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 12,695
Average 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 12,695
Average 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 12,695
Average 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 11,445
Average 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 12,695
Average Annual Total Returns of Class Y Shares of the Fund at 10/31/03*
1-Year 3.15% Since Inception 5.31%
The performance information for the Lehman Brothers 1-3 Year Government
Bond Index in the graphs begins on 9/30/99 for Class A, Class B, Class C
and Class Y and on 2/28/01 for Class N shares.
Past performance cannot guarantee future results. Graphs are not drawn to
same scale.
9 OPPENHEIMER CAPITAL PRESERVATION FUND
NOTES
- --------------------------------------------------------------------------------
In reviewing performance, please remember that past
performance cannot guarantee future results. Investment
return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Because of
ongoing market volatility, the Fund's performance may be
subject to substantial fluctuations, and current performance
may be more or less than the results shown. For updates on
the Fund's performance, visit our website at
www.oppenheimerfunds.com.
Total returns and the ending account values in the graphs
include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment
for the periods shown. The Fund's total returns shown do not
reflect the deduction of income taxes on an individual's
investment. Taxes may reduce your actual investment returns
on income or gains paid by the Fund or any gains you may
realize if you sell your shares. For more complete
information about the Fund, including charges, expenses and
risks, please refer to the prospectus. To obtain a copy,
call your financial advisor, call OppenheimerFunds
Distributor, Inc. at 1.800.CALL OPP (1.800.225.5677) or
visit the OppenheimerFunds website at
www.oppenheimerfunds.com. Read the prospectus carefully
before you invest or send money.
Class A shares of the Fund were first publicly offered on
9/27/99. Class A returns include the current maximum initial
sales charge of 3.50%.
Class B shares of the Fund were first publicly offered on
9/27/99. Class B returns include the applicable contingent
deferred sales charges of 4% (1-year) and 2% (since
inception). Class B shares are subject to an annual 0.75%
asset-based sales charge.
Class C shares of the Fund were first publicly offered on
9/27/99. Class C returns include the contingent deferred
sales charge of 1% for the one-year period. Class C shares
are subject to an annual 0.75% asset-based sales charge.
Class N shares of the Fund were first publicly offered on
3/1/01. Class N shares are offered only through retirement
plans. Unless otherwise noted, Class N returns include the
contingent deferred sales charge of 1% for the one-year
period.
Class Y shares of the Fund were first publicly offered on
9/27/99. Class Y shares are offered only to certain
institutional investors under special agreement with the
Distributor.
An explanation of the calculation of performance is in the
Fund's Statement of Additional Information.
10 OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENT OF INVESTMENTS October 31, 2003
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
----------------------------------------------------------------------------
Investments in Affiliated Companies--101.1%
----------------------------------------------------------------------------
Fixed Income Funds--96.0%
Oppenheimer Bond Fund, Cl. Y 3,443,783 $ 35,298,772
----------------------------------------------------------------------------
Oppenheimer Limited-Term Government Fund, Cl. Y 23,457,985 240,678,927
----------------------------------------------------------------------------
Oppenheimer Strategic Income Fund, Cl. Y 14,510,240 59,346,883
-------------
335,324,582
----------------------------------------------------------------------------
Money Market Fund--5.1%
Oppenheimer Money Market Fund, Inc. 18,006,131 18,006,131
----------------------------------------------------------------------------
Total Investments, at Value (Cost $347,576,825) 101.1% 353,330,713
----------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.1) (3,896,798)
--------------------------
Net Assets 100.0% $349,433,915
==========================
See accompanying Notes to Financial Statements.
11 OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 2003
- --------------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets
Investments, at value--see accompanying statement:
Affiliated companies (cost $347,576,825) $353,330,713
----------------------------------------------------------------------------
Cash used for collateral on futures 25,000
----------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 713,959
Interest and dividends 702,087
Other 1,159
-------------
Total assets 354,772,918
----------------------------------------------------------------------------
Liabilities
Bank overdraft 378,513
----------------------------------------------------------------------------
Payables and other liabilities:
Wrapper agreement 3,434,739
Shares of beneficial interest redeemed 1,072,770
Wrapper fee payable 191,750
Transfer and shareholder servicing agent fees 86,752
Distribution and service plan fees 74,051
Shareholder reports 34,146
Trustees' compensation 11,390
Futures margins 3,734
Other 51,158
-------------
Total liabilities 5,339,003
----------------------------------------------------------------------------
Net Assets $349,433,915
=============
----------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $347,811,995
----------------------------------------------------------------------------
Overdistributed net investment income (10,216)
----------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (643,436)
----------------------------------------------------------------------------
Net unrealized appreciation on investments and wrapper
agreement 2,275,572
-------------
Net Assets $349,433,915
=============
12 OPPENHEIMER CAPITAL PRESERVATION FUND
----------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $94,727,427 and
9,473,122 shares of beneficial interest
outstanding) $10.00
Maximum offering price per share (net asset
value plus sales charge of 3.50% of offering
price) $10.36
----------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge) and
offering price per share (based on net assets of
$9,986,747 and 998,663 shares of beneficial
interest outstanding) $10.00
----------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge) and
offering price per share (based on net assets of
$24,404,533 and 2,440,518 shares of beneficial
interest outstanding) $10.00
----------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge) and
offering price per share (based on net assets of
$219,590,275 and 21,958,614 shares of beneficial
interest outstanding) $10.00
----------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering
price per share (based on net assets of $724,933
and 72,473 shares of beneficial interest
outstanding) $10.00
See accompanying Notes to Financial Statements.
13 OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENT OF OPERATIONS For the Year Ended October 31, 2003
- --------------------------------------------------------------------------------
----------------------------------------------------------------------------
Investment Income
Dividends from affiliated companies $ 9,469,836
----------------------------------------------------------------------------
Interest 76,236
------------
Total investment income 9,546,072
----------------------------------------------------------------------------
Expenses
Management fees 2,220,602
----------------------------------------------------------------------------
Distribution and service plan fees:
Class A 228,125
Class B 80,423
Class C 193,012
Class N 450,965
----------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 456,802
Class B 65,890
Class C 139,907
Class N 457,882
Class Y 30
----------------------------------------------------------------------------
Wrapper fees 489,897
----------------------------------------------------------------------------
Shareholder reports 64,109
----------------------------------------------------------------------------
Trustees' compensation 15,215
----------------------------------------------------------------------------
Custodian fees and expenses 6,587
----------------------------------------------------------------------------
Other 57,515
------------
Total expenses 4,926,961
Less reduction to custodian expenses (392)
Less reimbursement of management fees (1,335,442)
Less voluntary waiver of transfer and shareholder servicing
agent fees--Class A (152,350)
Less voluntary waiver of transfer and shareholder servicing
agent fees--Class B (37,422)
Less voluntary waiver of transfer and shareholder servicing
agent fees--Class C (70,269)
Less voluntary waiver of transfer and shareholder servicing
agent fees--Class Y (13)
------------
Net expenses 3,331,073
----------------------------------------------------------------------------
Net Investment Income 6,214,999
----------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments from affiliated companies 187,632
Closing of futures contracts (38,787)
------------
Net realized gain 148,845
----------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments from affiliated companies 4,556,064
Futures contracts (43,577)
Wrapper agreement (4,616,791)
------------
Net change in unrealized appreciation (104,304)
----------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 6,259,540
============
See accompanying Notes to Financial Statements.
14 OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Year Ended October 31, 2003 2002
----------------------------------------------------------------------------
Operations
Net investment income $ 6,214,999 $ 5,200,284
----------------------------------------------------------------------------
Net realized gain (loss) 148,845 (686,530)
----------------------------------------------------------------------------
Net change in unrealized appreciation (104,304) 2,153,270
----------------------------
Net increase in net assets resulting from
operations 6,259,540 6,667,024
----------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A (1,969,962) (2,422,826)
Class B (104,775) (102,516)
Class C (249,835) (205,654)
Class N (3,927,405) (2,350,783)
Class Y (7,561) (95)
----------------------------------------------------------------------------
Tax return of capital distribution:
Class A -- (726,971)
Class B -- (38,902)
Class C -- (79,157)
Class N -- (740,098)
Class Y -- (23)
----------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions:
Class A 16,147,988 28,403,767
Class B 4,781,818 3,427,529
Class C 11,965,018 10,595,020
Class N 100,792,528 111,483,337
Class Y 722,428 120
----------------------------------------------------------------------------
Net Assets
Total increase 134,409,782 153,909,772
----------------------------------------------------------------------------
Beginning of period 215,024,133 61,114,361
----------------------------
End of period [including overdistributed
net investment income of $10,216 and $6,233,
respectively] $349,433,915 $215,024,133
============================
See accompanying Notes to Financial Statements.
15 OPPENHEIMER CAPITAL PRESERVATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Class A Year Ended October 31, 2003 2002 2001 2000 1999 1
--------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00
--------------------------------------------------------------------------------------------------
Income (loss)from investment operations:
Net investment income .22 .42 .56 .57 .05
Net realized and unrealized gain -- .09 .02 .03 --
--------------------------------------------
Total from investment operations .22 .51 .58 .60 .05
--------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.22) (.41) (.55) (.60) (.05)
Tax return of capital distribution -- (.10) (.03) -- --
--------------------------------------------
Total dividends and/or distributions
to shareholders (.22) (.51) (.58) (.60) (.05)
--------------------------------------------------------------------------------------------------
Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00
============================================
--------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2 2.22% 5.25% 6.00% 6.18% 0.55%
--------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $94,727 $78,552 $50,179 $10,431 $100
--------------------------------------------------------------------------------------------------
Average net assets (in thousands) $92,035 $62,359 $33,976 $ 7,171 $100
--------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.11% 3.90% 5.39% 5.55% 5.75%
Total expenses 1.70% 1.71% 1.58% 1.96% 1.55%
Expenses after expense reimbursement or fee
waiver and reduction to custodian expenses 1.09% 1.18% 1.14% 1.51% 1.12%
--------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 47% 36% 89% 0%
<FN>
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.
</FN>
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%
<FN>
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.
</FN>
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%
<FN>
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.
</FN>
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%
<FN>
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.
</FN>
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%
<FN>
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.
</FN>
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 FUND
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.
- --------------------------------------------------------------------------------
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 FUND
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 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 Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
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
<FN>
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.
</FN>
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.
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7. Borrowing and Lending Arrangements
The 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
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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
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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.
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Portfolio Proxy Voting
Policies and Procedures Unaudited
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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
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Name, Position(s) Held with Principal Occupation(s) During Past 5 Years;
Fund, Length of Service, Age Other Trusteeships/Directorships Held by
Trustee; Number of Portfolios in Fund
Complex Currently Overseen by Trustee
INDEPENDENT The address of each Trustee in the chart
TRUSTEES below is 6803 S. Tucson Way, Centennial, CO
80112-3924. Each Trustee serves for an
indefinite term, until his or her
resignation, retirement, death or removal.
Mr. Motley was elected as Trustee to the
Board I funds effective October 10, 2002
and did not hold shares of Board I funds
during the calendar year ended
December 31, 2002.
Clayton K. Yeutter, Of Counsel (since 1993), Hogan & Hartson (a
Chairman of the Board law firm). Other directorships: Weyerhaeuser
of Trustees (since 2003), Corp. (since 1999) and Danielson Holding
Trustee (since 1999) Corp. (since 2002); formerly a director of
Age: 72 Caterpillar, Inc. (1993-December 2002).
Oversees 25 portfolios in the Oppenheimer
Funds complex.
Robert G. Galli, A trustee or director of other Oppenheimer
Trustee (since 1999) funds. Oversees 35 portfolios in the
Age: 70 OppenheimerFunds complex.
Phillip A. Griffiths, A director (since 1991) of the Institute for
Trustee (since 1999) Advanced Study, Princeton, N.J., a director
Age: 65 (since 2001) of GSI Lumonics, a trustee
(since 1983) of Woodward Academy, a Senior
Advisor (since 2001) of The Andrew W.
Mellon Foundation. A member of: the National
Academy of Sciences (since 1979), American
Academy of Arts and Sciences (since 1995),
American Philosophical Society (since 1996)
and Council on Foreign Relations (since
2002). Formerly a director of Bankers Trust
New York Corporation (1994-1999). Oversees
25 portfolios in the OppenheimerFunds
complex.
Joel W. Motley, Director (since 2002) Columbia Equity
Trustee (since 2002) Financial Corp. (privately-held financial
Age: 51 adviser); Managing Director (since 2002)
Carmona Motley, Inc. (privately-held
financial adviser); Formerly he held the
following positions: Managing Director
(January 1998-December 2001), Carmona Motley
Hoffman Inc. (privately-held financial
adviser); Managing Director (January 1992-
December 1997), Carmona Motley & Co.
(privately-held financial adviser). Oversees
25 portfolios in the OppenheimerFunds
complex.
Kenneth A. Randall, A director of Dominion Resources, Inc.
Trustee (since 1999) (electric utility holding company) and Prime
Age: 76 Retail, Inc. (real estate investment trust);
formerly a director of Dominion Energy, Inc.
(electric power and oil & gas producer),
President and Chief Executive Officer of The
Conference Board, Inc. (international
economic and business research) and a
director of Lumbermens Mutual Casualty
Company, American Motorists Insurance Company
and American Manufacturers Mutual Insurance
Company. Oversees 25 portfolios in the
OppenheimerFunds complex.
Edward V. Regan, President, Baruch College, CUNY; a director
Trustee (since 1999) of RBAsset (real estate manager); a director
Age: 73 of OffitBank; formerly Trustee, Financial
Accounting Foundation (FASB and GASB), Senior
Fellow of Jerome Levy Economics Institute,
Bard College, Chairman of Municipal
Assistance Corporation for the City of New
York, New York State Comptroller and Trustee
of New York State and Local Retirement Fund.
Oversees 25 investment companies in the
OppenheimerFunds complex.
32 OPPENHEIMER CAPITAL PRESERVATION FUND
Russell S. Reynolds, Jr., Chairman (since 1993) of The Directorship
Trustee (since 1999) Search Group, Inc. (corporate governance
Age: 71 consulting and executive recruiting); a life
trustee of International House (non-profit
educational organization), and a trustee
(since 1996) of the Greenwich Historical
Society. Oversees 25 portfolios in the
OppenheimerFunds complex.
Donald W. Spiro, Chairman Emeritus (since January 1991) of the
Vice Chairman of Manager. Formerly a director (January 1969-
the Board of Trustees, August 1999) of the Manager. Oversees 25
Trustee (since 1999) portfolios in the OppenheimerFunds complex.
Age: 77
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INTERESTED TRUSTEE The address of Mr. Murphy in the chart below
AND OFFICER is Two World Financial Center, 225 Liberty
St., New York, NY 10281-1008. Mr. Murphy
serves for an indefinite term, until his
resignation, death or removal.
John V. Murphy, Chairman, Chief Executive Officer and
President and Trustee, director (since June 2001) and President
Trustee (since 2001) (since September 2000) of the Manager;
Age: 54 President and a director or trustee of other
Oppenheimer funds; President and a director
(since July 2001) of Oppenheimer Acquisition
Corp. (the Manager's parent holding company)
and of Oppenheimer Partnership Holdings,
Inc. (a holding company subsidiary of the
Manager); a director (since November 2001)
of OppenheimerFunds Distributor, Inc. (a
subsidiary of the Manager); Chairman and a
director (since July 2001) of Shareholder
Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries
of the Manager); President and a director
(since July 2001) of OppenheimerFunds Legacy
Program (a charitable trust program
established by the Manager); a director of
the investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management,
Inc. and Centennial Asset Management
Corporation (since November 2001),
HarbourView Asset Management Corporation and
OFI Private Investments, Inc. (since July
2001); President (since November 1, 2001)
and a director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; a
director (since November 2001) of Trinity
Investment Management Corp. and Tremont
Advisers, Inc. (investment advisory
affiliates of the Manager); Executive Vice
President (since February 1997) of
Massachusetts Mutual Life Insurance Company
(the Manager's parent company); a director
(since June 1995) of DLB Acquisition
Corporation (a holding company that owns the
shares of David L. Babson & Company, Inc.);
formerly, Chief Operating Officer (September
2000-June 2001) of the Manager; President
and trustee (November 1999-November 2001) of
MML Series Investment Fund and MassMutual
Institutional Funds (open-end investment
companies); a director (September
1999-August 2000) of C.M. Life Insurance
Company; President, Chief Executive Officer
and director (September 1999-August 2000) of
MML Bay State Life Insurance Company; a
director (June 1989-June 1998) of Emerald
Isle Bancorp and Hibernia Savings Bank (a
wholly-owned subsidiary of Emerald Isle
Bancorp). Oversees 72 portfolios as
Trustee/Officer and 10 portfolios as Officer
in the OppenheimerFunds complex.
33 OPPENHEIMER CAPITAL PRESERVATION FUND
TRUSTEES AND OFFICERS Unaudited / Continued
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OFFICERS The address of the Officers in the chart
below is as follows: for Messrs. Manioudakis
and Zack, Two World Financial Center, 225
Liberty St., New York, NY 10281-1008, for
Mr. Wixted, 6803 S. Tucson Way, Centennial,
CO 80112-3924. Each Officer serves for an
annual term or until his or her earlier
resignation, death or removal.
Angelo Manioudakis, Senior Vice President of the Manager (since
Vice President (since 2002) April 2002); formerly Executive Director and
Age: 36 portfolio manager for Miller, Anderson &
Sherrerd, a division of Morgan Stanley
Investment Management (August 1993-April
2002). An officer of 9 portfolios in the
OppenheimerFunds complex.
Brian W. Wixted, Senior Vice President and Treasurer (since
Treasurer (since 1999) March 1999) of the Manager; Treasurer (since
Age: 44 March 1999) of HarbourView Asset Management
Corporation, Shareholder Services, Inc.,
Oppenheimer Real Asset Management
Corporation, Shareholder Financial Services,
Inc., Oppenheimer Partnership Holdings,
Inc., OFI Private Investments, Inc. (since
March 2000), OppenheimerFunds International
Ltd. and OppenheimerFunds plc (since May
2000) and OFI Institutional Asset
Management, Inc. (since November 2000)
(offshore fund management subsidiaries of
the Manager); Treasurer and Chief Financial
Officer (since May 2000) of Oppenheimer
Trust Company (a trust company subsidiary of
the Manager); Assistant Treasurer (since
March 1999) of Oppenheimer Acquisition Corp.
and OppenheimerFunds Legacy Program (since
April 2000); formerly Principal and Chief
Operating Officer (March 1995-March 1999),
Bankers Trust Company-Mutual Fund Services
Division. An officer of 82 portfolios in the
OppenheimerFunds complex.
Robert G. Zack, Senior Vice President (since May 1985) and
Secretary (since 2001) General Counsel (since February 2002) of the
Age: 55 Manager; General Counsel and a director
(since November 2001) of OppenheimerFunds
Distributor, Inc.; Senior Vice President and
General Counsel (since November 2001) of
HarbourView Asset Management Corporation;
Vice President and a director (since
November 2000) of Oppenheimer Partnership
Holdings, Inc.; Senior Vice President,
General Counsel and a director (since
November 2001) of Shareholder Services,
Inc., Shareholder Financial Services, Inc.,
OFI Private Investments, Inc., Oppenheimer
Trust Company and OFI Institutional Asset
Management, Inc.; General Counsel (since
November 2001) of Centennial Asset
Management Corporation; a director (since
November 2001) of Oppenheimer Real Asset
Management, Inc.; Assistant Secretary and a
director (since November 2001) of
OppenheimerFunds International Ltd.; Vice
President (since November 2001) of
OppenheimerFunds Legacy Program; Secretary
(since November 2001) of Oppenheimer
Acquisition Corp.; formerly Acting General
Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October
2001) of the Manager; Assistant Secretary of
Shareholder Services, Inc. (May
1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November
2001); OppenheimerFunds International Ltd.
and OppenheimerFunds plc (October
1997-November 2001). An officer of 82
portfolios in the OppenheimerFunds complex.
The Fund's Statement of Additional Information contains additional information
about the Fund's Trustees and is available without charge upon request.
34 OPPENHEIMER CAPITAL PRESERVATION FUND
ITEM 2. CODE OF ETHICS
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the Fund has determined that Edward
V. Regan, the Chairman of the Board's Audit Committee, possesses the technical
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as
an "audit committee financial expert," and has designated Mr. Regan as the Audit
Committee's financial expert. Mr. Regan is an "independent" Trustee pursuant to
paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES - NOT REQUIRED
ITEM 5. NOT APPLICABLE
ITEM 6. RESERVED
ITEM 7. NOT APPLICABLE
ITEM 8. RESERVED
ITEM 9. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(c)) as of October 31, 2003, registrant's
principal executive officer and principal financial officer found
registrant's disclosure controls and procedures to be appropriately
designed to ensure that information required to be disclosed by
registrant in the reports that it files under the Securities Exchange
Act of 1934 (a) is accumulated and communicated to registrant's
management, including its principal executive officer and principal
financial officer, to allow timely decisions regarding required
disclosure, and (b) is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms adopted by the
U.S. Securities and Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls or in other factors that could significantly affect
registrant's internal controls subsequent to the date of the most
recent evaluation as indicated, including no significant deficiencies
or material weaknesses that required corrective action.
ITEM 10. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)