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 - October 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED OCTOBER 31, 2004, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. The factors that supported
performance for the first half of Oppenheimer Capital Preservation Fund's fiscal
year generally prevailed throughout the remainder of the period. For the
12-month period ended October 31, 2004, the Fund's exposure to both U.S.
government agency and mortgage-related securities, gained primarily through its
allocation to Oppenheimer Limited-Term Government Fund, benefited performance.
The fact that we allocated roughly 65% of the Fund's assets to Oppenheimer
Limited-Term Government Fund, which ranked quite favorably within its own peer
group and was overweighted in its exposure to both agency and mortgage
securities, benefited the Fund during its past fiscal year. Since these
non-Treasury, or "spread" products performed well versus Treasuries and, in the
case of higher coupon mortgages, which Oppenheimer Limited-Term Government Fund
emphasized this year, this overall allocation added to Oppenheimer Capital
Preservation Fund's returns.
Second, the Fund's exposure to both high-yield corporate bonds and
international debt securities, acquired through our allocation to Oppenheimer
Strategic Income Fund, also helped returns, since both of these sectors
performed well versus Treasuries.
Finally, our allocation to Oppenheimer Bond Fund also added to returns for
the Fund's fiscal year. This Fund has remained a top-quartile performer among
its peers this year, benefiting from our active management of its portfolio's
interest-rate sensitivity, or duration. Additionally, the fact that Oppenheimer
Bond Fund held an emphasized exposure to the credit sector throughout the year
helped it perform quite well, thereby supporting performance for Oppenheimer
Capital Preservation Fund.
While no factors or circumstances specifically detracted from the Fund's
performance this period, we might have added marginal returns had we assumed
greater risk, or had we more aggressively emphasized areas that performed well
for us, such as higher-coupon mortgages or the credit sector.
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, 2004. 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
8 | OPPENHEIMER CAPITAL PRESERVATION FUND
Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
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
income but does not consider the effect of transaction costs, and none of the
data in the graphs shows the effect of taxes. The Fund's performance reflects
the effects of the Fund's 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 investments in
the index.
The Board of Trustees has recommended that shareholders approve merging
the Fund into Oppenheimer Cash Reserves (a money market fund). In order to
facilitate that merger and protect against rising interest rates, the Fund has
increased its allocation to money market securities and expects to be fully
invested in money market securities by the end of the year.
9 | OPPENHEIMER CAPITAL PRESERVATION FUND
FUND PERFORMANCE DISCUSSION
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CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class A)
Lehman Brothers 1-3 Year Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital Lehman Bros 1-3 Year
Date Preservation Fund (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
01/31/2004 11,803 12,797
04/30/2004 11,860 12,775
07/31/2004 11,897 12,812
10/31/2004 11,939 12,939
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year -1.95% 5-Year 3.49% Since Inception (9/27/99) 3.54%
10 | OPPENHEIMER CAPITAL PRESERVATION FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class B)
Lehman Brothers 1-3 Year Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital Lehman Bros 1-3 Year
Date Preservation Fund (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 11,837 12,695
01/31/2004 11,869 12,797
04/30/2004 11,903 12,775
07/31/2004 11,917 12,812
10/31/2004 11,934 12,939
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year -3.18% 5-Year 3.33% Since Inception (9/27/99) 3.53%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 3.50%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 4% (1-YEAR) AND 1% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 15 FOR FURTHER
INFORMATION.
11 | OPPENHEIMER CAPITAL PRESERVATION FUND
FUND PERFORMANCE DISCUSSION
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class C)
Lehman Brothers 1-3 Year Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital Lehman Bros 1-3 Year
Date Preservation Fund (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
01/31/2004 11,866 12,797
04/30/2004 11,900 12,775
07/31/2004 11,915 12,812
10/31/2004 11,933 12,939
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year -0.16% 5-Year 3.50% Since Inception (9/27/99) 3.53%
12 | OPPENHEIMER CAPITAL PRESERVATION FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class N)
Lehman Brothers 1-3 Year Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital Lehman Bros 1-3 Year
Date Preservation Fund (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
01/31/2004 11,249 11,537
04/30/2004 11,305 11,517
07/31/2004 11,343 11,550
10/31/2004 11,384 11,666
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 0.69% 5-Year N/A Since Inception (3/1/01) 3.60%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 3.50%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 4% (1-YEAR) AND 1% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 15 FOR FURTHER
INFORMATION.
13 | OPPENHEIMER CAPITAL PRESERVATION FUND
FUND PERFORMANCE DISCUSSION
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CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class Y)
Lehman Brothers 1-3 Year Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Capital Lehman Bros 1-3 Year
Date Preservation Fund (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
01/31/2004 12,434 12,797
04/30/2004 12,512 12,775
07/31/2004 12,569 12,812
10/31/2004 12,629 12,939
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES WITH SALES CHARGE OF THE FUND AT
10/31/04
1-Year 2.19% 5-Year 4.66% Since Inception (9/27/99) 4.69%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 3.50%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 4% (1-YEAR) AND 1% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 15 FOR FURTHER
INFORMATION.
14 | OPPENHEIMER CAPITAL PRESERVATION FUND
NOTES
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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.
Investors should consider the Fund's investment objectives, risks, and other
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.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
This Fund is only available through qualified retirement plans.
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 1% (5-year). 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 1-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 1-year
period.
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.
15 | OPPENHEIMER CAPITAL PRESERVATION FUND
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
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 October 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), redemption fees, or a $12.00 fee
imposed annually on accounts valued at less than $500.00 (subject to
16 | OPPENHEIMER CAPITAL PRESERVATION FUND
exceptions described in 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
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(5/1/04) (10/31/04) OCTOBER 31, 2004
- ---------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,006.60 $ 5.56
- ---------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.61 5.60
- ---------------------------------------------------------------------
Class B Actual 1,000.00 1,002.60 10.02
- ---------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.18 10.08
- ---------------------------------------------------------------------
Class C Actual 1,000.00 1,002.80 9.81
- ---------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.38 9.88
- ---------------------------------------------------------------------
Class N Actual 1,000.00 1,007.00 5.16
- ---------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,020.01 5.19
- ---------------------------------------------------------------------
Class Y Actual 1,000.00 1,009.40 2.78
- ---------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,022.37 2.80
Hypothetical 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 184/366
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended October 31, 2004 are as follows:
CLASS EXPENSE RATIOS
- ------------------------
Class A 1.10%
- ------------------------
Class B 1.98
- ------------------------
Class C 1.94
- ------------------------
Class N 1.02
- ------------------------
Class Y 0.55
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager and Transfer Agent 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 waivers or reimbursements.
17 | OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENT OF INVESTMENTS October 31, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--68.2%
- --------------------------------------------------------------------------------------------------------------
FIXED INCOME FUNDS--48.8%
Oppenheimer Bond Fund, Cl. Y 2,265,572 $ 23,811,167
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Limited-Term Government Fund, Cl. Y 1 16,165,114 164,560,862
------------
188,372,029
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MONEY MARKET FUND--19.4%
Oppenheimer Money Market Fund, Inc., Cl. A 74,807,357 74,807,357
------------
Total Investments in Affiliated Companies (Cost $261,749,023) 263,179,386
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--23.2%
- --------------------------------------------------------------------------------------------------------------
Bear Stearns Cos., Inc., 2.04%, 1/20/05 $ 10,000,000 9,950,300
- --------------------------------------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc., 2.05%, 1/24/05 10,000,000 9,946,200
- --------------------------------------------------------------------------------------------------------------
Crown Point Capital Co., 2.16%, 4/6/05 2 10,000,000 9,899,600
- --------------------------------------------------------------------------------------------------------------
FACR Owner Trust 1, 2.04%, 1/18/05 10,000,000 9,951,600
- --------------------------------------------------------------------------------------------------------------
Greenwich Capital Holdings, Inc., 2.02%, 1/21/05 10,000,000 9,949,700
- --------------------------------------------------------------------------------------------------------------
Lexington Parker Capital Co. LLC, 2.03%, 1/10/05 2 10,000,000 9,959,000
- --------------------------------------------------------------------------------------------------------------
Neptune Funding Corp., 2.13%, 3/28/05 2 10,000,000 9,905,900
- --------------------------------------------------------------------------------------------------------------
Sigma Finance, Inc., 2.01%, 1/13/05 2 10,000,000 9,956,900
- --------------------------------------------------------------------------------------------------------------
Washington Mutual Bank FA, 1.95%, 12/27/04 10,000,000 10,000,000
------------
Total Short-Term Notes (Cost $89,556,379) 89,519,200
- --------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--7.7%
- --------------------------------------------------------------------------------------------------------------
Undivided interest of 4.98% in joint repurchase agreement (Principal
Amount/Value $595,058,000, with a maturity value of $595,147,755) with UBS
1.81%, Warburg LLC, dated 10/29/04, to be repurchased at $29,616,466 on 11/1/04,
collateralized by Federal National Mortgage Assn., 5.50%, 1/1/34--4/1/34, with a
value of $607,720,116 (Cost $29,612,000) 29,612,000 29,612,000
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $380,917,402) 99.1% 382,310,586
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.9 3,487,517
----------------------------
NET ASSETS 100.0% $385,798,103
============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Represents ownership of at least 5% of the issuer.
2. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $39,721,400, or 10.30% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 2004
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value-see accompanying statement of investments:
Unaffiliated companies (cost $119,168,378) $ 119,131,200
Affiliated companies (cost $261,749,024) 263,179,386
----------------
382,310,586
- -------------------------------------------------------------------------------------------------------
Cash 402,129
- -------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 6,624,000
Shares of beneficial interest sold 2,479,295
Interest and dividends 706,201
Other 5,846
----------------
Total assets 392,528,057
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Wrapper agreement 6,235,100
Wrapper fee payable 214,214
Transfer and shareholder servicing agent fees 83,152
Distribution and service plan fees 81,883
Shareholder communications 44,902
Trustees' compensation 21,577
Other 49,126
----------------
Total liabilities 6,729,954
- -------------------------------------------------------------------------------------------------------
NET ASSETS $ 385,798,103
================
- -------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $ 385,614,084
- -------------------------------------------------------------------------------------------------------
Accumulated net investment income 1,815,635
- -------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 3,210,300
- -------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and wrapper agreement (4,841,916)
- -------------------------------------------------------------------------------------------------------
NET ASSETS $ 385,798,103
================
19 | OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $98,463,068 and 9,845,140 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 $11,498,325 and 1,150,282 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 $32,315,926 and 3,232,423 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 $243,164,130 and 24,312,117 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 $356,654 and 35,653 shares of beneficial interest outstanding) $ 10.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENT OF OPERATIONS For the Year Ended October 31, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends from affiliated companies $ 11,918,951
- --------------------------------------------------------------------------------
Interest 142,561
---------------
Total investment income 12,061,512
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 2,700,195
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 241,453
Class B 108,663
Class C 280,641
Class N 574,971
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 379,944
Class B 69,049
Class C 171,182
Class N 641,641
Class Y 90
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 11,223
Class B 9,597
Class C 17,353
Class N 535
Class Y 12
- --------------------------------------------------------------------------------
Wrapper fees 601,527
- --------------------------------------------------------------------------------
Trustees' compensation 16,930
- --------------------------------------------------------------------------------
Custodian fees and expenses 10,479
- --------------------------------------------------------------------------------
Other 90,976
---------------
Total expenses 5,926,461
Less reduction to custodian expenses (1,001)
Less payments and waivers of expenses (1,766,881)
---------------
Net expenses 4,158,579
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,902,933
21 | OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain on:
Investments from affiliated companies $ 4,704,134
Closing of futures contracts 3,187
---------------
Net realized gain 4,707,321
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments from affiliated companies (4,360,704)
Futures contracts 43,577
Wrapper agreement (2,800,361)
---------------
Net change in unrealized appreciation (depreciation) (7,117,488)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,492,766
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER CAPITAL PRESERVATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2004 2003
- ---------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment income $ 7,902,933 $ 6,214,999
- ---------------------------------------------------------------------------------------------
Net realized gain 4,707,321 148,845
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (7,117,488) (104,304)
----------------------------------
Net increase in net assets resulting from operations 5,492,766 6,259,540
- ---------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (1,539,549) (1,969,962)
Class B (86,556) (104,775)
Class C (228,135) (249,835)
Class N (3,818,168) (3,927,405)
Class Y (10,464) (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 3,792,043 16,147,988
Class B 1,524,458 4,781,818
Class C 7,940,832 11,965,018
Class N 23,712,121 100,792,528
Class Y (367,958) 722,428
- ---------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------
Total increase 36,364,188 134,409,782
- ---------------------------------------------------------------------------------------------
Beginning of period 349,433,915 215,024,133
----------------------------------
End of period [including accumulated net investment
income (loss) of $1,815,635 and $(10,216), respectively] $ 385,798,103 $ 349,433,915
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER CAPITAL PRESERVATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
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 .22 .42 .56 .57
Net realized and unrealized gain (loss) (.06) -- .09 .02 .03
-----------------------------------------------------------------------
Total from investment operations .16 .22 .51 .58 .60
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.16) (.22) (.41) (.55) (.60)
Tax return of capital distribution -- -- (.10) (.03) --
-----------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.16) (.22) (.51) (.58) (.60)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
=======================================================================
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 1.61% 2.22% 5.25% 6.00% 6.18%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 98,463 $ 94,727 $ 78,552 $ 50,179 $ 10,431
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 96,767 $ 92,035 $ 62,359 $ 33,976 $ 7,171
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 2.20% 2.11% 3.90% 5.39% 5.55%
Total expenses 1.59% 1.70% 1.71% 1.58% 1.96%
Expenses after payments and waivers
and reduction to custodian expenses 1.09% 1.09% 1.18% 1.14% 1.51%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 20% 47% 36% 89%
1. 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.
2. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER CAPITAL PRESERVATION FUND
CLASS B YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
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 .13 .14 .37 .50 .51
Net realized and unrealized gain (loss) (.05) -- .08 .02 .02
-----------------------------------------------------------------------
Total from investment operations .08 .14 .45 .52 .53
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.08) (.14) (.35) (.49) (.53)
Tax return of capital distribution -- -- (.10) (.03) --
-----------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.08) (.14) (.45) (.52) (.53)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
=======================================================================
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 0.82% 1.45% 4.59% 5.31% 5.43%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 11,498 $ 9,987 $ 5,205 $ 1,777 $ 331
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 10,866 $ 8,055 $ 3,337 $ 676 $ 82
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 1.35% 1.31% 3.15% 4.61% 4.55%
Total expenses 2.66% 2.77% 2.37% 2.34% 2.71%
Expenses after payments and waivers
and reduction to custodian expenses 1.94% 1.87% 1.84% 1.90% 2.26%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 20% 47% 36% 89%
1. 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.
2. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER CAPITAL PRESERVATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
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 .13 .14 .38 .51 .50
Net realized and unrealized gain (loss) (.05) -- .07 .01 .03
-----------------------------------------------------------------------
Total from investment operations .08 .14 .45 .52 .53
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.08) (.14) (.35) (.49) (.53)
Tax return of capital distribution -- -- (.10) (.03) --
-----------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.08) (.14) (.45) (.52) (.53)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
=======================================================================
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 0.84% 1.43% 4.58% 5.31% 5.43%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 32,316 $ 24,405 $ 12,437 $ 1,845 $ 48
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 28,078 $ 19,334 $ 6,790 $ 652 $ 25
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 1.37% 1.31% 3.07% 4.54% 4.65%
Total expenses 2.60% 2.67% 2.35% 2.36% 2.71%
Expenses after payments and waivers
and reduction to custodian expenses 1.91% 1.87% 1.82% 1.92% 2.26%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 20% 47% 36% 89%
1. 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.
2. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER CAPITAL PRESERVATION FUND
CLASS N YEAR ENDED OCTOBER 31, 2004 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 .22 .23 .45 .38
Net realized and unrealized gain (loss) (.05) -- .07 -- 2
-------------------------------------------------------------
Total from investment operations .17 .23 .52 .38
- ---------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.17) (.23) (.42) (.36)
Tax return of capital distribution -- -- (.10) (.02)
-------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.17) (.23) (.52) (.38)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
=============================================================
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 1.69% 2.37% 5.29% 3.88%
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 243,164 $ 219,590 $ 118,829 $ 7,311
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 230,434 $ 180,665 $ 63,485 $ 3,002
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.27% 2.16% 3.86% 5.18%
Total expenses 1.46% 1.45% 1.52% 1.64%
Expenses after payments and waivers and
reduction to custodian expenses 1.02% 1.01% 0.99% 1.20%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 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.
27 | OPPENHEIMER CAPITAL PRESERVATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
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 .32 .39 .41 .58 .59
Net realized and unrealized gain (loss) (.10) (.08) .11 .03 .03
-----------------------------------------------------------------------
Total from investment operations .22 .31 .52 .61 .62
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.22) (.31) (.42) (.58) (.62)
Tax return of capital distribution -- -- (.10) (.03) --
-----------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.22) (.31) (.52) (.61) (.62)
=======================================================================
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
=======================================================================
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 2.19% 3.15% 5.35% 6.25% 6.43%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 357 $ 725 $ 2 $ 2 $ 1
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 462 $ 368 $ 2 $ 2 $ 1
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 2.84% 2.53% 4.13% 5.73% 5.88%
Total expenses 0.96% 0.96% 67.64% 43.02% 1.71%
Expenses after payments and waivers
and reduction to custodian expenses 0.51% 0.52% 1.09% 0.82% 1.26%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 20% 47% 36% 89%
1. 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.
2. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | 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 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. Expenses included in the accompanying financial statements reflect
the expenses of the Fund and do not include any expenses associated with the
Underlying Funds. Class 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.
29 | OPPENHEIMER CAPITAL PRESERVATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2004, the Fund has entered into one wrapper
agreement, with the Bank of America, NA. Total fees paid for the year ended
October 31, 2004, to Bank of America, NA, for this agreement were $579,063.
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. Corporate, government and
30 | OPPENHEIMER CAPITAL PRESERVATION FUND
municipal debt instruments having a remaining maturity in excess of 60 days and
all mortgage-backed securities will be valued at the mean between the "bid" and
"asked" prices. 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 and domestic
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 exchanges will be fair 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).
- --------------------------------------------------------------------------------
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, 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
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2 TAX PURPOSES
------------------------------------------------------------------------
$ 1,836,666 $ 3,757,027 $ -- $ 5,388,643
1. During the fiscal year ended October 31, 2004, the Fund did not utilize any
capital loss carryforward.
2. During the fiscal year ended October 31, 2003, the Fund did not utilize any
capital loss carryforward.
31 | OPPENHEIMER CAPITAL PRESERVATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2004. Net assets of the
Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED GAIN
PAID-IN CAPITAL INCOME ON INVESTMENTS 3
-----------------------------------------------------------
$ 1,200,593 $ 394,210 $ 806,383
3. $1,200,593, of which $806,383 was long-term capital gain, was distributed in
connection with Fund share redemptions.
The tax character of distributions paid during the years ended October 31, 2004
and October 31, 2003 was as follows:
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
-----------------------------------------------------------------
Distributions paid from:
Ordinary income $ 5,682,872 $ 6,259,538
Long-term capital gain 47,202 --
------------ ------------
Total $ 5,730,074 $ 6,259,538
============ ============
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, 2004 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 $ 381,464,129
==============
Gross unrealized appreciation $ 909,367
Gross unrealized depreciation (6,298,010)
Net unrealized depreciation $ (5,388,643)
==============
- --------------------------------------------------------------------------------
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, 2004, the Fund's projected benefit obligations were increased by $7,100 and
payments of $1,186 were made to retired trustees, resulting in an accumulated
liability of $16,130 as of October 31, 2004.
32 | OPPENHEIMER CAPITAL PRESERVATION FUND
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. 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.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. The Fund pays interest to its custodian on
such cash overdrafts at a rate equal to the Federal Funds Rate plus 0.50%. The
Reduction to Custodian Expenses line item, if applicable, represents earnings on
cash balances maintained by the Fund during the period. Such interest expense
and other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
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
33 | OPPENHEIMER CAPITAL PRESERVATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2004 YEAR ENDED OCTOBER 31, 2003
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS A
Sold 4,620,420 $ 46,204,203 5,635,142 $ 56,351,417
Dividends and/or
distributions reinvested 153,761 1,537,619 197,233 1,972,335
Redeemed (4,402,163) (43,949,779) 1 (4,217,576) (42,175,764)
--------------------------------------------------------------
Net increase 372,018 $ 3,792,043 1,614,799 $ 16,147,988
==============================================================
- -----------------------------------------------------------------------------------------------
CLASS B
Sold 578,837 $ 5,788,366 788,002 $ 7,880,026
Dividends and/or
distributions reinvested 8,735 87,359 10,502 105,024
Redeemed (435,953) (4,351,267) 1 (320,322) (3,203,232)
--------------------------------------------------------------
Net increase 151,619 $ 1,524,458 478,182 $ 4,781,818
==============================================================
- -----------------------------------------------------------------------------------------------
CLASS C
Sold 1,911,178 $ 19,111,780 2,013,047 $ 20,130,482
Dividends and/or
distributions reinvested 23,017 230,172 24,997 249,971
Redeemed (1,142,290) (11,401,120) 1 (841,543) (8,415,435)
--------------------------------------------------------------
Net increase 791,905 $ 7,940,832 1,196,501 $ 11,965,018
==============================================================
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 11,501,276 $ 115,012,755 18,082,527 $ 180,825,268
Dividends and/or
distributions reinvested 381,357 3,813,576 394,329 3,943,292
Redeemed (9,529,130) (95,114,210) 1 (8,397,603) (83,976,032)
--------------------------------------------------------------
Net increase 2,353,503 $ 23,712,121 10,079,253 $ 100,792,528
==============================================================
- -----------------------------------------------------------------------------------------------
CLASS Y
Sold 3,693 $ 36,920 71,476 $ 714,766
Dividends and/or
distributions reinvested 1,040 10,406 766 7,662
Redeemed (41,553) (415,284) 1 -- --
--------------------------------------------------------------
Net increase (decrease) (36,820) $ (367,958) 72,242 $ 722,428
==============================================================
1. Net of redemption fees of $86,633, $10,002, $26,655, $203,364 and $301 for
Class A, Class B, Class C, Class N and Class Y, respectively.
34 | OPPENHEIMER CAPITAL PRESERVATION FUND
- --------------------------------------------------------------------------------
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, 2004 were
$180,897,335 and $264,805,730, 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, 2004, the Fund paid
$1,112,047 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.
- --------------------------------------------------------------------------------
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
35 | OPPENHEIMER CAPITAL PRESERVATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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. 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 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 expenses under the plan at October 31,
2004 for Class B, Class C and Class N shares were $276,206, $430,075 and
$1,175,545, 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
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------
October 31, 2004 $ 300 $ 7,267 $ 61,189 $ 19,267 $ 200,984
- -----------------------------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. 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%. During the year ended October 31, 2004, the
Manager waived $426,320, $47,818, $123,351, $1,013,884 and $2,049 for Class A,
Class B, Class C, Class N and Class Y shares, respectively.
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.
During the year ended October 31, 2004, OFS waived $51,488, $29,969 and $72,002
for Class A, Class B and Class C shares, respectively. This undertaking may be
amended or withdrawn at any time.
36 | OPPENHEIMER CAPITAL PRESERVATION FUND
- --------------------------------------------------------------------------------
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.
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 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 October 31, 2004, the Fund had no outstanding futures contracts.
- --------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES
As of October 31, 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.
37 | OPPENHEIMER CAPITAL PRESERVATION FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. FUND REORGANIZATION
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 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 February 4, 2005, with the Reorganization to
be effected on or about February 11, 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.
- --------------------------------------------------------------------------------
8. LITIGATION
Six 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") including 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. By order dated October 27, 2004, these
six actions, and future related actions, were consolidated by the U.S. District
Court for the Southern District of New York into a single consolidated
proceeding in contemplation of the filing of a superseding consolidated and
amended complaint.
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.
38 | OPPENHEIMER CAPITAL PRESERVATION FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 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 each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with 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 October 31, 2004, 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, 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 each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
KPMG LLP
Denver, Colorado
December 16, 2004
39 | OPPENHEIMER CAPITAL PRESERVATION FUND
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.
Dividends and distributions of $0.0145, $0.0082, $0.0082, $0.0149 and
$0.0196 per share were paid to Class A, Class B, Class C, Class N and Class Y
shareholders, respectively, on December 30, 2003, of which $0.0013 was
designated as a "capital gain distribution" for federal income tax purposes.
Whether received in stock or in cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of the 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.
40 | OPPENHEIMER CAPITAL PRESERVATION FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF
INVESTMENTS 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 quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at www.sec.gov. Those
forms may 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 1-800-SEC-0330.
41 | OPPENHEIMER CAPITAL PRESERVATION FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD
FUND, LENGTH OF SERVICE, AGE 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. TUCSON WAY, CENTENNIAL,
TRUSTEES CO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
CLAYTON K. YEUTTER, Of Counsel (since June 1993) Hogan & Hartson (a law firm); a director (since
Chairman of the Board 2002) of Danielson Holding Corp. Formerly a director of Weyerhaeuser Corp.
of Trustees (since 2003); (1999-April 2004), Caterpillar, Inc. (1993-December 2002), ConAgra Foods
Trustee (since 1999) (1993-2001), Texas Instruments (1993-2001) and FMC Corporation (1993-2001).
Age: 73 Oversees 25 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 35 portfolios in the
Trustee (since 1999) OppenheimerFunds complex.
Age: 71
PHILLIP A. GRIFFITHS, A director (since 1991) of the Institute for Advanced Study, Princeton, N.J.,
Trustee (since 1999) a director (since 2001) of GSI Lumonics, a trustee (since 1983) of Woodward
Age: 66 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.
MARY F. MILLER, Formerly a Senior Vice President and General Auditor, American Express
Trustee (since 2004) Company (July 1998-February 2003). Member of Trustees of the American
Age: 62 Symphony Orchestra (October 1998 to present). Oversees 25 portfolios in
the OppenheimerFunds complex.
JOEL W. MOTLEY, Director (since January 2002) Columbia Equity Financial Corp. (privately-held
Trustee (since 2002) financial adviser); Managing Director (since January 2002) Carmona Motley, Inc.
Age: 52 (privately-held financial adviser). Formerly a Managing Director of Carmona
Motley Hoffman Inc. (privately-held financial adviser) (January 1998-December
2001). Oversees 25 portfolios in the OppenheimerFunds complex.
KENNETH A. RANDALL, A director (since February 1972) of Dominion Resources, Inc. (electric utility
Trustee (since 1999) holding company); formerly a director of Prime Retail, Inc. (real estate investment
Age: 77 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 director of RBAsset (real estate manager); a
Trustee (since 1999) director of OffitBank; formerly Trustee, Financial Accounting Foundation (FASB
Age: 74 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.
42 | OPPENHEIMER CAPITAL PRESERVATION FUND
RUSSELL S. REYNOLDS, JR., Chairman (since 1993) of The Directorship Search Group, Inc. (corporate governance
Trustee (since 1999) consulting and executive recruiting); a Life Trustee of International House
Age: 72 (non-profit educational organization); a former trustee of The Historical Society
of the Town of Greenwich. Oversees 25 portfolios in the OppenheimerFunds
complex.
- ------------------------------------------------------------------------------------------------------------------
OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS.
MANIOUDAKIS, MURPHY, AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET,
11TH FLOOR, NEW YORK, NY 10281-1008, AND FOR MR. WIXTED AND MR. VANDEHEY, 6803 S.
TUCSON WAY, CENTENNIAL, CO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM
OR UNTIL HIS EARLIER RESIGNATION, DEATH OR REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and director (since June 2001) and President
President (since 2001) (since September 2000) of the Manager; President and a director or trustee of
Age: 55 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 63 portfolios as
Trustee/Director and 21 additional portfolios as Officer in the OppenheimerFunds
complex.
ANGELO MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President and Portfolio Management Corporation (since April, 2002 and of OFI Institutional Asset
Manager (since 2002) Management, Inc. (since June 2002); an officer of 14 portfolios in the
Age: 38 OppenheimerFunds complex. Formerly Executive Director and portfolio manager
for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment
Management (August 1993-April 2002).
43 | OPPENHEIMER CAPITAL PRESERVATION FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer
Treasurer (since 1999) of HarbourView Asset Management Corporation, Shareholder Financial Services,
Age: 44 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); Principal and Chief Operating Officer (March 1995-March 1999) at Bankers
Trust Company-Mutual Fund Services Division. An officer of 84 portfolios in the
OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since
Secretary (since 2001) February 2002) of the Manager; General Counsel and a director (since November
Age: 56 2001) of the 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
84 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since March 2004) of the
Vice President and Manager; Vice President (since June 1983) of OppenheimerFunds Distributor,
Chief Compliance Officer Inc., Centennial Asset Management Corporation and Shareholder Services, Inc.
(since 2004) Formerly (until February 2004) Vice President and Director of Internal Audit of
Age: 54 OppenheimerFunds, Inc. An officer of 84 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, BY
CALLING 1.800.525.7048.
44 | OPPENHEIMER CAPITAL PRESERVATION FUND
ITEM 2. CODE OF ETHICS
The 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 EXPERT
The Board of Trustees of the registrant 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
(a) Audit Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $30,000 in fiscal 2004 and $25,000 in
fiscal 2003.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $26,500 in fiscal 2004 and $21,250 in
fiscal 2003.
The principal accountant for the audit of the registrant's annual
financial statements billed $39,500 in fiscal 2004 and no such fees
in fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include, among others: internal control reviews and
consultation concerning financial accounting and reporting
standards.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed $6,000 in fiscal 2004 and $5,000 in
fiscal 2003 to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include, among others: tax compliance, tax planning and
tax advice. Tax compliance generally involves preparation of
original and amended tax returns, claims for a refund and tax
payment-planning services. Tax planning and tax advice includes
assistance with tax audits and appeals, tax advice related to
mergers and acquisitions and requests for rulings or technical
advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and $57 in
fiscal 2003.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees during the last two fiscal
years to the registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant.
Such fees include consultations regarding the registrant's
retirement plan with respect to its trustees.
(e) (1) During its regularly scheduled periodic meetings, the
registrant's audit committee will pre-approve all audit,
audit-related, tax and other services to be provided by the
principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its
Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any fees such
pre-approved are presented to the audit committee at its next
regularly scheduled meeting.
Pre-approval of non-audit services is waived provided that: 1) the
aggregate amount of all such services provided constitutes no more
than five percent of the total amount of fees paid by the registrant
to it principal accountant during the fiscal year in which services
are provided 2) such services were not recognized by the registrant
at the time of engagement as non-audit services and 3) such services
are promptly brought to the attention of the audit committee of the
registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $72,000 in fiscal 2004 and $26,307 in
fiscal 2003 to the registrant and the registrant's investment
adviser or any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the
registrant related to non-audit fees. Those billings did not include
any prohibited non-audit services as defined by the Securities
Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser, and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
account's independence. No such services were rendered.
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 HOLDERS
At a meeting of the Board of Trustees of the registrant held on February
18, 2004, the Board adopted (1) a policy that, should the Board determine that a
vacancy exists or is likely to exist on the Board, the Governance Committee of
the Board, which is comprised entirely of independent trustees, shall consider
any candidates for Board membership recommended by the registrant's security
holders and (2) a policy that security holders wishing to submit a nominee for
election to the Board may do so by mailing their submission to the offices of
OppenheimerFunds, Inc., Two World Financial Center, 225 Liberty Street - 11th
Floor, New York, NY 10281-1008, to the attention of the Chair of the Governance
Committee. Prior to February 18, 2004, the Board did not have a formalized
policy with respect to consideration of security holder nominees or a procedure
by which security holders may make their submissions. In addition to security
holder nominees, the Governance Committee may also consider nominees recommended
by independent Board members or recommended by any other Board members and is
authorized under its Charter, upon Board approval, to retain an executive search
firm to assist in screening potential candidates. Upon Board approval, the
Governance Committee may also obtain legal, financial, or other external counsel
that may be necessary or desirable in the screening process.
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 October 31, 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)(NOT
APPLICABLE TO SEMIANNUAL REPORTS)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)