<PAGE>
Annual Report October 31, 2000
Oppenheimer
Capital Preservation Fund
[LOGO] OppenheimerFunds/R/
The Right Way to Invest
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[Blank inside front cover]
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STRATEGY
Oppenheimer Capital Preservation Fund is designed to invest in shares of other
Oppenheimer fixed income mutual funds.While keeping a portfolio duration of 2
1/2 to 3 years, we will attempt to allocate the assets of the portfolio
primarily among Class Y shares of Oppenheimer Limited-Term Government Fund,
Class Y shares of Oppenheimer Bond Fund, Class Y shares of Oppenheimer Strategic
Income Fund and shares of Oppenheimer Money Market Fund, Inc. And although the
Fund currently does not invest in Class Y shares of Oppenheimer U.S. Government
Trust, it can.(1)
AVERAGE ANNUAL TOTAL RETURNS
For the 1-Year Period Ended 10/31/00(2)
Without With
Sales Chg. Sales Chg.
Class A 6.18% 2.46%
Class B 5.43% 1.43%
Class C 5.43% 4.43%
Class Y 6.43%
AVERAGE ANNUAL TOTAL RETURNS
For the Periods Ended 9/30/00(2)
1 Year Since Inception
Class A 2.46% 2.50%
Class B 1.43% 2.46%
Class C 4.43% 5.44%
Class Y 6.43% 6.44%
1. Oppenheimer Capital Preservation Fund is not a money market fund, and there
can be no assurance that it will be able to maintain a stable net asset value
per share.
2. See page 6 for further details.
1 Oppenheimer Capital Preservation Fund
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PRESIDENT'S LETTER
DEAR SHAREHOLDER,
Over the past several decades, our investment teams have learned the importance
of avoiding complacency when it comes to navigating the financial
markets--especially when times are good. Right now, times appear particularly
good. The U.S. economy is in its tenth year of expansion. In the bond market,
U.S. Treasury issues have been performing favorably over the past year. In
addition, despite volatility in the second quarter, the stock market has been
providing attractive returns from a wide spectrum of industry sectors,
capitalization ranges and investment styles.
We have arrived at this juncture after months of monitoring the rapid pace of
global economic growth and its implications for inflation, as well as the
Federal Reserve Board's evolving monetary policy. At this point, economic
indicators suggest a dampening of short-term inflationary pressures.While
recent increases in oil prices are certainly taking their toll, we don't
believe this signals a return to 1970's-style inflation.Accordingly, if the
Fed continues in its diligence, the economy could maintain its healthy rate
of growth.
In the bond market, the achievement of a federal budget surplus has prompted the
Treasury to buy back many of its long-term securities.The resulting supply
shortage boosted these securities' returns, causing an inversion of the yield
curve--an unusual situation in which shorter term Treasuries yield more than
their longer term counterparts. Other bond sectors are offering many
opportunities in the form of attractive valuations.
Perhaps most important is that we have begun to see encouraging signs in the
stock market. Formerly high-flying Internet stocks have generally come down to
earth, and investors have begun to refocus on companies with strong business
fundamentals and justifiable valuations. Investors have also returned to
long-neglected, value-oriented companies.
What else do these various trends tell us? They tell us that the ability to
discriminate between long-term potential and short-lived fads has become more
critical than ever. Trying to generate good long-term performance requires
tracking the best companies through intensive research, combined with
hard-earned experience.
At OppenheimerFunds, our seasoned portfolio management teams fight complacency
by remaining constantly aware of the risks that face the economy and financial
markets.Virtually anything could affect the overall markets-- a surge in
inflation, a decline in productivity, deteriorating corporate earnings, or even
the new Administration's proposals regarding tax reform, healthcare and Social
Security. However, by remaining vigilant in our quest for fundamentally sound
businesses, we believe we can find good investments that can weather market
volatility.
In this environment, we encourage you to consult your financial advisor and to
stay on track with your long-term financial plan. For our part, we will continue
to monitor the opportunities and risks ever present in the financial markets.
Thank you for your confidence in OppenheimerFunds, The Right Way to Invest.
Sincerely,
/s/Bridget A. Macaskill
Bridget A. Macaskill
President
Oppenheimer
Capital Preservation Fund
November 21, 2000
These general market views represent opinions of OppenheimerFunds, Inc. and are
not intended to predict or depict performance of the securities markets or any
particular fund. Specific discussion, as it applies to your Fund, is contained
in the pages that follow. Stocks and bonds have different types of investment
risks; stocks are subject to market volatility and bonds are subject to credit
and interest rate risks.
2 Oppenheimer Capital Preservation Fund
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AN INTERVIEW WITH YOUR FUND'S MANAGER
JOHN KOWALIK
Portfolio Manager
MANAGEMENT'S DISCUSSION OF PERFORMANCE
The year ending October 31, 2000, saw a continuation of the trend of higher
short-term interest rates caused by the federal government's buyback program for
longer-term debt. Short-term interest rates rose by about 1.3% during the
period.This caused the value of many fixed income investments to fall during
that time. Nevertheless, as designed, the share value of Oppenheimer Capital
Preservation Fund remained unchanged, shielding investors from the continued
drag on bond prices.
Yields on money market instruments were driven higher during the year.Yields on
such short-term securities are closely linked to the Federal Funds rate, which
experienced higher yields more than many Treasury securities during the covered
period.
The higher short- to intermediate-term yield environment may result in higher
crediting rates as more money is invested in the Fund.The mix of securities in
the Fund's underlying holdings seeks to offer solid long-term total returns. As
the economy slows and the Federal Reserve stops raising interest rates, the
Fund's yield should increase over money market yields.The Fund's portfolio
holdings, allocations and strategies are subject to change.
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. Performance is measured from the inception
date of September 27, 1999 until October 31, 2000.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 and Class C shares,
and reinvestments of all dividends and capital gains distributions.
The Fund's performance is compared to that of the Lehman Brothers 1-3 Year
Government Bond Index, an unmanaged sector index of U.S. Treasury issues,
publicly-issued debt of U.S. Government agencies and quasi-public corporations
and corporate debt guaranteed by the U.S. Government with maturities of one to
three years. Index performance reflects the reinvestment of dividends but does
not consider the effect of capital gains or transaction costs, and none of the
data in the graphs shows the effect of taxes.The Fund's performance reflects the
effects of Fund business and operating expenses.While index comparisons may be
useful to provide a benchmark for the Fund's performance, it must be noted that
the Fund's investments are not limited to the securities in the index.
3 Oppenheimer Capital Preservation Fund
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FUND PERFORMANCE
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class A) and the
Lehman Brothers 1-3 Year Government Bond Index
<TABLE>
<CAPTION>
Oppenheimer
Capital Lehman Brothers
Preservation 1-3 Year
Fund Government
(Class A) Bond Index
<S> <C> <C>
09/27/99 9,650 10,000
10/31/99 9,703 10,027
01/31/00 9,851 10,053
04/30/00 9,998 10,208
07/31/00 10,146 10,423
10/31/00 10,302 10,642
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 10/31/009(1)
1 Year 2.46% Life 2.76%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class B) and the
Lehman Brothers 1-3 Year Government Bond Index
<TABLE>
<CAPTION>
Oppenheimer
Capital Lehman Brothers
Preservation 1-3 Year
Fund Government
(Class B) Bond Index
<S> <C> <C>
09/27/99 10,000 10,000
10/31/99 10,048 10,027
01/31/00 10,183 10,053
04/30/00 10,317 10,208
07/31/00 10,451 10,423
10/31/00 10,293 10,642
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 10/31/00(1)
1 Year 1.43% Life 2.68%
The performance information for the Lehman Brothers 1-3 Year Government Bond
Index in the graphs begins on 9/30/99 for all classes.
1. See page 6 for further details.
Past performance is not predictive of future performance.
4 Oppenheimer Capital Preservation Fund
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CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class C) and the
Lehman Brothers 1-3 Year Government Bond Index
<TABLE>
<CAPTION>
Oppenheimer
Capital Lehman Brothers
Preservation 1-3 Year
Fund Government
(Class C) Bond Index
<S> <C> <C>
09/27/99 10,000 10,000
10/31/99 10,048 10,027
01/31/00 10,183 10,053
04/30/00 10,317 10,208
07/31/00 10,451 10,423
10/31/00 10,593 10,642
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 10/31/00(1)
1 Year 4.43% Life 5.41%
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Preservation Fund (Class Y) and the
Lehman Brothers 1-3 Year Government Bond Index
<TABLE>
<CAPTION>
Oppenheimer
Capital Lehman Brothers
Preservation 1-3 Year
Fund Government
(Class Y) Bond Index
<S> <C> <C>
09/27/99 10,000 10,000
10/31/99 10,057 10,027
01/31/00 10,217 10,053
04/30/00 10,375 10,208
07/31/00 10,535 10,423
10/31/00 10,703 10,642
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS Y SHARES OF THE FUND AT 10/31/00(1)
1 Year 6.43% Life 6.41%
The performance information for the Lehman Brothers 1-3 Year Government Bond
Index in the graphs begins on 9/30/99 for all classes.
1. See page 6 for further details.
Past performance is not predictive of future performance.
5 Oppenheimer Capital Preservation Fund
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NOTES
OPPENHEIMER CAPITAL PRESERVATION FUND IS NOT A MONEY MARKET FUND, AND THERE CAN
BE NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE PER
SHARE. IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. BECAUSE OF
ONGOING MARKET VOLATILITY, THE FUND'S PERFORMANCE HAS BEEN SUBJECT TO
SUBSTANTIAL SHORT-TERM FLUCTUATION AND CURRENT PERFORMANCE MAY BE LESS THAN THE
RESULTS SHOWN. FOR QUARTERLY UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT
YOUR FINANCIAL ADVISOR, CALL US AT 1.800.525.7048 OR VISIT OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown.The Fund's total returns shown do
not show the effects 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.
The inception date for all classes is 9/27/99.
CLASS A returns include the current maximum initial sales charge of 3.50%.The
total returns of the Fund do not reflect the effect of the 2% redemption fee.
See the prospectus for details on when the redemption fee applies.
CLASS B returns include the applicable contingent deferred sales charges of 4%
(1-year) and 3% (since inception). Class B shares are subject to an annual 0.75%
asset-based sales charge.
CLASS C returns include the contingent deferred sales charge of 1% for the
one-year period. Class C shares are subject to an annual 0.75% asset-based
sales charge.
CLASS 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.
6 Oppenheimer Capital Preservation Fund
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<TABLE>
<CAPTION>
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STATEMENT OF INVESTMENTS October 31, 2000
MARKET VALUE
SHARES SEE NOTE 1
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FIXED INCOME FUNDS - 88.3%
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<S> <C> <C>
Oppenheimer Bond Fund, Y Shares 42,210 $ 407,755
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Oppenheimer Limited-Term Government Fund, Y Shares 713,123 7,081,318
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Oppenheimer Strategic Income Fund, Y Shares 505,723 2,058,292
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Total Fixed Income Funds (Cost $9,605,837) 9,547,365
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MONEY MARKET FUND - 10.3%
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Oppenheimer Money Market Fund, Inc. (Cost $1,108,646) 1,108,646 1,108,646
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TOTAL INVESTMENTS, AT VALUE (COST $10,714,483) 98.6% 10,656,011
---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.4 155,517
------------------- ---------------
NET ASSETS 100.0% $ 10,811,528
=================== ===============
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Capital Preservation Fund
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<TABLE>
<CAPTION>
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STATEMENT OF ASSETS AND LIABILITIES October 31, 2000
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ASSETS
<S> <C>
Investments, at value (cost $10,714,483) - see accompanying statement $10,656,011
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Receivables and other assets:
Wrapper agreement 147,569
Interest and dividends 43,662
Shares of beneficial interest sold 4,758
Other 2,910
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Total assets 10,854,910
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LIABILITIES
Bank overdraft 5,900
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Payables and other liabilities:
Shares of beneficial interest redeemed 26,462
Transfer and shareholder servicing agent fees 2,576
Shareholder reports 2,469
Distribution and service plan fees 2,147
Trustees' compensation 1,923
Wrapper fee 1,405
Other 500
------------
Total liabilities 43,382
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NET ASSETS $10,811,528
============
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COMPOSITION OF NET ASSETS
Paid-in capital $10,778,876
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Accumulated net realized loss on investment transactions (56,445)
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Net unrealized appreciation on investments and wrapper agreement 89,097
------------
NET ASSETS $10,811,528
============
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NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$10,431,480 and 1,043,146 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 $331,170
and 33,120 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 $47,808
and 4,782 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 $1,070 and 107 shares of beneficial interest outstanding) $10.00
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Capital Preservation Fund
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended October 31, 2000
--------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C>
Dividends from underlying funds $511,066
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Interest 4,059
---------
Total income 515,125
--------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 54,382
--------------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 17,736
Class B 808
Class C 245
--------------------------------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 46,660
--------------------------------------------------------------------------------------------------------------------------------
Wrapper fee 11,698
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Shareholder reports 3,675
--------------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,340
--------------------------------------------------------------------------------------------------------------------------------
Trustees' compensation 1,923
--------------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 1,073
--------------------------------------------------------------------------------------------------------------------------------
Other 3,781
---------
Total expenses 144,321
Less expenses paid indirectly (433)
Less reimbursement of expenses (32,474)
---------
Net expenses 111,414
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NET INVESTMENT INCOME 403,711
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REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (56,445)
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Net change in unrealized appreciation (depreciation) on:
Investments (58,226)
Wrapper agreement 147,329
---------
Net change 89,103
---------
Net realized and unrealized gain 32,658
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $436,369
=========
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Capital Preservation Fund
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<TABLE>
<CAPTION>
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STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999(1)
--------------------------------------------------------------------------------------------------------------------------------
Operations
<S> <C> <C>
Net investment income $403,711 $567
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Net realized gain (loss) (56,445) --
--------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 89,103 (6)
--------------------- --------------------
Net increase in net assets resulting from operations 436,369 561
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DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (430,676) (545)
Class B (4,331) (5)
Class C (1,311) (5)
Class Y (65) (6)
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BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from
beneficial interest transactions:
Class A 10,331,470 --
Class B 330,195 --
Class C 46,813 --
Class Y 64 --
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NET ASSETS
Total increase 10,708,528 --
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Beginning of period 103,000 103,000
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End of period (including undistributed net investment
income of $21 for the period ended October 31, 1999) $10,811,528 $103,000
============ =========
</TABLE>
1. For the period from September 27, 1999 (inception of offering) to October 31,
1999.
2. Reflects the value of the Manager's initial seed money investment at
June 11, 1999.
See accompanying Notes to Financial Statements.
10 Oppenheimer Capital Preservation Fund
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<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS
CLASS A CLASS B
------------------------- ------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
2000 1999(1) 2000 1999(1)
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Per Share Operating Data
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .57 .05 .51 .05
Net realized and unrealized gain .03 -- .02 --
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Total income from investment operations .60 .05 .53 .05
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Dividends and/or distributions to shareholders:
Total dividends from net investment income (.60) (.05) (.53) (.05)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.00 $10.00 $10.00 $10.00
======= ======= ======= =======
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TOTAL RETURN, AT NET ASSET VALUE(2) 6.18% 0.55% 5.43% 0.48%
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RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $10,431 $100 $331 $1
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Average net assets (in thousands) $7,171 $100 $82 $1
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Ratios to average net assets:(3)
Net investment income 5.55% 5.75% 4.55% 5.10%
Expenses 1.96% 1.55% 2.71% 2.25%
Expenses, net of indirect and voluntary
assumption of expenses 1.51% 1.12% 2.26% 1.81%
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Portfolio turnover rate 89% 0% 89% 0%
</TABLE>
1. For the period from September 27, 1999 (inception of offering) to October 31,
1999.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
See accompanying Notes to Financial Statements.
11 Oppenheimer Capital Preservation Fund
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<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS
CLASS C CLASS Y
------------------------ ------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
2000 1999(1) 2000 1999(1)
--------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .50 .05 .59 .06
Net realized and unrealized gain .03 -- .03 --
-------------------------------------------------------------------------------
Total income from investment operations .53 .05 .62 .06
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Dividends and/or distributions to shareholders:
Total dividends from net investment income (.53) (.05) (.62) (.06)
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.00 $10.00 $10.00 $10.00
======= ======= ======= =======
--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 5.43% 0.48% 6.43% 0.57%
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $48 $1 $1 $1
--------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $25 $1 $1 $1
--------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 4.65% 5.10% 5.88% 6.19%
Expenses 2.71% 2.25% 1.71% 1.15%
Expenses, net of indirect and voluntary
assumption of expenses 2.26% 1.81% 1.26% 0.72%
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 89% 0% 89% 0%
</TABLE>
1. For the period from September 27, 1999 (inception of offering) to October 31,
1999.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
See accompanying Notes to Financial Statements.
12 Oppenheimer Capital Preservation Fund
<PAGE>
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 seeks 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 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 and Class C shares are offered without front-end sales charge, but may
be subject to a contingent deferred-sales charge (CDSC) if redeemed within 5
years or 12 months, respectively, of purchase. 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 to earnings, assets and voting
privileges, except that each class has its own expenses directly attributable to
that class and exclusive voting rights with respect to matters affecting that
class. Expenses included in the accompanying financial statements reflect the
expenses of the Fund and do not include any expenses associated with the
Underlying Funds. Classes A, B and C 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 following is a summary of significant accounting policies consistently
followed by the Fund.
SECURITIES VALUATION. The Fund will, under normal circumstances, invest in Class
Y shares of Oppenheimer Limited-Term Government Fund, Oppenheimer Bond Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund, and in
shares of Oppenheimer Money Market Fund, Inc. (collectively referred to as the
"underlying funds"). The net asset values of the underlying funds are determined
as of the close of The New York Stock Exchange, on each day the Exchange is open
for trading. The net asset value per share is determined by dividing the value
of the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding.
The Fund may invest in certain portfolio securities, as described in the Fund's
prospectus. Portfolio securities are valued at the close of the New York Stock
Exchange on each trading day. Listed and unlisted securities for which such
information is regularly reported are valued at the last sale price of the day
or, in the absence of sales, at values based on the closing bid or the last sale
price on the prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the Board of
Trustees. Such securities which cannot be valued by an approved portfolio
pricing service are valued using dealer-supplied valuations provided the Manager
is satisfied that the firm rendering the quotes is reliable and that the quotes
reflect current market value, or are valued under consistently applied
procedures established by the Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or discount. Foreign
currency exchange contracts are valued based on the closing prices of the
foreign currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer.
The Fund will, under normal circumstances, enter into wrapper agreements with
insurance companies and banks. If an insurance wrap contract or a synthetic
Guaranteed Investment Contract, collectively, "wrapper agreement" obligates the
contract provider to maintain the book value of all or a portion of the Fund's
investments up to a specified maximum dollar amount, such contract will be
valued at its fair value. The book value of the covered assets is the price the
Fund paid for them plus interest on those assets accrued at a rate calculated
pursuant to a formula specified in the wrapper agreement ("crediting rate"). The
crediting rate is normally reset monthly. However, if there is a material change
in interest rates or purchases or redemptions of fund shares, 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 ("wrapper agreement") 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 ("wrapper agreement") 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, 2000, the Fund has entered
into one wrapper agreement, with the Bank of America, NA.
13 Oppenheimer Capital Preservation Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
1. SIGNIFICANT ACCOUNTING POLICIES Continued
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
As of October 31, 2000, the Fund had available for federal income tax purposes
an unused capital loss carryover as follows:
Expiring
2008 $38,114
TRUSTEES' COMPENSATION. The Fund has adopted a 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, 2000, a provision of $1,818 was made for the Fund's projected benefit
obligations, resulting in an accumulated liability of $1,818 as of October 31,
2000.
The Board of Trustees has adopted a deferred compensation plan for independent
Trustees that enables Trustees to elect to defer receipt of all or a portion of
annual compensation they are entitled to receive from the Fund. Under the plan,
the compensation deferred is periodically adjusted as though an equivalent
amount had been invested for the Trustee in shares of one or more Oppenheimer
funds selected by the Trustee. The amount paid to the Trustee under the plan
will be determined based upon the performance of the selected funds. Deferral of
Trustees' fees under the plan will not affect the net assets of the Fund, and
will not materially affect the Fund's assets, liabilities or net income per
share.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-distribution 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-distribution 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.
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, during the year ended
October 31, 2000, amounts have been reclassified to reflect a decrease in
paid-in capital of $32,651. Overdistributed net investment income was decreased
by the same amount. Net assets of the Fund were unaffected by the
reclassifications.
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
14 Oppenheimer Capital Preservation Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
1. SIGNIFICANT ACCOUNTING POLICIES Continued
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest for the
year ended October 31, 2000 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 2000
SHARES AMOUNT
-----------------------------------------------------------------------------------
CLASS A
<S> <C> <C>
Sold 1,611,987 $ 16,119,874
Dividends and/or distributions reinvested 43,122 431,235
Redeemed (621,963) (6,219,639)
---------- -------------------
Net increase 1,033,146 $ 10,331,470
========== ===================
-----------------------------------------------------------------------------------
CLASS B
Sold 32,651 $ 326,514
Dividends and/or distributions reinvested 428 4,280
Redeemed (59) (599)
---------- -------------------
Net increase 33,020 $ 330,195
========== ===================
-----------------------------------------------------------------------------------
CLASS C
Sold 6,692 $ 66,914
Dividends and/or distributions reinvested 131 1,314
Redeemed (2,141) (21,415)
--------- -------------------
Net increase 4,682 $ 46,813
========== ===================
-----------------------------------------------------------------------------------
CLASS Y
Sold -- $ --
Dividends and/or distributions reinvested 7 64
Redeemed -- --
---------- -------------------
Net increase 7 $ 64
========== ===================
</TABLE>
There were no transactions in shares of beneficial interest for the period from
September 27, 1999 (inception of offering) to October 31, 1999.
15 Oppenheimer Capital Preservation Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
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, 2000, were
$16,727,984 and $6,060,288, respectively.
As of October 31, 2000, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $10,732,815 was:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $ 41,746
Gross unrealized depreciation (118,550)
---------
Net unrealized depreciation $(76,804)
=========
</TABLE>
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Under the Investment Advisory Agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional assets as
the Fund grows: 0.75% of the first $200 million of average annual net assets of
the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66%
of the next $200 million, 0.60% of the next $200 million and 0.50% of average
annual net assets over $1 billion. That fee shall be reduced by the management
fees received by the Manager during the period from the underlying funds
attributable to investments by the Fund in shares of such underlying funds. This
is to assure that the management fee paid directly and indirectly by the Fund to
the Manager shall not exceed the fees described above. The Fund's management fee
for the year ended October 31, 2000 was an annualized rate of 0.75%, before any
waiver by the Manager if applicable
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the shareholder servicing agent for the Fund on an "at-cost" basis. OFS
also acts as the shareholder servicing agent for the other Oppenheimer funds.
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, OppenheimerFunds Distributor, Inc (OFDI) acts as the Fund's
principal underwriter in the continuous public offering of the different classes
of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
-------------------- ------------ -------------------- -------------------- ------------------- --------------------
AGGREGATE CLASS A FRONT-END COMMISSIONS ON COMMISSIONS ON COMMISSIONS ON
FRONT-END SALES CHARGES CLASS A SHARES CLASS B SHARES CLASS C SHARES
SALES RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
CHARGES ON DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
CLASS A
YEAR ENDED SHARES
-------------------- ------------ -------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C>
October 31, 2000 $21,305 $1,390 $21,305 $9,701 $--
-------------------- ------------ -------------------- -------------------- ------------------- --------------------
</TABLE>
1. THE DISTRIBUTOR ADVANCES COMMISSION PAYMENTS TO DEALERS FOR CERTAIN SALES
OF CLASS A SHARES AND FOR SALES OF CLASS B AND CLASS C SHARES FROM ITS OWN
RESOURCES AT THE TIME OF SALE.
<TABLE>
-------------------- --------------------------- -------------------------------- ----------------------------------
CLASS A CONTINGENT CLASS B CONTINGENT DEFERRED CLASS C CONTINGENT DEFERRED
YEAR DEFERRED SALES CHARGES SALES CHARGES RETAINED BY SALES CHARGES RETAINED BY
ENDED RETAINED BY DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
-------------------- --------------------------- -------------------------------- ----------------------------------
<S> <C> <C> <C>
October 31, 2000 $-- $-- $--
-------------------- --------------------------- -------------------------------- ----------------------------------
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
16 Oppenheimer Capital Preservation Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CLASS A SERVICE PLAN Under the Class A service plan, the Distributor currently
uses the fees it receives from the Fund to pay brokers, dealers and other
financial institutions. The Class A service plan permits reimbursements to the
Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares purchased. The Distributor makes payments to plan recipients quarterly at
an annual rate not to exceed 0.25% of the average annual net assets consisting
of Class A shares of the Fund. For the year ended October 31, 2000, payments
under the Class A Plan totaled $17,736, all of which was paid by the Distributor
to recipients. That included $3,246 paid to an affiliate of the Manager. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent years.
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The Class B and Class C plan provides for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may be
more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTION FEES PAID TO THE DISTRIBUTOR FOR THE YEAR ENDED OCTOBER
31, 2000 WERE AS FOLLOWS:
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTOR'S
DISTRIBUTOR'S AGGREGATE UNREIMBURSED EXPENSES
TOTAL PAYMENTS AMOUNT RETAINED BY UNREIMBURSED EXPENSES AS % OF NET ASSETS OF
UNDER PLAN DISTRIBUTOR UNDER PLAN CLASS
------------------- --------------------- ---------------------- ---------------------------- ------------------------
<S> <C> <C> <C> <C>
CLASS B PLAN $-- $-- $6,744 2.04%
------------------- --------------------- ---------------------- ---------------------------- ------------------------
CLASS C PLAN -- -- -- --
------------------- --------------------- ---------------------- ---------------------------- ------------------------
</TABLE>
5. ILLIQUID OR RESTRICTED SECURITIES
As of October 31, 2000, 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.
6. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended or at October 31,
2000.
17 Oppenheimer Capital Preservation Fund
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Capital Preservation Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Capital Preservation Fund as of
October 31, 2000, and the related statement of operations for the year then
ended, and the statements of changes in net assets and the financial highlights
for the year then ended and the period from September 27, 1999 (inception of
offering) to October 31, 1999. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 2000, 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,
2000, the results of its operations for the year then ended, and the changes in
its net assets and financial highlights for the year then ended and the period
from September 27, 1999 (inception of offering) to October 31, 1999, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
Denver, Colorado
November 21, 2000
18 Oppenheimer Capital Preservation Fund
<PAGE>
FEDERAL INCOME TAX INFORMATION (Unaudited)
In early 2001 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 2000. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
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.
19 Oppenheimer Capital Preservation Fund
<PAGE>
OPPENHEIMER CAPITAL PRESERVATION FUND
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board
of Trustees
Bridget A. Macaskill, Trustee and President
Robert G. Galli, Trustee
Phillip A. Griffiths, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Clayton K. Yeutter, Trustee
John S. Kowalik, Vice President
Andrew J. Donohue, Secretary
Brian W. Wixted, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
INVESTMENT ADVISOR OppenheimerFunds, Inc.
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
TRANSFER AND OppenheimerFunds Services
SHAREHOLDER SERVICING
AGENT
CUSTODIAN OF PORTFOLIO Citibank, N.A.
SECURITIES
INDEPENDENT AUDITORS KPMG LLP
LEGAL COUNSEL Mayer, Brown & Platt
For more complete information about Oppenheimer Capital Preservation Fund,
please refer to the Prospectus. To obtain a copy, call your financial
advisor, or call OppenheimerFunds Distributor, Inc. at 1.800.525.7048, or
visit the OppenheimerFunds Internet web site, at www.oppenheimerfunds.com.
SHARES OF OPPENHEIMER FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE
NOT GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
OPPENHEIMER FUNDS ARE DISTRIBUTED BY OPPENHEIMERFUNDS DISTRIBUTOR, INC.,
TWO WORLD TRADE CENTER, NEW YORK, NY 10048-0203
(C) Copyright 2000 OppenheimerFunds, Inc. All rights reserved.
20 Oppenheimer Capital Preservation Fund
<PAGE>
[Blank inside back cover]
<PAGE>
RA755.001.1000 December 30, 2000
