,505) ------------------------------------------------------------------------------------ Net Assets 100.0% 100.0% 100.0% $756,146,741 $388,291,243 $1,144,437,984 ====================================================================================1. Represents the current interest rate for a variable or increasing rate security. 2. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $195,361,254 or 25.84%, $20,634,407 or 5.23% (Combined $215,995,661 or 18.77%) of the Trust's net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. 3. Illiquid or restricted security. 4. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $40,497,657 or 5.36%, $0 or 0.00% (Combined $40,497,657 or 3.52%) of the Trust's net assets as of September 30, 2004.
OPPENHEIMER CASH RESERVES FORM N-1A PART C OTHER INFORMATION Item 22. Exhibits - ------------------ (a) (i) Amended and Restated Declaration of Trust dated February 2, 2001: Previously filed with Registrant's Post-Effective Amendment No. 20 (9/27/01) (Reg. No. 33-23223), and incorporated herein by reference. (ii) Amendment No. 1 dated 8/27/02 to Amended and Restated Declaration of Trust dated 2/2/01: Previously filed with Registrant's Post-Effective Amendment No. 22 (9/23/02) (Reg. No. 33-23223), and incorporated herein by reference. (b) By-Laws, as amended and restated through October 24, 2000: Previously filed with Registrant's Post-Effective Amendment No. 20 (9/27/01) (Reg. No. 33-23223), and incorporated herein by reference. (c) (i) Specimen Class A Share Certificate: Previously filed with Registrant's Post-Effective Amendment No. 21, 11/26/01, and incorporated herein by reference. (ii) Specimen Class B Share Certificate: Previously filed with Registrant's Post-Effective Amendment No. 21, 11/26/01, and incorporated herein by reference. (iii) Specimen Class C Share Certificate: Previously filed with Registrant's Post-Effective Amendment No. 21, 11/26/01, and incorporated herein by reference. (iv) Specimen Class N Share Certificate: Previously filed with Registrant's Post-Effective Amendment No. 21, 11/26/01, and incorporated herein by reference. (d) Investment Advisory Agreement dated October 22, 1990: Previously filed with Registrant's Post Effective Amendment No. 3 (2/28/91) and refiled with Registrant's Post-Effective Amendment No. 10 (4/25/95), pursuant to Item 102 of Regulation S-T and incorporated herein by reference. (e) (i) General Distributor's Agreement dated October 13, 1992: Previously filed with Registrant's Post Effective Amendment No. 10 (4/25/95), and incorporated herein by reference. (ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (iii) Form of Broker Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (iv) Form of Agency Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (v) Form of Trust Company Fund/SERV Purchase Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (vi) Form of Trust Company Agency Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (f) Form of Deferred Compensation Agreement for Disinterested Trustees/Directors: Previously filed with Post-Effective Amendment No. 40 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/27/98, and incorporated herein by reference. (g) (i) Global Custodial Services Agreement dated July 15, 2003 between Registrant and Citibank, N.A.: Previously filed with Pre-Effective Amendment No. 1 to the Registration Statement of Oppenheimer International Large Cap Core Trust (Reg. No. 33-23223), 8/05/03, and incorporated herein by reference. (ii) Amended and Restated Foreign Custody Manager Agreement dated May 31, 2001, as amended July 15, 2003 between Registrant and Citibank, N.A.: Previously filed with Pre-Effective Amendment No. 1 to the Registration Statement of Oppenheimer Large Cap Core Trust (Reg. No. 33-23223), 8/05/03, and incorporated herein by reference. (h) Not applicable. (i) (i) Opinion and Consent of Counsel dated November 24, 1999: Previously filed with Registrant's Post-Effective Amendment No. 17, (11/24/99), and incorporated herein by reference. (ii) Opinion and Consent of Counsel for Class N shares dated November 21, 2000: Previously filed with Registrant's Post-Effective Amendment No. 19, (11/22/00), and incorporated herein by reference. (j) Independent Auditors' Consent: to be filed by amendment. (k) Not applicable. (l) Not applicable. (m) (i) Amended and Restated Service Plan and Agreement for Class A shares dated April 26, 2004: Previously filed with Registrant's Post-Effective Amendment No 24, (09/27/04), pursuat to Rule 12b-1 under the Investment Company Act of 1940 and incorporated herein by reference. (ii) Amended and Restated Distribution and Service Plan and Agreement for Class B shares dated February 24, 1998: Previously filed with Registrant's Post-Effective Amendment No. 15, (11/26/98), pursuant to Rule 12b-1 under the Investment Company Act of 1940 and incorporated herein by reference. (iii) Amended and Restated Distribution and Service Plan and Agreement for Class C shares dated February 23, 2004: Previously filed with Registrant's Post-Effective Amendment No 24, (09/27/04), pursuant to Rule 12b-1 under the Investment Company Act of 1940 and incorporated herein by reference. (iv) Distribution and Service Plan and Agreement for Class N shares dated October 24, 2000: Previously filed with Registrant's Post-Effective Amendment No. 19, (11/22/00), pursuant to Rule 12b-1 under the Investment Company Act of 1940 and incorporated herein by reference. (v) Prototype Supplemental Distribution Assistance Agreement: Previously filed with Registrant's Post-Effective Amendment No. 5, (4/30/92), refiled with Registrant's Post-Effective Amendment No. 10, (4/25/95), pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (n) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through 09/15/04: Previously filed with Registrant's Post-Effective Amendment No 24, (09/27/04), and incorporated herein by reference. (o) Powers of Attorneys for John V. Murphy, Brian Wixted and all Trustees/Directors Officer: Previously filed with Registrant's Post-Effective Amendment No 24, (09/27/04), and incorporated herein by reference. (p) Not applicable [the Registrant is a money market fund]. Item 23. - Persons Controlled by or Under Common Control with the Fund - ---------------------------------------------------------------------- None. Item 24. - Indemnification - -------------------------- Reference is made to the provisions of Article Seven of Registrant's Amended and Restated Declaration of Trust filed as Exhibit 22(a) to this Registration Statement, and incorporated herein by reference. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of Registrant pursuant to the foregoing provisions or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a trustee, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Item 25. - Business and Other Connections of the Investment Adviser - ------------------------------------------------------------------- (a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and certain subsidiaries and affiliates act in the same capacity to other investment companies, including without limitation those described in Parts A and B hereof and listed in Item 25(b) below. (b) There is set forth below information as to any other business, profession, vocation or employment of a substantial nature in which each officer and director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal years has been, engaged for his/her own account or in the capacity of director, officer, employee, partner or trustee. - ------------------------------------------------------------------------------ Name and Current Position with OppenheimerFunds, Inc. Other Business and Connections During the Past Two Years - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Lizbeth Aaron-DiGiovanni Formerly Vice President (April 2000) and First Vice President Vice President (2003-July 2004) of Citigroup Global Markets Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Timothy L. Abbuhl, None Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Robert Agan, Vice President of OppenheimerFunds Distributor, Vice President Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc. and Centennial Asset Management Corporation; Senior Vice President of Shareholders Services, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michael Amato, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Erik Anderson, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Tracey Apostolopoulos, Assistant Vice President of OppenheimerFunds Assistant Vice President Distributor, Inc. - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Janette Aprilante, Secretary (since December 2001) of: Vice President & Secretary OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation, Oppenheimer Partnership Holdings, Inc., Oppenheimer Real Asset Management, Inc., Shareholder Financial Services, Inc., Shareholder Services, Inc. and OppenheimerFunds Legacy Program. Secretary (since June 2003) of: HarbourView Asset Management Corporation, OFI Private Investments, Inc. and OFI Institutional Asset Management, Inc. Assistant Secretary (since December 2001) of OFI Trust Company. - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Hany S. Ayad, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Robert Baker, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ John Michael Banta, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Joanne Bardell, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kevin Baum, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jeff Baumgartner, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Connie Bechtolt, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Lalit K. Behal Assistant Secretary of HarbourView Asset Assistant Vice President Management Corporation. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kathleen Beichert, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Gerald Bellamy, Assistant Vice President of OFI Institutional Assistant Vice President Asset Management, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Erik S. Berg, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Rajeev Bhaman, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Craig Billings, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Mark Binning, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Robert J. Bishop, Treasurer (since October 2003) of Vice President OppenheimerFunds Distributor, Inc. and Centennial Asset Management Corporation. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John R. Blomfield, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Lisa I. Bloomberg, Formerly First Vice President and Associate Vice President & Associate General Counsel of UBS Financial Services Inc. Counsel (May 1999-May 2004). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Chad Boll, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Antulio N. Bomfim, A senior economist with the Federal Reserve Vice President Board (June 1992-October 2003). - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- John C. Bonnell, Formerly a Portfolio Manager at Strong Financial Vice President Corporation (May 1999-May 2004). - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michelle Borre Massick, None Vice President - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John Boydell, None Assistant Vice President - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michael Bromberg, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Lowell Scott Brooks, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Joan Brunelle, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Richard Buckmaster, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Paul Burke, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Mark Burns, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jeoffrey Caan, Formerly Vice President of ABN AMRO NA, Inc. Vice President (June 2002-August 2003). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Catherine Carroll, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Debra Casey, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Lisa Chaffee, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Charles Chibnik, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Brett Clark, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ H.C. Digby Clements, None Vice President: Rochester Division - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Peter V. Cocuzza, None Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Susan Cornwell, Vice President of Centennial Asset Management Vice President Corporation, Shareholder Financial Services, Inc. and OppenheimerFunds Legacy Program; Senior Vice President of Shareholder Services, Inc. - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Scott Cottier, None Vice President: Rochester Division - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Lauren Coulston, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- George Curry, None. Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Julie C. Cusker, None Assistant Vice President: Rochester Division - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John Damian, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John M. Davis, Assistant Vice President of OppenheimerFunds Assistant Vice President Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Craig P. Dinsell, None Executive Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Randall C. Dishmon, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Rebecca K. Dolan None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Steven D. Dombrower, Senior Vice President of OFI Private Vice President Investments, Inc.; Vice President of OppenheimerFunds Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Thomas Doyle, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Bruce C. Dunbar, None Senior Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Brian Dvorak, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Richard Edmiston, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Daniel R. Engstrom, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ James Robert Erven None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ George R. Evans, None Senior Vice President and Director of International Equities - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Edward N. Everett, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kathy Faber, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ David Falicia, Assistant Secretary (as of July 2004) of Assistant Vice President HarbourView Asset Management Corporation. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Scott T. Farrar, Vice President of OFI Private Investments, Inc. Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Thomas Farrell, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Emmanuel Ferreira, Formerly a portfolio manager with Lashire Vice President Investments (July 1999-December 2002). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Ronald H. Fielding, Vice President of OppenheimerFunds Distributor, Senior Vice President; Inc.; Director of ICI Mutual Insurance Company; Chairman of the Rochester Governor of St. John's College; Chairman of the Division Board of Directors of International Museum of Photography at George Eastman House. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Brian Finley, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John E. Forrest, Senior Vice President of OppenheimerFunds Senior Vice President Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jordan Hayes Foster, Vice President of OFI Institutional Asset Vice President Management, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ David Foxhoven, Assistant Vice President of OppenheimerFunds Vice President Legacy Program. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Colleen M. Franca, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Dominic Freud, Formerly, a Partner and European Equity Vice President Portfolio manager at SLS Management (January 2002-February 2003). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Dan Gagliardo, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Hazem Gamal, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Dan P. Gangemi, None Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Seth Gelman, Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Subrata Ghose, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Charles W. Gilbert, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Alan C. Gilston, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jill E. Glazerman, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Bejamin J. Gord, Vice President of HarbourView Asset Management Vice President Corporation and of OFI Institutional Asset Management, Inc.. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Laura Granger, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Robert B. Grill, None Senior Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Robert Haley, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Marilyn Hall, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kelly Haney, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Steve Hauenstein, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Thomas B. Hayes, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Dennis Hess, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Joseph Higgins, Vice President of OFI Institutional Asset Vice President Management, Inc. - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Dorothy F. Hirshman, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Daniel Hoelscher, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Edward Hrybenko, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Scott T. Huebl, Assistant Vice President of OppenheimerFunds Vice President Legacy Program. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Margaret Hui, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John Huttlin, Senior Vice President (Director of the Vice President International Division) (since January 2004) of OFI Institutional Asset Management, Inc.; Director (since June 2003) of OppenheimerFunds (Asia) Limited - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ James G. Hyland, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Steve P. Ilnitzki, Vice President of OppenheimerFunds Distributor, Senior Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kelly Bridget Ireland, Vice President (since January 2004) of Vice President OppenheimerFunds Distributor Inc. Formerly, Director of INVESCO Distributors Inc. (April 2000-December 2003). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kathleen T. Ives, Vice President and Assistant Secretary of Vice President, Senior OppenheimerFunds Distributor, Inc. and Counsel and Assistant Shareholder Services, Inc.; Assistant Secretary Secretary of Centennial Asset Management Corporation, OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- William Jaume, Senior Vice President of HarbourView Asset Vice President Management Corporation and OFI Institutional Asset Management, Inc.; Director of OFI Trust Company. - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Frank V. Jennings, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John Jennings, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John Michael Johnson, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Charles Kandilis, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jennifer E. Kane, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Lynn O. Keeshan, Assistant Treasurer of OppenheimerFunds Legacy Senior Vice President Program - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Thomas W. Keffer, None Senior Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Cristina J. Keller, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Michael Keogh, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Martin S. Korn, Senior Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ James Kourkoulakos, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Brian Kramer, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Paul Kunz, None Assistant Vice President - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Lisa Lamentino, None Vice President - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John W. Land, Formerly Human Resources Manager at Goldman Assistant Vice President Sachs (October 2000-July 2004). - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Tracey Lange, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John Latino, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kristina Lawrence, Formerly Assistant Vice President of Vice President OppenheimerFunds, Inc. (November 2002-March 2004). - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Guy E. Leaf, None Vice President - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Gayle Leavitt, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Christopher M. Leavy, None Senior Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Dina C. Lee, Formerly (until December 2003) Assistant Assistant Vice President & Secretary of OppenheimerFunds Legacy Program. Assistant Counsel - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Randy Legg, Formerly an associate with Dechert LLP Assistant Vice President & (September 1998-January 2004). Assistant Counsel - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Laura Leitzinger, Senior Vice President of Shareholder Services, Vice President Inc.; Vice President of Shareholder Financial Services, Inc. - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Justin Leverenz, Formerly, a research/technology analyst at Vice President Goldman Sachs, Taiwan (May 2002-May 2004) - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Michael S. Levine, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Gang Li, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Shanquan Li, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Mitchell J. Lindauer, None Vice President & Assistant General Counsel - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Bill Linden, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Malissa B. Lischin, Assistant Vice President of OppenheimerFunds Assistant Vice President Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ David P. Lolli, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Daniel G. Loughran None Vice President: Rochester Division - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Patricia Lovett, Vice President of Shareholder Financial Vice President Services, Inc. and Senior Vice President of Shareholder Services, Inc. - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Dongyan Ma, Formerly an Assistant Vice President with Assistant Vice President Standish Mellon Asset Management (October 2001-October 2003). - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Steve Macchia, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Mark Madden, Formerly a Managing Director, Global Emerging Vice President Markets Team at Pioneer Investments (November 2000-August 2004). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Michael Magee, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Kathleen Mandzij, Formerly Marketing Manager - Sales Force Assistant Vice President Marketing (March 2003-June 2004) of OppenheimerFunds, Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Jerry Mandzij, None Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Angelo G. Manioudakis Senior Vice President of HarbourView Asset Senior Vice President Management Corporation and of OFI Institutional Asset Management, Inc. Formerly Executive Director and portfolio manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April 2002). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ LuAnn Mascia, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Susan Mattisinko, Assistant Secretary (as of January 2004) of Vice President & Associate HarbourView Asset Management Corporation, Counsel OppenheimerFunds Legacy Program, OFI Private Investments, Inc. and OFI Institutional Asset Management, Inc. Formerly an Associate at Sidley Austin Brown and Wood LLP (1995 - October 2003). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Elizabeth McCormack, Vice President and Assistant Secretary of Vice President HarbourView Asset Management Corporation. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Joseph McGovern, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Charles L. McKenzie, Chairman of the Board and Director of OFI Trust Senior Vice President Company; Chief Executive Officer, President, Senior Managing Director and Director of HarbourView Asset Management Corporation and OFI Institutional Asset Management, Inc.; President, Chairman and Director of Trinity Investment Management Corporation - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Wayne Miao, Formerly an Associate with Sidley Austin Brown Assistant Vice President and & Wood LLP (September 1999 - May 2004). Assistant Counsel - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Andrew J. Mika, None Senior Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Nikolaos D. Monoyios, None Senior Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Charles Moon, Vice President of HarbourView Asset Management Vice President Corporation and of OFI Institutional Asset Management, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John Murphy, President and Director of Oppenheimer Chairman, President, Chief Acquisition Corp. and Oppenheimer Partnership Executive Officer & Director Holdings, Inc. Director of Centennial Asset Management Corporation, OppenheimerFunds Distributor, Inc.; Chairman Director of Shareholder Services, Inc. and Shareholder Financial Services, Inc.; President and Director f OppenheimerFunds Legacy Program; Director of OFI Institutional Asset Management, Inc., Trinity Investment Management Corporation, Tremont Capital Management, Inc., HarbourView Asset Management Corporation, OFI Private Investments, Inc.; President and Director of Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company; Director of DLB Acquisition Corporation; a member of the Investment Company Institute's Board of Governors. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Thomas J. Murray, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kenneth Nadler, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Christina Nasta, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Jesper Nergaard, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Richard Nichols, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ William Norman, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Matthew O'Donnell, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John O'Hare, Formerly Executive Vice President and Portfolio Vice President Manager (June 2000 - August 2003) at Geneva Capital Management, Ltd. - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Lerae A. Palumbo, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ David P. Pellegrino, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Allison C. Pells, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Robert H. Pemble, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Susan Pergament, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Brian Petersen, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Marmeline Petion-Midy, Assistant Vice President - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- David Pfeffer, Senior Vice President of HarbourView Asset Senior Vice President and Management Corporation since February 2004. Chief Financial Officer Formerly, Director and Chief Financial Officer at Citigroup Asset Management (February 2000-February 2004). - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ James F. Phillips, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Scott Phillips, Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Gary Pilc, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Peter E. Pisapia, Formerly, Associate Counsel at SunAmerica Asset Assistant Vice President & Management Corp. (December 2000-December 2002). Assistant Counsel - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ David Poiesz, Formerly a Senior Portfolio Manager at Merrill Senior Vice President, Head Lynch (October 2002-May 2004). Founding partner of Growth Equity Investments of RiverRock, a hedge fund product (April 1999-July 2001). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Raghaw Prasad, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- David Preuss, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Jane C. Putnam, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Michael E. Quinn, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Julie S. Radtke, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Norma J. Rapini, None Assistant Vice President: Rochester Division - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Brian N. Reid, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Marc Reinganum, Formerly (until August 2002) Vaughn Rauscher Vice President Chair in Financial Investments and Director, Finance Institute of Southern Methodist University, Texas. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jill Reiter, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kristina Richardson, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Claire Ring, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ David Robertson, Senior Vice President of OppenheimerFunds Senior Vice President Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Antoinette Rodriguez, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Stacey Roode, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jeffrey S. Rosen, None Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Stacy Roth, None Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ James H. Ruff, President and Director of OppenheimerFunds Executive Vice President Distributor, Inc. and Centennial Asset Management Corporation; Executive Vice President of OFI Private Investments, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Andrew Ruotolo, Vice Chairman, Treasurer, Chief Financial Executive Vice President Officer and Management Director of Oppenheimer and Director Acquisition Corp.; President and Director of Shareholder Services, Inc. and Shareholder Financial Services, Inc.; Director of Trinity Investment Management Corporation and Director of OFI Trust Company. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kim Russomanno, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Timothy Ryan, Formerly a research analyst in the large Vice President equities group at Credit Suisse Asset Management (August 2001-June 2004) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Rohit Sah, None Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Valerie Sanders, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Karen Sandler, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Rudi Schadt, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Ellen P. Schoenfeld, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Maria Schulte, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Scott A. Schwegel, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Allan P. Sedmak None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jennifer L. Sexton, Senior Vice President of OFI Private Vice President Investments, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Martha A. Shapiro, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Navin Sharma, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Bonnie Sherman, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ David C. Sitgreaves, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Edward James Sivigny None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Enrique H. Smith, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Louis Sortino, None Assistant Vice President: Rochester Division - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Keith J. Spencer, None Senior Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Marco Antonio Spinar, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Richard A. Stein, None Vice President: Rochester Division - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Arthur P. Steinmetz, Senior Vice President of HarbourView Asset Senior Vice President Management Corporation. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jennifer Stevens, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Gregory J. Stitt, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ John P. Stoma, Senior Vice President of OppenheimerFunds Senior Vice President Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Michael Stricker, Vice President of Shareholder Services, Inc. Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Deborah A. Sullivan, Secretary of OFI Trust Company. Assistant Vice President & Assistant Counsel - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Mary Sullivan, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Michael Sussman, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Susan B. Switzer, None Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Brian C. Szilagyi, Manager of Compliance at Berger Financial Group Assistant Vice President LLC (May 2001-March 2003); Director of Financial Reporting and Compliance at First Data Corporation (April 2003-June 2004). - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Martin Telles, Senior Vice President of OppenheimerFunds Senior Vice President Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Paul Temple, None Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Jeaneen Terrio, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Vincent Toner, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Eamon Tubridy, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Keith Tucker, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Tane Tyler, Formerly Vice President and Assistant General Vice President and Counsel at INVESCO Funds Group, Inc. (September Associate Counsel 1991 - December 2003) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Cameron Ullyat, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Angela Uttaro, None Assistant Vice President: Rochester Division - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Mark S. Vandehey, Vice President of OppenheimerFunds Distributor, Senior Vice President and Inc., Centennial Asset Management Corporation Chief Compliance Officer and Shareholder Services, Inc. Formerly (until March 2004) Vice President of OppenheimerFunds, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Maureen Van Norstrand, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Rene Vecka, Formerly Vice President of Shareholder Assistant Vice President, Services, Inc. (September 2000-July 2003). Rochester Division - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Vincent Vermette, Vice President of OppenheimerFunds Distributor, Assistant Vice President Inc. - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Phillip F. Vottiero, None Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Lisa Walsh, None Assistant Vice President - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Patricia Walters, None Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Teresa M. Ward, Vice President of OppenheimerFunds Distributor, Vice President Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Jerry A. Webman, Senior Vice President of HarbourView Asset Senior Vice President Management Corporation. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Christopher D. Weiler, None Vice President: Rochester Division - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- Adam Weiner, Assistant Vice President - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Barry D. Weiss, Vice President of HarbourView Asset Management Vice President Corporation - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Melissa Lynn Weiss, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Christine Wells, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Joseph J. Welsh, Vice President of HarbourView Asset Management Vice President Corporation. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Diederick Wermolder, Director of OppenheimerFunds International Ltd. Senior Vice President and OppenheimerFunds plc; Senior Vice President (Managing Director of the International Division) of OFI Institutional Asset Management, Inc.; Director of OppenheimerFunds (Asia) Limited. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Catherine M. White, Assistant Vice President of OppenheimerFunds Assistant Vice President Distributor, Inc.; member of the American Society of Pension Actuaries (ASPA) since 1995. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Annabel Whiting, None Assistant Vice President - ------------------------------------------------------------------------------ - -------------------------------------------------------------------------------- William L. Wilby, None Senior Vice President and Senior Investment Officer, Director of Equities - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------ Donna M. Winn, President, Chief Executive Officer and Director Senior Vice President of OFI Private Investments, Inc.; Director and President of OppenheimerFunds Legacy Program; Senior Vice President of OppenheimerFunds Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Philip Witkower, Senior Vice President of OppenheimerFunds Senior Vice President Distributor, Inc. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Brian W. Wixted, Treasurer of HarbourView Asset Management Senior Vice President and Corporation; OppenheimerFunds International Treasurer Ltd., Oppenheimer Partnership Holdings, Inc., Oppenheimer Real Asset Management, Inc., Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc., OFI Institutional Asset Management, Inc., OppenheimerFunds plc and OppenheimerFunds Legacy Program; Treasurer and Chief Financial Officer of OFI Trust Company; Assistant Treasurer of Oppenheimer Acquisition Corp. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Carol Wolf, Senior Vice President of HarbourView Asset Senior Vice President Management Corporation; serves on the Board of the Colorado Ballet. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Kurt Wolfgruber, Director of Tremont Capital Management, Inc., Executive Vice President, HarbourView Asset Management Corporation and Chief Investment Officer OFI Institutional Asset Management, Inc. (since and Director June 2003) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Caleb C. Wong, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Edward C. Yoensky, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Lucy Zachman, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Robert G. Zack General Counsel and Director of Executive Vice President and OppenheimerFunds Distributor, Inc.; General General Counsel Counsel of Centennial Asset Management Corporation; Senior Vice President and General Counsel of HarbourView Asset Management Corporation and OFI Institutional Asset Management, Inc.; Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private Investments, Inc. and OFI Trust Company; Vice President and Director of Oppenheimer Partnership Holdings, Inc.; Director and Assistant Secretary of OppenheimerFunds plc; Secretary and General Counsel of Oppenheimer Acquisition Corp.; Director and Assistant Secretary of OppenheimerFunds International Ltd.; Director of Oppenheimer Real Asset Management, Inc. and OppenheimerFunds (Asia) Limited); Vice President of OppenheimerFunds Legacy Program. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Neal A. Zamore, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Mark D. Zavanelli, None Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Alex Zhou, None Assistant Vice President - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Arthur J. Zimmer, Senior Vice President (since April 1999) of Senior Vice President HarbourView Asset Management Corporation. - ------------------------------------------------------------------------------ Item 26. Principal Underwriter - ------------------------------ (a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's shares. It is also the Distributor of each of the other registered open-end investment companies for which OppenheimerFunds, Inc. is the investment adviser, as described in Part A and B of this Registration Statement and listed in Item 25(b) above (except Oppenheimer Multi-Sector Income Trust and Panorama Series Fund, Inc.) and for MassMutual Institutional Funds. (b) The directors and officers of the Registrant's principal underwriter are: - -------------------------------------------------------------------------------- Name & Principal Position & Office Position and Office Business Address with Underwriter with Registrant - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Robert Agan(1) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Janette Aprilante(1) Secretary None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- James Barker Vice President None 2901B N. Lakewood Avenue Chicago, IL 60657 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kathleen Beichert(1) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Robert J. Bishop(1) Treasurer None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Douglas S. Blankenship Vice President None 17011 Wood Bark Road Springs, TX 77379 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Tracey Blinzler(1) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- David A Borrelli Vice President None 105 Black Calla Ct. San Ramon, CA 94583 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michelle Brennan(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- L. Scott Brooks(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kevin E. Brosmith Senior Vice President None 5 Deer Path South Natlick, MA 01760 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Jeffrey W. Bryan Vice President None 1048 Malaga Avenue Coral Gables, FL 33134 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Patrick Campbell(1) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Andrew Chonofsky Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Melissa Clayton(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Robert A. Coli Vice President None 12 White Tail Lane Bedminster, NJ 07921 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Jeffrey D. Damia(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John Davis(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Stephen J. Demetrovits(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kristi Diehl(1) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Joseph A. DiMauro Vice President None 522 Lakeland Avenue Grosse Pointe, MI 48230 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Steven Dombrower(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- George P. Dougherty Vice President None 328 Regency Drive North Wales, PA 19454 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Cliff H. Dunteman Vice President None N 53 27761 Bantry Road Sussex, WI 53089-45533 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John Eiler(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kent M. Elwell Vice President None 35 Crown Terrace Yardley, PA 19067 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Gregg A. Everett Vice President None 4328 Auston Way Palm Harbor, FL 34685-4017 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- George R. Fahey Senior Vice President None 2 Pheasant Drive Ringoes, NJ 08551 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Eric C. Fallon Vice President None 10 Worth Circle Newton, MA 02458 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Joseph Fernandez Vice President None 1717 Richbourg Park Drive Brentwood, TN 37027 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Mark J. Ferro(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Ronald H. Fielding(3) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Eric Fishel Vice President None 3A Lawnwood Place, Apt. 1 Charlestown, MA 02129 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Patrick W. Flynn (1) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John E. Forrest(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John ("J) Fortuna(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Lucio Giliberti Vice President None 6 Cyndi Court Flemington, NJ 08822 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Raquel Granahan(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Ralph Grant Senior Vice President None 10 Boathouse Close Mt. Pleasant, SC 29464 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michael D. Guman Vice President None 3913 Pleasant Avenue Allentown, PA 18103 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kevin J. Healy(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Clifford W. Heidinger Vice President None 111 Ipswich Road Boxford, MA 01921 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Phillipe D. Hemery Vice President None 5 Duck Pond Lane Ramsey, NJ 07446 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kevin Hennessey Vice President None 10206 Emerald Woods Avenue Orlando, FL 32836 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Elyse R. Jurman Herman Vice President None 3150 Equestrian Drive Boca Raton, FL 33496 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Wendy G. Hetson Vice President None 4 Craig Street Jericho, NY 11753 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- William E. Hortz(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Edward Hrybenko(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Andrew Humble Vice President None 419 Phillips Avenue Glen Ellyn, IL 60137 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Brian F. Husch(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Stephen Ilnitzki(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kathleen T. Ives(1) Vice President & Assistant Secretary Assistant Secretary - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Nivan Jaleeli Vice President None 13622 E. Geronimo Road Scottsdale, AZ 85259 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Eric K. Johnson(1) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Mark D. Johnson Vice President None 15792 Scenic Green Court Chesterfield, MO 63017 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Christina J. Keller(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Brian G. Kelly Vice President None 76 Daybreak Road Southport, CT 06490 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michael Keogh(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Lisa Klassen(1) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Richard Klein Senior Vice President None 4820 Fremont Avenue So. Minneapolis, MN 55409 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Richard Knott(1) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Dean Kopperud(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Brent A. Krantz Senior Vice President None P. O. Box 1313 Seahurst, WA 98062 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- David T. Kuzia Vice President None 19102 Miranda Circle Omaha, NE 68130 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Tracey Lange(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Paul R. LeMire(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Eric J. Liberman(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Malissa Lischin(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- James V. Loehle Vice President None 30 Wesley Hill Lane Warwick, NY 10990 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Thomas Loncar(1) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Montana Low Vice President None 1636 N. Wells Street, Apt. 3411 Chicago, IL 60614 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Craig Lyman Vice President None 7578 Massachusetts Pl Rancho Cucamonga, CA 91730 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John J. Lynch Vice President None 6325 Bryan Parkway Dallas, TX 75214 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michael Malik Vice President None 126 Bernard Street San Francisco, CA 94109 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Steven C. Manns Vice President None 1627 N. Hermitage Avenue Chicago, IL 60622 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Todd A. Marion Vice President None 24 Midland Avenue Cold Spring Harbor, NY 11724 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LuAnn Mascia(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Sandie Massaro(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Theresa-Marie Maynier Vice President None 2421 Charlotte Drive Charlotte, NC 28203 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Anthony P. Mazzariello Vice President None 8 Fairway Road Sewickley, PA 15143 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John C. McDonough Vice President None 3812 Leland Street Chevy Chase, MD 20815 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kent C. McGowan Vice President None 9510 190th Place SE Edmonds, WA 98020 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Craig Meister Vice President None 1880 Hemlock Circle Abinston, PA 19001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Daniel Melehan Vice President None 906 Bridgeport Court San Marcos, CA 92069 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Mark Mezzanotte Vice President None 16 Cullen Way Exeter, NH 03833 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Clint Modler(1) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Robert Moser(1) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- David W. Mountford Vice President None 7820 Banyan Terrace Tamarac, FL 33321 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John V. Murphy(2) Director President & Trustee - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Wendy Jean Murray Vice President None 32 Carolin Road Upper Montclair, NJ 07043 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Christina Nasta(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kevin P. Neznek(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Bradford Norford Vice President None 2217 Ivan Street #911 Dallas, TX 75201 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Alan Panzer Vice President None 6755 Ridge Mill Lane Atlanta, GA 30328 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Brian C. Perkes Vice President None 8734 Shady Shore Drive Frisco, TX 75034 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Charles K. Pettit Vice President None 22 Fall Meadow Drive Pittsford, NY 14534 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Elaine Puleo-Carter(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Minnie Ra Vice President None 100 Dolores Street, #203 Carmel, CA 93923 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Dustin Raring Vice President None 27 Blakemore Drive Ladera Ranch, CA 92797 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michael A. Raso Vice President None 3 Vine Place Larchmont, NY 10538 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Richard Rath Vice President None 46 Mt. Vernon Avenue Alexandria, VA 22301 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Douglas Rentschler Vice President None 677 Middlesex Road Grosse Pointe Park, MI 48230 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Ruxandra Risko(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- David R. Robertson(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Ian Roche Vice President None 7070 Bramshill Circle Bainbridge, OH 44023 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kenneth A. Rosenson Vice President None 24753 Vantage Pt. Terrace Malibu, CA 90265 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- James H. Ruff(2) President & Director None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Matthew Rutig Vice President None 199 North Street Ridgefield, CT 06877 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- William R. Rylander Vice President None 85 Evergreen Road Vernon, CT 06066 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Thomas Sabow Vice President None 6617 Southcrest Drive Edina, MN 55435 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John Saunders Vice President None 911 North Orange Avenue #401 Orlando, FL 32801 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Jill E. Schmitt (Crockett)(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Jill Schmitt Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Thomas Schmitt(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- William Schories(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Eric Sharp Vice President None 862 McNeill Circle Woodland, CA 95695 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Debbie A. Simon Vice President None 1 W. Superior Street, Apt. 4101 Chicago, IL 60610 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Douglas Bruce Smith Vice President None 8927 35th Street W. University Place, WA 98466 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John Spensley Vice President None 12863 Tradd Street, Apt. 1D Carmel, IN 46032 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Steven Stablein Vice President None 2131 Dunnigan NE Grand Rapids, MI 49525 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Bryan Stein Vice President None 5897 NW 120th Terrace Coral Springs, FL 33076 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John Stoma(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Wayne Strauss(3) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Brian C. Summe Vice President None 2479 Legends Way Crestview Hills, KY 41017 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michael Sussman(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- George T. Sweeney Senior Vice President None 5 Smoke House Lane Hummelstown, PA 17036 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- James Taylor(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Martin Telles(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- David G. Thomas Vice President None 16628 Elk Run Court Leesburg, VA 20176 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Barrie L. Tiedemann Vice President None 2592 S. Belvoir Blvd. University Heights, OH 44118 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Bryan K.Toma Vice President None 7311 W. 145th Terrace Overland Park, KS 66223 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Mark Vandehey(1) Vice President Vice President and Chief Compliance Officer - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Vincent Vermette(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Kenneth Lediard Ward Vice President None 1400 Cottonwood Valley Circle N. Irving, TX 75038 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Teresa Ward(1) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Michael J. Weigner Vice President None 4905 W. San Nicholas Street Tampa, FL 33629 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Donn Weise Vice President None 3249 Earlmar Drive Los Angeles, CA 90064 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Chris Werner(1) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Catherine White(2) Assistant Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Thomas Wilson(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Donna Winn(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Philip Witkower(2) Senior Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Cary Patrick Wozniak Vice President None 18808 Bravata Court San Diego, CA 92128 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- John Charles Young Vice President None 3914 Southwestern Houston, TX 77005 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Jill Zachman(2) Vice President None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Robert G. Zack(2) General Counsel & Secretary Director - -------------------------------------------------------------------------------- (1)6803 South Tucson Way, Centennial, CO 80112-3924 (2)Two World Financial Center, 225 Liberty Street-11th Floor, New York, NY 10281-1008 (3)350 Linden Oaks, Rochester, NY 14623 (c) Not applicable. Item 27. Location of Accounts and Records - ----------------------------------------- The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and rules promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its offices at 6803 South Tucson Way, Centennial, Colorado 80112. Item 28. Management Services - ---------------------------- Not applicable Item 29. Undertakings - --------------------- Not applicable. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and/or the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Arapahoe and State of Colorado on the 27th day of October, 2004. OPPENHEIMER CASH RESERVES By: /s/ John V. Murphy* ---------------------------------------------- John V. Murphy, President, Principal Executive Officer & Trustee Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities on the dates indicated: /s/ William L. Armstrong* Vice Chairman of the October 27, 2004 - --------------------------- Board of Trustees William L. Armstrong /s/ John V. Murphy* President, Principal October 27, 2004 - ------------------------ Executive Officer & Trustee John V. Murphy /s/ Brian W. Wixted* Treasurer, Principal October 27, 2004 - ------------------------- Financial & Brian W. Wixted Accounting Officer /s/ Robert G. Avis* Trustee October 27, 2004 - --------------------- Robert G. Avis /s/ George Bowen* Trustee October 27, 2004 - ---------------------- George Bowen /s/ Edward Cameron* Trustee October r 27, 2004 - ------------------------ Edward Cameron /s/ Jon S. Fossel* Trustee October 27, 2004 - -------------------- Jon S. Fossel /s/ Sam Freedman* Trustee October 27, 2004 - --------------------- Sam Freedman /s/ Beverly L. Hamilton* - ------------------------- Trustee October 27, 2004 Beverly L. Hamilton /s/ Robert J. Malone* - ----------------------- Trustee October 27, 2004 Robert J. Malone /s/ F. William Marshall, Jr.* Trustee October 27, 2004 - ---------------------------- F. William Marshall, Jr. *By: /s/ Mitch Lindauer ----------------------------------------- Mitch Lindauer, Attorney-in-FactOPPENHEIMER CASH RESERVES Registration Statement No. 33-23223 EXHIBIT INDEX ------------- Exhibit No. Description - ----------- -----------
Oppenheimer Cash Reserves Prospectus dated September 27, 2004 Oppenheimer Cash Reserves is a money market mutual fund. Its goal is to seek the maximum current income that is consistent with stability of principal. The Fund invests in short-term, high-quality "money market" instruments. This Prospectus contains important information about the Fund's objective, its investment policies, strategies and risks. It also contains important information about how to buy and sell shares of the Fund and other account features. Please read this Prospectus carefully before you invest and keep it for future reference about your account. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the Fund's securities nor has it determined that this Prospectus is accurate or complete. It is a criminal offense to represent otherwise. 1234 CONTENTS ABOUT THE FUND The Fund's Investment Objective and Principal Investment Strategies Main Risks of Investing in the Fund The Fund's Past Performance Fees and Expenses of the Fund About the Fund's Investments How the Fund is Managed ABOUT YOUR ACCOUNT How to Buy Shares Class A Shares Class B Shares Class C Shares Class N Shares Special Investor Services AccountLink PhoneLink OppenheimerFunds Internet Website Retirement Plans How to Sell Shares By Wire By Checkwriting By Mail By Telephone How to Exchange Shares Shareholder Account Rules and Policies Dividends and Taxes Financial Highlights 29 ABOUT THE FUND The Fund's Investment Objective and Principal Investment Strategies WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks the maximum current income that is consistent with stability of principal. WHAT DOES THE FUND INVEST IN? The Fund invests in a variety of high-quality money market instruments to seek current income. The money market instruments that the Fund invests in include, for example, bank obligations, repurchase agreements, commercial paper, other corporate debt obligations and government debt obligations. "High-quality" instruments generally must be rated in one of the two highest credit-quality categories for short-term securities by nationally-recognized rating organizations. If unrated, they must be determined by the Fund's investment Manager, OppenheimerFunds, Inc., to be of comparable quality to securities rated in the two highest categories. WHO IS THE FUND DESIGNED FOR? The Fund is designed for investors who want to earn income at current money market rates while seeking to preserve the value of their investment. The Fund tries to keep its share prices stable at $1.00. Income on money market instruments tends to be lower than income on longer-term debt securities, so the Fund's yield will likely be lower than the yield on longer-term fixed income funds. The Fund also offers easy access to your money through checkwriting and wire redemption privileges. The Fund does not invest to seek capital appreciation and is not a complete investment program. Main Risks of Investing in the Fund All investments have risks to some degree. Funds that invest in debt obligations for income may be subject to credit risks and interest rate risks. However, the Fund's investments must meet strict standards set by its Board of Trustees following special rules for money market funds under federal law. Those standards include requirements for maintaining high credit quality in the Fund's portfolio, a short average portfolio maturity to reduce the effects of changes in prevailing interest rates on the value of the Fund's securities and diversifying the Fund's investments among issuers to reduce the effects of a default by any one issuer on the Fund's overall portfolio and the value of the Fund's shares. Even so, there are risks that any of the Fund's holdings could have its credit rating downgraded, or the issuer could default, or that interest rates could rise sharply, causing the value of the Fund's investments (and its share prices) to fall. As a result, there is a risk that the Fund's shares could fall below $1.00 per share. If there is a high redemption demand for the Fund's shares that was not anticipated, portfolio securities might have to be sold prior to their maturity at a loss. Also, there is the risk that the value of your investment could be eroded over time by the effects of inflation, and that poor security selection could cause the Fund to underperform other funds that have a similar objective. - ------------------------------------------------------------ An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. - ------------------------------------------------------------ The Fund's Past Performance The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the Fund's performance (for its Class A shares) from year to year for the last 10 calendar years and its average annual total returns for the 1-, 5- and 10- year periods. Variability of returns is one measure of the risks of investing in a money market fund. The Fund's past investment performance does not predict how the Fund will perform in the future. Annual Total Returns (Class A) (as of 12/31 each year) [See appendix to prospectus for annual total return data for bar chart.] For the period from 1/1/04 through 6/30/04, the cumulative return (not annualized) for Class A shares was 0.07%. During the period shown in the bar chart, the highest return (not annualized) for a calendar quarter was 1.40% (4th Qtr '00) and the lowest return (not annualized) for a calendar quarter was 0.04% (2nd and 4th Qtr `03). Average Annual Total Returns 5 Years 10 Years for the periods ended December (or life of (or life of 31, 2002 1 Year class, if less) class, if less) - ------------------------------------------------------------------------------- Class A Shares (inception 0.28% 2.84% 3.58% 1/3/89) - ------------------------------------------------------------------------------- Class B Shares (inception -4.86% 2.00% 3.22% 8/17/93) - ------------------------------------------------------------------------------- Class C Shares (inception -0.85% 2.37% 3.03% 12/01/93) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class N Shares (inception -0.85% 1.07% N/A 3/01/01) The Fund's average annual total returns include the applicable sales charge: for Class B, the contingent deferred sales charges of 5% (1-year) and 2% (5-years) and for Class C and Class N, the contingent deferred sales charges of 1% for the 1-year period for Class C and for Class N shares. Because Class B shares convert to Class A shares 72 months after purchase, Class B "life-of-class" performance does not include any contingent deferred sales charge and uses Class A performance for the period after conversion. The Fund's returns measure the performance of a hypothetical account and assume that all distributions have been reinvested in additional shares. The total returns are not the Fund's current yield. The Fund's yield more closely reflects the Fund's current earnings. To obtain the Fund's current 7-day yield information, please call the Transfer Agent toll-free at 1.800.CALL OPP (225.5677). Fees and Expenses of the Fund The following tables are provided to help you understand the fees and expenses you may pay if you buy and hold shares of the Fund. The Fund pays a variety of expenses directly for management of its assets, administration, distribution of its shares and other services. Those expenses are subtracted from the Fund's assets to calculate the Fund's net asset values per share. All shareholders therefore pay those expenses indirectly. Shareholders pay other transaction expenses directly, such as sales charges. The numbers below are based on the Fund's expenses during its fiscal year ended July 31, 2004. Shareholder Fees (charges paid directly from your investment): Class A Class B Class C Class N Shares Shares Shares Shares ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Maximum Sales Charge on None None None None purchases (as % of offering price) ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Maximum Deferred Sales None1 5%2 1%3 1%4 Charge (as % of the lower of the original offering price or redemption proceeds) Annual Fund Operating Expenses (deducted from Fund assets): (% of average daily net assets) Class A Class B Class C Class N Shares Shares Shares Shares - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Management Fees5 0.47% 0.47% 0.47% 0.47% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Distribution and/or Service 0.20% 0.75%6 0.75%6 0.50% (12b-1) Fees - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other Expenses7 0.55% 0.37% 0.42% 0.42% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total Annual Operating 1.22% 1.59% 1.64% 1.39% Expenses8 Expenses may vary in future years. 1. A contingent deferred sales charge may apply if you redeem Class A shares of the Fund that were purchased by exchanging Class A shares of another Oppenheimer fund that were purchased subject to a contingent deferred sales charge, as described in "How to Sell Shares." 2. Applies to redemptions in the first year after purchase. The contingent deferred sales charge declines to 1% in the sixth year and is eliminated after that. 3. Applies to shares redeemed within 12 months of purchase. 4. Applies to shares redeemed within 18 months of a retirement plan's first purchase of Class N shares. 5. The Manager has voluntarily agreed to waive a portion of its Management Fees so the fees do not exceed an annual rate of 0.40% of the average annual net assets for each class of shares. That undertaking may be amended or withdrawn at any time. After the Manager's waiver the "Management Fees" were 0.40% for all classes. 6. OppenheimerFunds Distributor, Inc. ("OFDI") has voluntarily agreed to reduce Class B and Class C "Distribution and /or Service (12b-1) Fees" by 0.25% of the average annual net assets for each respective class of shares. That undertaking may be amended or withdrawn at any time. After OFDI's waiver the "Distribution and/or Service Fees" for Class B and Class C shares were 0.50%. 7. "Other Expenses" include transfer agent fees, custodial fees, and accounting and legal expenses that the Fund pays. The "Other Expenses" in the table are based on, among other things, the fees the Fund would have paid if the transfer agent had not waived a portion of its fees under a voluntary undertaking to the Fund to limit those fees to 0.35% of average daily net assets per fiscal year for all classes, or (effective April 28, 2003) in an amount necessary to allow each class of the Fund to matain a 7 day yield of at least approximately 0.10%. Those undertaking may be amended or withdrawn at any time. After the waiver, the actual "Other Expenses" as percentages of average daily net assets were 0.39% for Class A shares, 0.14% for Class B shares, 0.15% for Class C and 0.16% for Class N shares. 8. After the "Management Fees", "Distribution and/or Service Fess" and "Other Expenses" waivers as described above, the "Total Annual Operating Expenses" as a percentage of average daily net assets were 0.99% for Class A, 1.04% for Class B, 1.05% for Class C and 1.06 for Class N. EXAMPLES. The following examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The examples assume that you invest $10,000 in a class of shares of the Fund for the time periods indicated and then reinvest your dividends and distributions. The first example assumes that you redeem all of your shares at the end of those periods. The second example assumes that you keep your shares. Both examples also assume that your investment has a 5% return each year and that the class's operating expenses remain the same as shown in the above table . Your actual costs may be higher or lower, because expenses will vary over time. Based on these assumptions your expenses would be as follows: If shares are redeemed: 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class A Shares $124 $387 $670 $1,477 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class B Shares $662 $802 $1,066 $1,7001 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class C Shares $267 $517 $892 $1,944 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class N Shares $242 $440 $761 $1,669 If shares are not redeemed: 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class A Shares $124 $387 $670 $1,477 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class B Shares $162 $502 $866 $17001 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class C Shares $167 $517 $892 $1,944 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Class N Shares $142 $440 $761 $1,669 In the first example, expenses include the applicable Class B, Class C or Class N contingent deferred sales charges. In the second example, the Class B, Class C and Class N expenses do not include the contingent deferred sales charges. 1. Class B expenses for years 7 through 10 are based on Class A expenses because Class B shares automatically convert to Class A shares 72 months after purchase. About the Fund's Investments THE FUND'S PRINCIPAL INVESTMENT POLICIES AND RISKS. The allocation of the Fund's portfolio among different types of investments will vary over time based upon the Manager's evaluation of economic and market trends. The Fund's portfolio might not always include all of the different types of investments described below. The Statement of Additional Information contains more detailed information about the Fund's investment policies and risks. The Fund invests in short-term money market instruments that must meet quality, maturity and diversification standards established by its Board of Trustees as well as rules that apply to money market funds under the Investment Company Act of 1940. The Fund's Manager tries to reduce risks by diversifying investments and by carefully researching investments before the Fund buys them. The rate of the Fund's income will vary from day to day, generally reflecting changes in overall short-term interest rates. There is no assurance that the Fund will achieve its investment objective. What Does the Fund Invest In? The Fund invests in a variety of money market instruments. They may have fixed, variable or floating interest rates. Below is a brief description of the types of money market instruments the Fund invests in. o U.S. Government Securities. These include obligations issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. Some are direct obligations of the U.S. Treasury and are supported by the full faith and credit of the United States. Other U.S. government securities issued by some agencies and instrumentalities of the government are also supported by the full faith and credit of the U.S. government. Some U.S. government securities issued by agencies or instrumentalities of the U.S. government are supported by the right of the issuer to borrow from the U.S. Treasury. Others may be supported only by the credit of the instrumentality. o Bank Obligations. The Fund can buy time deposits, certificates of deposit and bankers' acceptances. These obligations must be denominated in U.S. dollars, even if issued by a foreign bank. o Commercial Paper. Commercial paper is a short-term, unsecured promissory note of a domestic or foreign company or other financial firm. The Fund may buy commercial paper only if it matures in nine months or less from the date of purchase. o Corporate Debt Obligations. The Fund can invest in other short-term corporate debt obligations, besides commercial paper. o Other Money Market Obligations. The Fund may invest in money market obligations other than those listed above if they are subject to repurchase agreements or guaranteed as to their principal and interest by a domestic bank or a corporation whose commercial paper may be purchased by the Fund. A bank whose money market instruments the Fund buys must meet credit criteria set by the Fund's Board of Trustees. Additionally, the Fund may buy other money market instruments that its Board of Trustees approves from time to time. They must be U.S. dollar-denominated short-term investments that the Manager must determine to have minimal credit risks. Currently, the Board has approved the Fund's purchase of dollar-denominated obligations of foreign banks (payable in the U.S. or in other approved locations), floating or variable rate demand notes, asset-backed securities and bank loan participation agreements. Their purchase may be subject to restrictions adopted by the Board from time to time. WHAT CREDIT QUALITY, DIVERSIFICATION AND MATURITY STANDARDS APPLY TO THE FUND'S INVESTMENTS? The Fund may buy only those investments that meet standards set by the Board of Trustees and standards prescribed by the Investment Company Act for money market funds. The Fund's Board has adopted evaluation procedures for the Fund's portfolio investments, and the Manager has the responsibility to implement those procedures when selecting investments for the Fund. In general, the Fund buys only high-quality investments that the Manager believes present minimal credit risk at the time of purchase. "High-quality" investments are: o rated in one of the two highest short-term rating categories by two nationally-recognized rating organizations, or o rated by one rating organization in one of its two highest rating categories (if only one rating organization has rated the investment), or o unrated investments that the Manager determines are comparable in quality to instruments rated in the two highest rating categories. The procedures also limit the amount of the Fund's assets that can be invested in the securities of any one issuer (other than the U.S. government, its agencies and instrumentalities), to spread the Fund's investment risks. A security's maturity must not exceed 397 days. In addition, the Fund must maintain a dollar-weighted average portfolio maturity of not more than 90 days, to reduce interest rate risks. CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of Trustees can change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies cannot be changed without the approval of a majority of the Fund's outstanding voting shares. The Fund's investment objective is a fundamental policy. Some investment restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment policy is not fundamental unless this Prospectus or the Statement of Additional Information says that it is. OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can use the investment techniques and strategies described below. The Fund might not always use all of them. These techniques involve risks. The Statement of Additional Information contains more information about some of these practices, including limitations on their use that are designed to reduce some of the risks. Floating Rate/Variable Rate Notes. The Fund can purchase notes with floating or variable interest rates. Variable rates are adjustable at stated periodic intervals. Floating rates are adjusted automatically according to a specified market rate or benchmark, such as the prime rate of a bank. If the maturity of a note is greater than 397 days, it may be purchased only if it has a demand feature. That feature must permit the Fund to recover the principal amount of the note on not more than thirty days' notice at any time, or at specified times not exceeding 397 days from purchase. Obligations of Foreign Banks and Foreign Branches of U.S. Banks. The Fund can invest in U.S. dollar-denominated of foreign banks that are payable in the U.S. or in other locations approved by the Fund's Board. It can also buy dollar-denominated securities of foreign branches of U.S. banks. These securities have investment risks different from obligations of domestic branches of U.S. banks. Risks that may affect the bank's ability to pay its debt include: o political and economic developments in the country in which the bank or branch is located, o imposition of withholding taxes on interest income payable on the securities, o seizure or nationalization of foreign deposits, o the establishment of exchange control regulations, and o the adoption of other governmental restrictions that might affect the payment of principal and interest on those securities. Additionally, not all of the U.S. and state banking laws and regulations that apply to domestic banks and that are designed to protect depositors and investors apply to foreign branches of domestic banks. None of those U.S. and state regulations apply to foreign banks. Bank Loan Participation Agreements. The Fund can invest in bank loan participation agreements. They provide the Fund an undivided interest in a loan made by the issuing bank in the proportion the Fund's interest bears to the total principal amount of the loan. In evaluating the risk of these investments, the Fund looks to the creditworthiness of the borrower that is obligated to make principal and interest payments on the loan. Because the participation agreements are not rated the Fund will make the determination that the borrower or guarantor has received a short-term rating on a class of debt obligations (or any debt obligation within that class) that is comparable in priority and security with the underlying loan. The Fund's investments in bank loan participation agreements will be subject to the Fund's limits on investments and illiquid securities. Asset-Backed Securities. The Fund can invest in asset-backed investments. These are fractional interests in pools of consumer loans and other trade receivables, which are the obligations of a number of different parties. The income from the underlying pool is passed through to investors, such as the Fund. These investments might be supported by a credit enhancement, such as a letter of credit, a guarantee or a preference right. However, the credit enhancement typically applies only to a fraction of the security's value. If the issuer of the security has no security interest in the related collateral, there is the risk that the Fund could lose money if the issuer defaults. 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. 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 will cause more than 10% of its net assets to be subject to repurchase agreements maturing in more than 7 days. There is no limit on the amount of the Fund's net assets that may be subject to repurchase agreements of 7 days or less. Illiquid and Restricted Securities. Investments may be illiquid because they do not have an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. Restricted securities may have terms that limit their resale to other investors or may require registration under the applicable securities laws before they may be sold publicly. The Fund will not invest more than 10% of its net assets in illiquid or restricted securities. Certain restricted securities that are eligible for resale to qualified institutional purchasers m ay not be subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. Difficulty in selling a security may result in a loss to the Fund or additional costs. How the Fund is Managed THE MANAGER. The Manager chooses the Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to certian policies established by the Fund's Board of Trustees, under an investment advisory agreement that states the Manager's responsibilities. The agreement sets the fees the Fund pays to the Manager and describes the expenses that the Fund is responsible to pay to conduct its business. The Manager has been an investment advisor since January 1960. The Manager and its subsidiaries and controlled affiliates managed more than $155 billion in assets as of June 30, 2004 including other Oppenheimer funds, with more than 7 million shareholder accounts. The Manager is located at Two World Financial Center, 225 Liberty Street-11th Floor, New York, New York 10281-1008. Portfolio Managers. Carol E. Wolf and Barry D. Weiss are the Fund's portfolio managers. They are Vice Presidents of the Fund and are the persons principally responsible for the day-to-day management of the Fund's portfolio. Ms. Wolf has been a portfolio manager of the Fund since June 15, 1998 and Mr. Weiss, since July 2001. Ms. Wolf is a Senior Vice President of the Manager and Mr. Weiss is a Vice President of the Manager, and each is an officer and portfolio manager of other Oppenheimer funds. Prior to joining the Manager as Senior Credit Analyst in February 2000, Mr. Weiss was an Associate Director, Fitch IBCA Inc. (April 1998 - February 2000). Advisory Fees. Under the investment advisory agreement, the Fund may be required to pay the Manager an advisory fee at an annual rate that declines as the Fund's assets grow: 0.500% of the first $250 million of average annual net assets, 0.475% of the next $250 million, 0.450% of the next $250 million, 0.425% of the next $250 million, and 0.400% of net assets in excess of $1 billion. Effective December 6, 2002, the Manager has agreed to limit the Fund's management fees to 0.40% of the Fund's average net assets for each class of shares. That expense limitation can be amended or terminated at any time without advance notice. The Fund's management fees for the fiscal year ended July 31, 2004 was 0.40% of the Fund's average annual net assets for each class of shares; it would have been 0.47% if the full management fees had been charged. PENDING LITIGATION. Three law suits have been filed as putative derivative and class actions against the Fund's investment Manager, Distributor and Transfer Agent, some of the Oppenheimer funds and directors or trustees of some of those funds , excluding the Fund. The complaints allege that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of Oppenheimer funds, and failed to properly disclose the use of fund assets to make those payments in violation of the Investment Company Act and the Investment Advisers Act of 1940. The complaints further allege that by permitting and/or participating in those actions, the defendant directors breached their fiduciary duties to fund shareholders under the Investment Company Act and at common law. Those law suits were filed on August 31, 2004, September 3, 2004 and September 14, 2004, respectively, in the U. S. District Court for the Southern District of New York. The complaints seek unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The Manager and the Distributor believe the claims asserted in these law suits to be without merit, and intend to defend the suits vigorously. The Manager and the Distributor do not believe that the pending actions are likely to have a material adverse effect on the Fund or on their ability to perform their respective investment advisory or distribution agreements with the Fund. ABOUT YOUR ACCOUNT How to Buy Shares You can buy shares several ways, as described below. The Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing agents to accept purchase (and redemption) orders. The Distributor, in its sole discretion, may reject any purchase order for the Fund's shares. Buying Shares Through Your Dealer. You can buy shares through any dealer, broker or financial institution that has a sales agreement with the Distributor. Your dealer will place your order with the Distributor on your behalf. A broker/dealer may charge for that service. o Guaranteed Payment Procedures. Some broker/dealers may have arrangements with the Distributor to enable them to place purchase orders for shares on a regular business day with a guarantee that the Fund's custodian bank will receive Federal Funds to pay for the shares by 2:00 P.M. on the next regular business day. The shares will start to accrue dividends starting on the day the Federal Funds are received by 2:00 P.M. 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. Your check must be in U.S. dollars and drawn on a U.S. bank. 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 with a financial advisor before you make a purchase to be sure that the Fund is appropriate for you. o Paying by Federal Funds Wire. Shares purchased through the Distributor may be paid for by Federal Funds wire. The minimum investment is $2,500. Before sending a wire, call the Distributor's Wire Department at 1.800.225.5677 to notify the Distributor of the wire and to receive further instructions. o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you pay for shares by electronic funds transfers from your bank account. Shares are purchased for your account by a transfer of money from your bank account through the Automated Clearing House (ACH) system. You can provide those instructions automatically, under an Asset Builder Plan, described below, or by telephone instructions using OppenheimerFunds PhoneLink, also described below. Please refer to "AccountLink," below for more details. o Buying Shares Through Asset Builder Plans. You may purchase shares of the Fund automatically each month from your account at a bank or other financial institution under an Asset Builder Plan with AccountLink. Details are in the Asset Builder Application and the Statement of Additional Information. WHAT IS THE MINIMUM AMOUNT YOU Must Invest? In most cases, you can buy Fund shares with a minimum initial investment of $1,000 and make additional investments at any time with as little as $50. There are reduced minimums available under the following special investment plans: o If you establish one of the many types of retirement plan accounts that OppenheimerFunds offers, more fully described under "Special Investor Services," you can start your account with as little as $500. o By using an Asset Builder Plan or Automatic Exchange Plan (details are in the Statement of Additional Information), or government allotment plan, you can make subsequent investments (after making the initial investment of $500) for as little as $50. For any type of account established under one of these plans prior to November 1, 2002, the minimum additional investment will remain at $25. o The minimum investment requirement does not apply to reinvesting dividends 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 reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. At What Price Are Shares Sold? Shares are sold at their offering price which is the net asset value per share without any initial sales charge that applies. The net asset value per share will normally remain fixed at $1.00 per share. However, there is no guarantee that the Fund will maintain a stable net asset value of $1.00 per share. The offering price that applies to a purchase order is based on the next calculation of the net asset value per share that is made after the Distributor receives the purchase order at its offices in Colorado, or after any agent appointed by the Distributor receives the order. Net Asset Value. The Fund calculates the net asset value of each class of shares as of the close of The New York Stock Exchange (the "Exchange"), on each day the Exchange is open for trading (referred to in this Prospectus as a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern time, but may close earlier on some days. All references to time in this Prospectus mean "Eastern time." The net asset value per share is determined 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. Under a policy adopted by the Fund's Board of Trustees, the Fund uses the amortized cost method to value its securities to determine net asset value. If, after the close of the principal market on which a security held by the Fund is traded, and before the time the Fund's securities are priced that day, an event occurs that the Manager deems likely to cause a material change in the value of such security, the Fund's Board of Trustees has authorized the Manager, subject to the Board's review, to ascertain a fair value for such security. A security's valuation may differ depending on the method used for determining value. The Offering Price. To receive the offering price for a particular day, in most cases the Distributor or its designated agent must receive your order by the time the Exchange closes that day. If your order is received on a day when the Exchange is closed or after it has closed, the order will receive the next offering price that is determined after your order is received. Buying Through a Dealer. If you buy shares through a dealer, your dealer must receive the order by the close of the Exchange and transmit it to the Distributor so that it is received before the Distributor's close of business on a regular business day (normally 5:00 P.M.) to receive that day's offering price, unless your dealer has made alternative arrangements with the Distributor. Otherwise, the order will receive the next offering price that is determined. - ------------------------------------------------------------ WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four different classes of shares. The different classes of shares represent investments in the same portfolio of securities, but the classes are subject to different expenses and will likely have different share prices. When you buy shares, be sure to specify the class of shares. If you do not choose a class, your investment will be made in Class A shares. - ------------------------------------------------------------ - ------------------------------------------------------------ Class A Shares. If you buy Class A shares there is no initial sales charge on your purchase. - ------------------------------------------------------------ - ------------------------------------------------------------ Class B Shares. If you buy Class B shares, you pay no sales charge at the time of purchase, but you will pay an annual asset-based sales charge. If you sell your shares within 6 years of buying them, you will normally pay a contingent deferred sales charge. That contingent deferred sales charge varies depending on how long you own your shares, as described in "How Can You Buy Class B Shares?" below. - ------------------------------------------------------------ - ------------------------------------------------------------ Class C Shares. If you buy Class C shares, you pay no sales charge at the time of purchase, but you will pay an annual asset-based sales charge. If you sell your shares within 12 months of buying them, you will normally pay a contingent deferred sales charge of 1.0%, as described in "How Can You Buy Class C Shares?" below. - ------------------------------------------------------------ - ------------------------------------------------------------ Class N Shares. If you buy Class N shares (available only through certain retirement plans), you pay no sales charge at the time of purchase, but you will pay an annual asset-based sales charge. If you sell your shares within 18 months of the retirement plan's first purchase of Class N shares, you may pay a contingent deferred sales charge of 1.0%, as described in "How Can You Buy Class N 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 best suited to your needs depends on a number of factors that you should discuss with your financial advisor. Some 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. 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 discussion below is not intended to be investment advice or a recommendation, because each investor's financial considerations are different. You should analyze your options carefully with your financial advisor before making that choice. Investing for the Shorter Term. If you 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. The Distributor will not accept purchase orders of $100,000 or more for Class B shares or $1 million or more for Class C shares from a single investor. Dealers or other financial intermediaries purchasing shares for their customers in omnibus accounts are responsible for compliance with those limits. Are There Differences in Account Features That Matter to You? Some account features may not be available to Class B, Class C and Class N shareholders. Other features may not be advisable (because of the effect of the contingent deferred sales charge) for Class B, Class C and Class N shareholders. Therefore, you should carefully review how you plan to use your investment account before deciding which class of shares to buy. Additionally, the dividends payable to Class B, Class C and Class N shareholders will be reduced by the additional expenses borne by those classes that are not borne by Class A shares, such as the Class B, Class C and Class N asset-based sales charge described below and in the Statement of Additional Information. Also, checkwriting is not available on accounts subject to a contingent deferred sales charge. How Do Share Classes Affect Payments to Your Broker? A financial advisor may receive different compensation for selling one class of shares than for selling another class. The Distributor may pay additional 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. Special Sales Charge Arrangements and Waivers. Appendix C to the Statement of Additional Information details the conditions for the waiver of sales charges that apply in certain cases, and the special sales charge rates that apply to purchases of shares of the Fund by certain groups or under specified retirement plan arrangements or in other special types of transactions. To receive a waiver or special sales charge rate, you must advise the Distributor when purchasing shares or the Transfer Agent when redeeming shares that a special condition applies. HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering price, which is the net asset value per share without any initial sales charge. Will You Pay a Sales Charge When You Sell Class A Shares? The Fund does not charge a fee when you redeem Class A shares of this Fund that you bought either directly or by reinvesting dividends or distributions from another Oppenheimer fund. Generally, you will not pay a fee when you redeem Class A shares of this Fund you bought by exchange of Class A shares of another Oppenheimer fund. However, o if you bought shares of this Fund by exchanging Class A shares of another Oppenheimer fund that were subject to the Class A contingent deferred sales charge of that fund, and o if those shares remain subject to that Class A contingent deferred sales charge when you exchange them into this Fund, o then, you will pay the contingent deferred sales charge if you redeem those shares from this Fund (i) within 24 months of the purchase date of the shares you exchanged, if you initially purchased shares of either Rochester Fund Municipals or Oppenheimer Rochester National Municipals, or (ii) within 18 months of the purchase date of the shares of the fund you exchanged, if you initially purchased Class A shares of any other Oppenheimer fund. o Other Special Sales Charge Arrangements and Waivers. The Fund and the Distributor offer additional arrangements to reduce or eliminate front-end sales charges or to waive contingent deferred sales charges for certain types of transactions and for certain classes of investors (primarily retirement plans that purchase shares in special programs through the Distributor). The Fund reserves the right to amend or discontinue these programs at any time without prior notice. These are described in greater detail in Appendix C to the Statement of Additional Information, which is also available on the OppenheimerFunds website, at www.oppenheimerfunds.com ------------------------ (under the hyperlinks "Access Accounts and Services - Investor Service Center"). To receive a waiver or special sales charge rate under these programs, the purchaser must notify the Distributor (or other financial intermediary through which shares are being purchased) at the time of purchase or notify the Transfer Agent with at the time of redeeming shares for those waivers that apply to contingent deferred sales charges. HOW CAN YOU BUY CLASS B SHARES? You can acquire Class B shares by exchanging Class B shares of other Oppenheimer funds. Direct purchases are only permitted by plan administrators or plan sponsors on behalf of plan participants in qualified retirement plans. Class B shares are sold at net asset value per share without an initial sales charge. However, if Class B shares are redeemed within six years of the beginning of the calendar month of their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. 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. 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 for the Class B contingent deferred sales charge holding period: Years Since Beginning of Month in Contingent Deferred Sales Charge on Which Redemptions in That Year (As % of Purchase Order was Accepted 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% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- More than 6 None In the table, a "year" is a 12-month period. In applying the contingent deferred sales charge, all purchases are considered to have been made on the first regular business day of the month in which the purchase was made. Automatic Conversion of Class B Shares. Class B shares automatically convert to Class A shares 72 months after you purchase them. This conversion feature relieves Class B shareholders 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 any Class B shares you hold convert, any other Class B shares that were acquired by reinvesting dividends and distributions on the converted shares will also convert to Class A shares. For further information on the conversion feature and its tax implications, see "Class B Conversion" in the Statement of Additional Information. HOW CAN YOU BUY CLASS C SHARES? Class C shares may be acquired at net asset value per share only by exchange of Class C shares of other Oppenheimer funds, except that direct purchases are permitted by plan administrators or plan sponsors on behalf of participants in qualified retirement plans, and by participants in certain asset allocation programs sponsored by the Distributor. However, if Class C shares are redeemed within a holding period of 12 months from the beginning of the calendar month of their purchase, a contingent deferred sales charge of 1.0% will be deducted from the redemption proceeds. 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. HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered for sale to retirement plans (including IRAs and 403(b) plans) that purchase $500,000 or more of Class N shares of one or more Oppenheimer funds or to group retirement plans (which do not include IRAs and 403(b) plans) that have assets of $500,000 or more or 100 or more eligible participants. See "Availability of Class N shares" in the Statement of Additional Information for other circumstances where Class N shares are available for purchase. Class N shares are sold at net asset value without an initial sales charge. A contingent deferred sales charge of 1.0% will be imposed upon the redemption of Class N shares, if: o The group retirement plan is terminated or Class N shares of all Oppenheimer funds are terminated as an investment option of the plan and Class N shares are redeemed within 18 months after the plan's first purchase of Class N shares of any Oppenheimer fund, or o With respect to an IRA or 403(b) plan, Class N shares are redeemed within 18 months of the plan's first purchase of Class N shares of any Oppenheimer fund. Retirement plans that offer Class N shares may impose charges on plan participant accounts. The procedures for buying, selling, exchanging and transferring the Fund's other classes of shares (other than the time those orders must be received by the Distributor or Transfer Agent in Colorado) and the special account features applicable to purchasers of those other classes of shares described elsewhere in this prospectus do not apply to Class N shares offered through a group retirement plan. Instructions for buying, selling, exchanging or transferring Class N shares offered through a group retirement plan must be submitted by the plan, not by plan participants for whose benefit the shares are held. Distribution and Service (12b-1) Plans Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.20% of the average annual net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions quarterly for providing personal service and maintenance of accounts of their customers that hold Class A shares. With respect to Class A shares subject to a Class A contingent deferred sales charge purchased by grandfathered retirement accounts, the Distributor pays the 0.20% service fee to dealers in advance for the first year after the shares are sold by the dealer. During the first year the shares are sold to grandfathered retirement accounts, the Distributor retains the service fee. After the shares have been held by grandfathered retirement accounts for a year, the Distributor pays the service fee to dealers on a quarterly basis. Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares to pay the Distributor for its services and costs in distributing Class B, Class C and Class N shares and servicing accounts. Under the plans, the Fund may pay the Distributor an annual asset-based sales charge of 0.75% on Class B shares and Class C shares, and for Class N shares, the Fund pays the Distributor an annual service fee of 0.25% per year and an asset-based sales charge of 0.25% per year. The Distributor is entitled to receive a service fee of 0.25% per year under each plan, but the Board of Trustees has not authorized the Fund to pay the service fees on Class B and Class C shares at this time. Effective January 1, 2003, the Fund decreased the asset-based sales charge on Class B and Class C shares to 0.50% of average daily net assets per annum. If the Class B and Class C asset-based sales charge and service fee were assessed at the maximum permitted rates, they would increase expenses of those share classes by 0.50% of average net assets per annum. The asset-based sales charge and service fees if paid at the maximum rate permitted increase Class B and Class C expenses by 1.00% and the asset-based sales charge and service fee increase Class N expenses by 0.50% of the net assets per year of that class. Because these fees are paid out of the Fund's assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than other types of sales charges. If the service fees were paid, the Distributor would use them to pay dealers for providing personal services for accounts that hold Class B or Class C shares. On direct purchases of Class B shares, the Distributor pays a sales concession of 2.00% of the purchase price of Class B shares to dealers from its own resources at the time of sale. The Distributor normally retains the Class B asset-based sales charge. See the Statement of Additional Information for exceptions. The Distributor currently pays a sales concession of 0.50% of the purchase price of Class C shares to dealers from its own resources at the time of sale. The Distributor pays the asset-based sales charge as an ongoing concession to the dealer on Class C shares that have been outstanding for a year or more. The Distributor normally retains the asset-based sales charge on Class C shares. See the Statement of Additional Information for exceptions. The Distributor currently pays a sales concession of 0.50% of the purchase price of Class N shares to dealers from its own resources at the time of sale. The Distributor also pays the 0.25% Class N service fee to dealers in advance for the first year after the Class N shares are sold by the dealer. Including the advance of the service fee, the total amount paid by the Distributor to the dealer at the time of sale of Class N shares is therefore 0.75% of the purchase price. After the shares have been held for a year, the Distributor pays the service fees to dealers on a quarterly basis. The Distributor normally retains the asset-based sales charge on Class N shares, and the service fees for accounts for which it renders the required personal service. See the Statement of Additional Information for exceptions. Under certain circumstances, the Distributor will pay the full Class B, Class C or Class N asset-based sales charge and the service fee to the dealer beginning in the first year after purchase of such shares in lieu of paying the dealer the sales concession and the advance of the first year's service fee at the time of purchase, if there is a special agreement between the dealer and the Distributor. In those circumstances, the sales concession will not be paid to the dealer. For Class C shares purchased through the OppenheimerFunds Recordkeeper Pro program, the Distributor will pay the Class C asset-based sales charge to the dealer of record in the first year after the purchase of such shares in lieu of paying the dealer a sales concession at the time of purchase. The Distributor will use the service fee it receives from the Fund on those shares to reimburse FASCorp for providing personal services to the Class C accounts holding those shares. In addition, the Manager and the Distributor may make substantial payments to dealers or other financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Manager receives from the Fund. Some of these distribution-related payments may be made to dealers or financial intermediaries for marketing, promotional or related expenses; these payments are often referred to as "revenue sharing." In some circumstances, those types of payments may create an incentive for a dealer or financial intermediary or its representatives to recommend or offer shares of the Fund or other Oppenheimer funds to its customers. You should ask your dealer or financial intermediary for more details about any such payments it receives. Special Investor Services ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with an account at a U.S. bank or other financial institution. It must be an Automated Clearing House (ACH) member. AccountLink lets you: o transmit funds electronically to purchase shares by telephone (through a service representative or by PhoneLink) or automatically under Asset Builder Plans, or o have the Transfer Agent send redemption proceeds or transmit dividends and distributions directly to your bank account. Please call the Transfer Agent for more information. You may purchase shares 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 1.800.225.5677. The purchase payment will be debited from your bank account. AccountLink privileges should be requested on your Application or your dealer's settlement instructions if you buy your shares through a dealer. After your account is established, you can request AccountLink privileges by sending signature-guaranteed instructions and proper documentation 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. 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 PhoneLink number, 1.800.225.5677. Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone, by calling 1.800.225.5677. 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 OppenheimerFunds account you have already established by calling the special PhoneLink number. 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. CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain types of account transactions to the Transfer Agent by fax (telecopier). Please call 1.800.225.5677 for information about which transactions may be handled this way. Transaction requests submitted by fax are subject to the same rules and restrictions as written and telephone requests described in this Prospectus. OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund, as well as your account balance, on the OppenheimerFunds Internet website, at www.oppenheimerfunds.com. Additionally, shareholders listed in the account registration (and the dealer of record) may request certain account transactions through a special section of that website. To perform account transactions or obtain account information online, you must first obtain a user I.D. and password on that website. If you do not want to have Internet account transaction capability for your account, please call the Transfer Agent at 1.800.225.5677. At times, the website may be inaccessible or its transaction features may be unavailable. AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable you to sell shares automatically or exchange them to another OppenheimerFunds account on a regular basis. Please call the Transfer Agent or consult the Statement of Additional Information for details. REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B shares of the Fund that were purchased by reinvesting dividends or distributions from another Oppenheimer fund or by exchanging shares from another Oppenheimer fund on which you paid a sales charge, you have up to six months to reinvest all or part of the redemption proceeds in Class A shares of the Fund or other Oppenheimer funds without paying a sales charge. This privilege applies only 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 or Class N shares. You must be sure to ask the Distributor for this privilege when you send your payment. RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan account. If you participate in a plan sponsored by your employer, the plan trustee or administrator must buy the shares for your plan account. The Distributor also offers a number of different retirement plans that individuals and employers can use: Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs, SIMPLE IRAs and rollover IRAs. SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business owners or self-employed individuals. 403(b)(7) Custodial Plans. These are tax-deferred plans for employees of eligible tax-exempt organizations, such as schools, hospitals and charitable organizations. 401(k) Plans. These are special retirement plans for businesses. Pension and Profit-Sharing Plans. These plans are designed for businesses and self-employed individuals. Please call the Distributor for OppenheimerFunds retirement plan documents, which include applications and important plan information. How to Sell Shares You can sell (redeem) 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 in proper form (which means that it must comply with the procedures described below) and is accepted by the Transfer Agent. The Fund lets you sell your shares by writing a letter, by wire, by using the Fund's checkwriting privilege, or by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on a regular basis. 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 account, please call the Transfer Agent first, at 1.800.225.5677, for assistance. Certain Requests Require a Signature Guarantee. To protect you and the Fund from fraud, the following redemption requests must be in writing and must include a signature guarantee (although there may be other situations that also require a signature guarantee): o You wish to redeem more than $100,000 and receive a check. o The redemption check is not payable to all shareholders listed on the account statement. o The redemption check is not sent to the address of record on your account statement. o Shares are being transferred to a Fund account with a different owner or name. o Shares are being redeemed by someone (such as an Executor) other than the owners. Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a guarantee of your signature by a number of financial institutions, including: o a U.S. bank, trust company, credit union or savings association, o a foreign bank that has a U.S. correspondent bank, o a U.S. registered dealer or broker in securities, municipal securities or government securities, or o a U.S. national securities exchange, a registered securities association or a clearing agency. If you are signing on behalf of a corporation, partnership or other business or as a fiduciary, you must also include your title in the signature. Retirement Plan Accounts. There are special procedures to sell shares in an OppenheimerFunds retirement plan account. Call the Transfer Agent for a distribution request form. Special income tax withholding requirements apply to distributions from retirement plans. You must submit a withholding form with your redemption request to avoid delay in getting your money and if you do not want tax withheld. If your employer holds your retirement plan account for you in the name of the plan, you must ask the plan trustee or administrator to request the sale of the Fund shares in your plan account. Sending Redemption Proceeds by Wire. While the Fund normally sends your money by check, you can arrange to have the proceeds of shares you sell sent by Federal Funds wire to a bank account you designate. It must be a commercial bank that is a member of the Federal Reserve wire system. The minimum redemption you can have sent by wire is $2,500. There is a $10 fee for each request. To find out how to set up this feature on your account or to arrange a wire, call the Transfer Agent at 1.800.225.5677. Checkwriting. To write checks against your Fund account, request that privilege on your account application, or contact the Transfer Agent for signature cards. They must be signed (with a signature guarantee) by all owners of the account and returned to the Transfer Agent so that checks can be sent to you to use. Shareholders with joint accounts can elect in writing to have checks paid over the signature of one owner. If you previously signed a signature card to establish checkwriting in another Oppenheimer fund, simply call 1.800.225.5677 to request checkwriting for an account in this Fund with the same registration as the other account. o Checks can be written to the order of whomever you wish, but may not be cashed at the bank the checks are payable through or the Fund's custodian bank. o Checkwriting privileges are not available for accounts holding shares that are subject to a contingent deferred sales charge. o Checks must be written for at least $500. Checks written below the stated amount on the check will not be accepted. However, if you have existing checks indicating a $100 minimum, you may still use them for amounts of $100 or more. o Checks cannot be paid if they are written for more than your account value. Remember, your account value fluctuates in value and you should not write a check close to the total account value. o You may not write a check that would require the Fund to redeem shares that were purchased by check or Asset Builder Plan payments within the prior 10 days. o Don't use your checks if you changed your Fund account number, until you receive new checks. HOW DO you SELL SHARES BY MAIL? Write a letter of instruction that includes: o Your name o The Fund's name o Your Fund account number (from your account statement) o The dollar amount or number of shares to be redeemed o Any special payment instructions o Any share certificates for the shares you are selling o The signatures of all registered owners exactly as the account is registered, and o Any special documents requested by the Transfer Agent to assure proper authorization of the person asking to sell the shares. Use the following address for Requests by Send courier or express mail mail: requests to: OppenheimerFunds Services OppenheimerFunds Services P.O. Box 5270 10200 E. Girard Avenue, Building D Denver, Colorado 80217 Denver, Colorado 80231 HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of record may also sell your shares by telephone. To receive the redemption price calculated on a particular regular business day, your call must be received by the Transfer Agent by the close of the Exchange that day, which is normally 4:00 P.M., but may be earlier on some days. You may not redeem shares held in an OppenheimerFunds retirement plan account or under a share certificate by telephone. o To redeem shares through a service representative or automatically on PhoneLink, call 1.800.225.5677. 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 sent to that bank account. Are There Limits on Amounts Redeemed by Telephone? Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone in any seven-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. Telephone Redemptions Through AccountLink or by Wire. 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. If you have requested Federal Funds wire privileges for your account, the wire of the redemption proceeds will normally be transmitted on the next bank business day after the shares are redeemed. There is a possibility that the wire may be delayed up to seven days to enable the Fund to sell securities to pay the redemption proceeds. No dividends are accrued or paid on the proceeds of shares that have been redeemed and are awaiting transmittal by wire. CAN YOU SELL SHARES THROUGH YOUR DEALER? The Distributor has made arrangements to repurchase Fund shares from dealers and brokers on behalf of their customers. A broker/dealer may charge for that service. If your shares are held in the name of your dealer, you must redeem them through your dealer. how contingent deferred sales charges affect redemptions. If you purchase shares subject to a Class A, Class B, Class C or Class N contingent deferred sales charge and redeem any of those shares during the applicable holding period for the class of shares, the contingent deferred sales charge will be deducted from the redemption proceeds, (unless you are eligible for a waiver of that sales charge based on the categories listed in Appendix C to the Statement of Additional Information and you advise the Transfer Agent of your eligibility for the waiver when you place your redemption request). A 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 net asset value. A contingent deferred sales charge is not imposed on: o the amount of your account value represented by an increase in net asset value over the initial purchase price, o shares purchased by the reinvestment of dividends or capital gains distributions, or o shares redeemed in the special circumstances described in Appendix C to the Statement of Additional Information. To determine whether a 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 the holding period that applies to the class, and 3. shares held the longest during the holding period. Contingent deferred sales charges are not charged when you exchange shares of the Fund for shares of other Oppenheimer funds. However, if you exchange them within the applicable contingent deferred sales charge holding period, the holding period will carry over to the fund whose shares you acquire. Similarly, if you acquire shares of this Fund by exchanging shares of another Oppenheimer fund that are still subject to a contingent deferred sales charge holding period, that holding period will carry over to this Fund. How to Exchange Shares To exchange shares, you must meet several conditions: o Shares of the fund selected for exchange must be available for sale in your state of residence. o The prospectuses of both funds must offer the exchange privilege. o You must hold the shares you buy when you establish your account for at least seven days before you can exchange them. After the account is open seven days, you can exchange shares every regular business day. o You must meet the minimum purchase requirements for the fund whose shares you purchase by exchange. o Before exchanging into a fund, you must 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. In some cases, sales charges may be imposed on exchange transactions. You may pay a sales charge when you exchange Class A shares of this Fund. Because Class A shares of this Fund are sold without sales charge, in some cases you may pay a sales charge when you exchange Class A shares of this Fund for shares of other Oppenheimer funds that are sold subject to a sales charge. You will not pay a sales charge when you exchange shares of this Fund purchased by reinvesting dividends or distributions from other Oppenheimer funds, or shares of this Fund purchased by exchange of shares, on which you paid a sales charge. For tax purposes, exchanges of shares involve a sale 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. Since shares of this Fund normally maintain a $1.00 net asset value, in most cases you should not realize a capital gain or loss when you sell or exchange your shares. Please refer to "How to Exchange Shares" in the Statement of Additional Information for more details. 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 1.800.225.5677. That list can change from time to time. HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or by telephone: Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form, signed by all owners of the account. Send it to the Transfer Agent at the address on the back cover. Exchanges of shares held under certificates cannot be processed unless the Transfer Agent receives the certificates with the request. Telephone Exchange Requests. Telephone exchange requests may be made either by calling a service representative, or by using PhoneLink for automated exchanges by calling 1.800.225.5677. 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. ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you should be aware of: o Shares are redeemed from one fund and are normally purchased from the other fund in the same transaction on the same regular business day on which the Transfer Agent or its agent (such as a financial intermediary holding the investor's shares in an omnibus account) receives an exchange request that conforms to the policies described above. It must be received 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. The Transfer Agent may delay the reinvestment of the proceeds of an exchange up to seven days if it determines in its discretion that an earlier transmittal of the redemption proceeds to the receiving fund would be detrimental to the Fund from which the exchange is made or to the receiving fund. o The interests of the Fund's shareholders and the Fund's ability to manage its investments may be adversely affected when its shares are repeatedly exchanged over the short term. When large dollar amounts are involved, the Fund's implementation of its investment strategies may be negatively affected or the Fund might have to raise or retain more cash than the portfolio manager would normally retain, to meet unanticipated redemptions. Frequent exchange activity also may force the Fund to sell portfolio securities at disadvantageous times to raise the cash needed to meet those exchange requests. These factors might hurt the Fund's performance. When the Transfer Agent in its discretion believes frequent trading activity by any person, group or account would have a disruptive effect on the Fund's ability to manage its investments, the Fund and the Transfer Agent may reject purchase orders and/or exchanges into the Fund. The history of exchange activity in all accounts known by the Transfer Agent to be under common ownership or control within the Oppenheimer funds complex may be considered by the Transfer Agent, with respect to the review of exchanges involving this Fund as part of the Transfer Agent's procedures to detect and deter excessive exchange activity. The Transfer Agent may permit exchanges that it believes in the exercise of its judgment are not disruptive. The Transfer Agent might not be able to detect frequent exchange activity conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent exchange activity in those accounts. There is no guarantee that the Transfer Agent's controls and procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity. As stated above, the Fund permits dealers or financial intermediaries to submit exchange requests on behalf of their customers (unless the customer has revoked that authority). The Manager, the Distributor and/or the Transfer Agent have agreements with a limited number of broker-dealers and investment advisers permitting them to submit exchange orders in bulk on behalf of their clients, provided that those broker-dealers or advisers agree to restrictions on their exchange activity (which are more stringent than the restrictions that apply to other shareholders). Those restrictions include limitations on the funds available for exchanges, the requirement to give advance notice of exchanges to the Transfer Agent, and limits on the amount of client assets that may be invested in a particular fund. The Fund and its Transfer Agent may restrict or refuse bulk exchange requests submitted by a financial intermediary on behalf of a large number of accounts (including pursuant to the arrangements described above) if, in the Transfer Agent's judgment exercised in its discretion, those exchanges would be disruptive to either fund in the exchange transaction. o The Fund may amend, suspend or terminate the exchange privilege at any time. The Fund may refuse any exchange order and is currently not obligated to provide notice before rejecting an exchange order. o If the Transfer Agent cannot exchange all the shares you request because of a restriction cited above, only the shares eligible for exchange will be exchanged. Shareholder Account Rules and Policies More information about the Fund's policies and procedures for buying, selling, and exchanging shares is contained in the Statement of Additional Information. A $12 annual "Minimum Balance Fee" is assessed on each Fund account with a value of less than $500. The fee is automatically deducted from each applicable Fund account annually on or about the second to last "regular business day" of September. See the Statement of Additional Information (shareholders may also visit the OppenheimerFunds website) to learn how you can avoid this fee and for circumstances under which this fee will not be assessed. 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. Telephone transaction privileges for purchases, redemptions or exchanges may be modified, suspended or terminated by the Fund at any time. The Fund will provide you notice whenever it is required to do so by applicable law. 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 the Transfer Agent receives cancellation instructions from an owner of the account. 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. The Transfer Agent and the Fund will not be liable for losses or expenses arising out of telephone instructions reasonably believed to be genuine. 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. Dealers that 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. Payment for redeemed shares ordinarily is made in cash. It is forwarded by check or through AccountLink or by Federal Funds wire (as elected by the shareholder) within seven days after the Transfer Agent receives redemption instructions in proper form. However, under unusual circumstances determined by the Securities and Exchange Commission, payment may be delayed or suspended. For accounts registered in the name of a broker-dealer, payment will normally be forwarded within three business days after redemption. The Transfer Agent may delay processing any type of redemption payment as described under "How to Sell Shares" 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 or certified check, or arrange with your bank to provide telephone or written assurance to the Transfer Agent that your purchase payment has cleared. Involuntary Redemptions of Small Accounts may be made by the Fund if the account value has fallen below $200. In some cases, involuntary redemptions may be made to repay the Distributor for losses from the cancellation of share purchase orders. Shares may be "redeemed in kind" under unusual circumstances (such as a lack of liquidity in the Fund's portfolio to meet redemptions). This means that the redemption proceeds will be paid with liquid securities from the Fund's portfolio. Federal regulations may require the Fund to obtain your name, your date of birth (for a natural person), your residential street address or principal place of business and your Social Security number, Employer Identification Number or other government issued identification when you open an account. Additional information may be required in certain circumstances or to open corporate accounts. The Fund or the Transfer Agent may use this information to attempt to verify your identity. The Fund may not be able to establish an account if the necessary information is not received. The Fund may also place limits on account transactions while it is in the process of attempting to verify your identity. Additionally, if the Fund is unable to verify your identity after your account is established, the Fund may be required to redeem your shares and close your account. "Backup withholding" of federal income tax may be applied against taxable dividends, distributions and redemption proceeds (including exchanges) if you fail to furnish the Fund your correct, certified Social Security or Employer Identification Number when you sign your application, or if you under-report your income to the Internal Revenue Service. To avoid sending duplicate copies of materials to households, the Fund will mail only one copy of each prospectus, annual and semi-annual report and annual notice of the Fund's privacy policy to shareholders having the same last name and address on the Fund's records. The consolidation of these mailings, called householding, benefits the Fund through reduced mailing expense. If you want to receive multiple copies of these materials, you may call the Transfer Agent at 1.800.225.5677. You may also notify the Transfer Agent in writing. Individual copies of prospectuses, reports and privacy notices will be sent to you commencing within 30 days after the Transfer Agent receives your request to stop householding. Dividends and Taxes DIVIDENDS. The Fund intends to declare dividends from net investment income each regular business day and to pay those dividends to shareholders monthly on a date selected by the Board of Trustees. To maintain a net asset value of $1.00 per share, the Fund might withhold dividends or make distributions from capital or capital gains. The Fund intends to be as fully invested as possible to maximize its yield. Therefore, newly-purchased shares normally will begin to accrue dividends after the Distributor accepts your purchase order, starting on the business day after the Fund receives Federal Funds from your purchase payment. CAPITAL GAINS. The Fund normally holds its securities to maturity and therefore will not usually pay capital gains. Although the Fund does not seek capital gains, it could realize capital gains on the sale of portfolio securities. If it does, it may make distributions out of any net short-term or long-term capital gains in December of each year. The Fund may make supplemental distributions of dividends and capital gains following the end of its fiscal year. WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your account, specify on your application how you want to receive your dividends and distributions. You have four options: Reinvest All Distributions in the Fund. You can elect to reinvest all dividends and capital gains distributions in additional shares of the Fund. Reinvest Dividends or Capital Gains. You can elect to reinvest some distributions (dividends, short-term capital gains or long-term capital gains distributions) in the Fund while receiving the other types of distributions by check or having them sent to your bank account through AccountLink. Receive All Distributions in Cash. You can elect to receive a check for all dividends and capital gains distributions or have them sent to your bank through AccountLink. Reinvest Your Distributions in Another OppenheimerFunds Account. You can reinvest all distributions in the same class of shares of another OppenheimerFunds account you have established. TAXES. If your shares are not held in a tax-deferred retirement account, you should be aware of the following tax implications of investing in the Fund. The Fund expects that its distributions will consist primarily of ordinary income, which is subject to federal income tax and may be subject to state or local taxes. Dividends paid from net investment income and short-term capital gains are taxable as ordinary income. Long-term capital gains are taxable as long-term capital gains when distributed to shareholders, and may be taxable at different rates depending on how long the Fund holds the asset. It does not matter how long you have held your shares. Whether you reinvest your distributions in additional shares or take them in cash, the tax treatment is the same. Every year the Fund will send you and the IRS a statement showing the amount of any taxable distribution you received in the previous year. Any long-term capital gains will be separately identified in the tax information the Fund sends you after the end of the calendar year. The Fund intends each year to qualify as a "regulated investment company" under the Internal Revenue Code, but reserves the right not qualify. It qualified during its last fiscal year. The Fund, as a regulated investment company, will not be subject of Federal income taxes on any of its income, provided that it satisfies certain income, diversification and distribution requirements. Because the Fund seeks to maintain a stable $1.00 per share net asset value, it is unlikely that you will have a capital gain or loss when you sell or exchange your shares. 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. Any capital gain is subject to capital gains tax. 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. This information is only a summary of certain federal income tax information about your investment. You should consult with your tax advisor about the effect of an investment in the Fund on your particular tax situation. Financial Highlights The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past five fiscal years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Statement of Additional Information, which is available on request.FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
CLASS A YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ----------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 .01 .01 .05 .05 Net realized gain -- 1 --1 -- 1 -- -- ------------------------------------------------------------------------------ Total from investment operations -- 1 .01 .01 .05 .05 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 (.01) (.01) (.05) (.05) Distributions from net realized gain -- -- 1 -- 1 -- -- ------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders -- 1 (.01) (.01) (.05) (.05) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================== - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.17% 0.54% 1.31% 4.84% 5.10% - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 385,393 $ 465,843 $ 439,893 $ 395,898 $ 317,198 - ----------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 405,288 $ 451,634 $ 405,285 $ 351,490 $ 312,440 - ----------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets:3 Net investment income 0.17% 0.53% 1.30% 4.67% 5.00% Total expenses 1.22% 1.16% 1.17% 1.15% 1.06% Expenses after payments and waivers and reduction to custodian expenses 0.99% 1.00% 1.16% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 | OPPENHEIMER CASH RESERVES
CLASS B YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ---------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 -- 1 .01 .04 .04 Net realized gain -- 1 -- 1 -- 1 -- -- ----------------------------------------------------------------------------- Total from investment operations -- 1 -- 1 .01 .04 .04 - ---------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 -- 1 (.01) (.04) (.04) Distributions from net realized gain -- -- 1 -- 1 -- -- ----------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 1 -- 1 (.01) (.04) (.04) - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================= - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.11% 0.27% 0.76% 4.25% 4.52% - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 219,061 $ 316,750 $ 417,768 $ 239,201 $ 172,345 - ---------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 247,836 $ 385,078 $ 288,676 $ 208,775 $ 225,824 - ---------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.10% 0.27% 0.75% 4.07% 4.40% Total expenses 1.34% 1.37% 1.71% 1.70% 1.61% Expenses after payments and waivers and reduction to custodian expenses 1.04% 1.27% 1.70% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER CASH RESERVES FINANCIAL HIGHLIGHTS Continued - --------------------------------------------------------------------------------
CLASS C YEAR ENDED JULY 31, 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 1 -- 1 .01 .04 .04 Net realized gain -- 1 -- 1 -- 1 -- -- ---------------------------------------------------------------------------- Total from investment operations -- 1 -- 1 .01 .04 .04 - --------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 1 -- 1 (.01) (.04) (.04) Distributions from net realized gain -- -- 1 -- 1 -- -- ---------------------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 1 -- 1 (.01) (.04) (.04) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================================ - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 2 0.10% 0.25% 0.76% 4.26% 4.52% - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 109,083 $ 106,650 $ 123,120 $ 85,076 $ 49,382 - --------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 97,058 $ 113,569 $ 85,893 $ 68,741 $ 59,556 - --------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.10% 0.24% 0.80% 4.07% 4.44% Total expenses 1.39% 1.41% 1.71% 1.70% 1.61% Expenses after payments and waivers and reduction to custodian expenses 1.05% 1.28% 1.70% N/A 4 N/A 41. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 | OPPENHEIMER CASH RESERVES
CLASS N YEAR ENDED JULY 31, 2004 2003 2002 2001 1 - -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 - -------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income -- 2 -- 2 .01 .01 Net realized gain -- 2 -- 2 -- 2 -- ---------------------------------------------------------------- Total from investment operations -- 2 -- 2 .01 .01 - -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 2 -- 2 (.01) (.01) Distributions from net realized gain -- -- 2 -- 2 -- ---------------------------------------------------------------- Total dividends and/or distributions to shareholders -- 2 -- 2 (.01) (.01) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ================================================================ - -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 3 0.10% 0.43% 1.08% 1.49% - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 57,309 $ 52,350 $ 42,761 $ 4,275 - -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 55,961 $ 49,145 $ 21,014 $ 737 - -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 0.10% 0.41% 0.68% 3.03% Total expenses 1.39% 1.24% 1.47% 1.19% Expenses after payments and waivers and reduction to custodian expenses 1.06% 1.11% 1.46% N/A 51. For the period from March 1, 2001 (inception of offering) to July 31, 2001. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%.
INFORMATION AND SERVICES For More Information on Oppenheimer Cash Reserves The following additional information about the Fund is available without charge upon request: STATEMENT OF ADDITIONAL INFORMATION. This document includes additional information about the Fund's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's investments and performance is available in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. How to Get More Information You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, the notice explaining the Fund's privacy policy and other information about the Fund or your account: - ------------------------------------------------------------------------------ By Telephone: Call OppenheimerFunds Services toll-free: 1.800.CALL OPP (225.5677) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ By Mail: Write to: OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217-5270 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ On the Internet: You can send us a request by e-mail or read or download documents on the OppenheimerFunds website: www.oppenheimerfunds.com - ------------------------------------------------------------------------------ Information about the Fund including the Statement of Additional Information can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1.202.942.8090. Reports and other information about the Fund are available on the EDGAR database on the SEC's Internet website at www.sec.gov. ----------- Copies may be obtained after payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Fund or to make any representations about the Fund other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a solicitation of an offer to buy shares of the Fund, to any person in any state or other jurisdiction where it is unlawful to make such an offer. The Fund's SEC File No. 811-5582 The Fund's shares are distributed by: PR0760.001.0904 [logo] OppenheimerFunds Distributor, Inc. Printed on recycled paper. APPENDIX TO THE PROSPECTUS OF OPPENHEIMER CASH RESERVES Graphic material included in Prospectus of Oppenheimer Cash Reserves (the "Fund") under the heading: "Annual Total Returns (as of 12/31 each year)." A bar chart will be included in the Prospectus of the Fund depicting the annual total returns of a hypothetical investment in Class A shares of the Fund for each of the ten most recent calendar years. Set forth below are the relevant data points that will appear on the bar chart. - -------------------------------------------------------------------------------- Calendar Year Ended: Annual Total Returns - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/94 3.22% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/95 4.84% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/96 4.51% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/97 4.48% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/98 4.57% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/99 4.40% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/00 5.51% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/01 3.29% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/02 0.82% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/03 0.28% - --------------------------------------------------------------------------------