Oppenheimer Government Cash Reserves Inactive
Filed: 26 Nov 04, 12:00am
As filed with the Securities and Exchange Commission on November 26, 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 December 10, 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
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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
- ---------------------------------------------------------------------------------
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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 4
1. 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 4
1. 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 4
1. 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 5
1. 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
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Oppenheimer Limited-Term Government Fund At least 65% but not more than 95%
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Oppenheimer Bond Fund Not more than 20%
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Oppenheimer Strategic Income Fund Not more than 20%
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Oppenheimer U.S. Government Trust Not more than 15%
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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)
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- ------------------------------------------------------------------------
Class A Shares (inception 9/27/99)
Return Before Taxes 1.09% 4.52%
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Lehman Brothers 1-3 year Government 6.01% 7.15%
Bond Index
(reflects no deduction for fees,
expenses or taxes)
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- ------------------------------------------------------------------------
Class B Shares (inception 9/27/99) 0.11% 4.42%
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Class C Shares (inception 9/27/99) 3.08% 4.96%
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Class N Shares (inception 3/1/01) 3.86% 5.32%
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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
- --------------------------------------------------------------
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Class B Shares $636 $927 $1,345 $2,1511
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- --------------------------------------------------------------
Class C Shares $326 $697 $1,195 $2,565
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- --------------------------------------------------------------
Class N Shares $203 $322 $558 $1,236
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- --------------------------------------------------------------
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.
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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.
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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.
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- ------------------------------------------------------------------------------
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.
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- ------------------------------------------------------------------------------
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.
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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
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Per Share Operating Data
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00
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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
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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
============================================
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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
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Average net assets (in thousands) $92,035 $62,359 $33,976 $ 7,171 $100
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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%
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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
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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 0.46
27 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 PX0000.012
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, 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. |
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 0.46
27 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. |
| | 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. |
| | 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. |
| | Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April 2002). An officer of 9 portfolios in the OppenheimerFunds complex. |
| | (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 4
1. 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 4
1. 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 4
1. 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 5
1. 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) of
30 | 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) and
31 | 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 trust
32 | 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 4,019,209
12 | 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. |
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
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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
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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 26th day of November, 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 November 26, 2004
- --------------------------- Board of Trustees
William L. Armstrong
/s/ John V. Murphy* President, Principal November 26, 2004
- ------------------------ Executive Officer & Trustee
John V. Murphy
/s/ Brian W. Wixted* Treasurer, Principal November 26, 2004
- ------------------------- Financial &
Brian W. Wixted Accounting Officer
/s/ Robert G. Avis* Trustee November 26, 2004
- ---------------------
Robert G. Avis
/s/ George Bowen* Trustee November 26, 2004
- ----------------------
George Bowen
/s/ Edward Cameron* Trustee November 26, 2004
- ------------------------
Edward Cameron
/s/ Jon S. Fossel* Trustee November 26, 2004
- --------------------
Jon S. Fossel
/s/ Sam Freedman* Trustee November 26, 2004
- ---------------------
Sam Freedman
/s/ Beverly L. Hamilton*
- ------------------------- Trustee November 26, 2004
Beverly L. Hamilton
/s/ Robert J. Malone*
- ----------------------- Trustee November 26, 2004
Robert J. Malone
/s/ F. William Marshall, Jr.* Trustee November 26, 2004
- ----------------------------
F. William Marshall, Jr.
*By: /s/ Mitch Lindauer
-----------------------------------------
Mitch Lindauer, Attorney-in-Fact
OPPENHEIMER 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 4
1. 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 4
1. 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 4
1. 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 5
1. 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%
- --------------------------------------------------------------------------------