OPPENHEIMER
Cash Reserves
Prospectus dated November 27, 1998
Oppenheimer Cash Reserves is a money-market mutual fund that seeks the maximum
current income that is consistent with stability of principal. The Fund seeks to
achieve this objective by investing in money market securities meeting specified
quality standards.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. While the Fund seeks to maintain a stable net asset value of $1.00
per share of each class of shares, there can be no assurance that it will be
able to do so.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the November
27, 1998 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(logo) OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
By Wire
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Each class of
shares bears different expenses. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as shareholder
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during the fiscal year ended July 31, 1998.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account" starting on page
__ for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Maximum Sales Charge None None None
on Purchases (as a % of
offering price)
- --------------------------------------------------------------------------
Maximum Deferred Sales None 5% in the 1% if redeemed
Charge (as a % of the lower first year, within 12
of the original offering declining months of
price or redemption to 1% in the purchase(3)
proceeds) sixth year and
eliminated
thereafter(2)
- --------------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- --------------------------------------------------------------------------
Redemption Fee None(1) None(1) None(1)
- --------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------
</TABLE>
(1) There is a $10 transaction fee for redemptions paid by Federal Funds wire,
but not for redemption proceeds paid by check or by ACH transfer through
AccountLink, or, with respect to Class A shares only, for which checkwriting
privileges are used (see "How to Sell Shares").
(2) See "How to Buy Shares - Class B Shares" below for more information on
contingent deferred sales charges.
(3) See "How to Buy Shares - Class C Shares" below for more information on
contingent deferred sales charges.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment advisor, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth below in "How the Fund is Managed". The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds its portfolio securities, audit fees and legal and other
expenses. Those expenses are detailed in the Fund's Financial Statements in the
Statement of Additional Information.
Annual Fund Operating Expenses (as a percentage of average net assets)
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------
Management Fees 0.50% 0.50% 0.50%
- --------------------------------------------------------------------------
12b-1 Plan Fees 0.20% 0.75% 0.75%
- --------------------------------------------------------------------------
Other Expenses 0.58% 0.58% 0.58%
- --------------------------------------------------------------------------
Total Fund Operating 1.28% 1.83% 1.83%
Expenses
- --------------------------------------------------------------------------
The numbers in the table above are based upon the Fund's expenses in its
fiscal year ended July 31, 1998. These amounts are shown as a percentage of
average net assets of each class of the Fund's shares for that year.
The "12b-1 Plan Fees" for Class A shares are the service plan fees (which
can be up to a maximum of 0.20% of average annual net assets of that class), and
for Class B and Class C shares, are the asset-based sales charge of 0.75%. At
present, the service fee paid on Class B and Class C shares has been set at zero
but a service fee of up to 0.25% is permitted.
The actual expenses for each class of shares in future years may be more
or less than the numbers below, depending on a number of factors, including the
actual value of the Fund's assets represented by each class of shares.
o Examples. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, and the Fund's
annual return is 5%, and that its operating expenses for each class are the ones
shown in the Annual Fund Operating Expenses chart above. If you were to redeem
your shares at the end of each period shown below, your investment would incur
the following expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
- -----------------------------------------------------------------
Class A Shares $13 $41 $ 70 $155
- -------------------------------------------------------------------
Class B Shares $69 $88 $119 $187
- -----------------------------------------------------------------
Class C Shares $29 $58 $ 99 $215
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------------
Class A Shares $13 $41 $70 $155
- ------------------------------------------------------------------
Class B Shares $19 $58 $99 $187
- -----------------------------------------------------------------
Class C Shares $19 $58 $99 $215
* In the first example, expenses include the applicable Class B or Class C
contingent deferred sales charges. In the second example, Class B and Class C
expenses do not include contingent deferred sales charges. The Class B expenses
in years 7 through 10 are based on the Class A expenses shown above, because the
Fund automatically converts your Class B shares into Class A shares after 6
years. Because of the asset-based sales charge and contingent deferred sales
charge, long-term holders of Class B and Class C shares could pay the economic
equivalent of more than the maximum front-end sales charge allowed under
applicable regulations. For Class B shareholders, the automatic conversion of
Class B to Class A shares is designed to minimize the likelihood that this will
occur. Please refer to "How to Buy Shares - Buying Class B Shares" for more
information.
These examples show the effect of expenses on an investment in the Fund,
but are not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which may be more or less than those shown.
A Brief Overview Of The Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the
entire Prospectus before making a decision about investing in the Fund. Keep the
Prospectus for reference after you invest, particularly for information about
your account, such as how to sell or exchange shares.
o What Is the Fund's Investment Objective? The Fund's investment objective
is to seek the maximum current income that is consistent with stability of
principal.
o What Does the Fund Invest In? The Fund invests in money market
securities meeting specified quality standards consistent with Rule 2a-7 under
the Investment Company Act of 1940 (the "Investment Company Act"). Those
securities may include U.S. government securities, bank obligations, commercial
paper and certain corporate debt obligations. These investments are more fully
explained in "Investment Objective and Policies", starting on page __.
o Who Manages the Fund? The Fund's investment advisor or Manager is
OppenheimerFunds, Inc., which (including subsidiaries) advises investment
company portfolios having over $85 billion in assets as of September 30, 1998.
The Fund's portfolio managers, who are employed by the Manager and are primarily
responsible for the selection of the Fund's securities, are Carol E. Wolf and
Arthur J. Zimmer. The Manager is paid an advisory fee by the Fund, based on its
net assets. The Fund's Board of Trustees, elected by shareholders, oversees the
Manager and the portfolio managers. Please refer to "How the Fund is Managed,"
starting on page __ for more information about the Manager and its fees.
o How Risky is the Fund? The Fund is a money market fund that seeks to
maintain a net asset value per share of $1.00, but there is no guarantee it will
do so for any of its three classes of shares. Like all investments, the values
of the Fund's investments are subject to interest rate risks and credit risks,
and their values will vary inversely with changes in interest rates. The types
of securities in which the Fund invests are of shorter maturities. The Fund
generally holds them to maturity. Price fluctuations should not affect the value
of the Fund's shares. While the Fund is a conservative investment for those
seeking income, liquidity and stability of principal, it is important to note
that the Fund's shares are not guaranteed by the U.S. Government or insured by
the Federal Deposit Insurance Corporation ("FDIC"). For a further discussion,
see "Investment Policies and Strategies" below and "Determination of Net Asset
Value Per Share" in the Statement of Additional Information.
o How Can I Buy Shares? You can buy Class A shares through your broker,
dealer or financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. The Fund's Class B and Class C shares are generally
available only by exchange at net asset value of Class B shares or Class C
shares of other Oppenheimer funds. Class B shares may be purchased directly only
by investors who have established an Asset Builder Plan and by participants in
the OppenheimerFunds prototype 401(k) plan. Requirements for establishing a
Class B Asset Builder Plan are described in the Statement of Additional
Information. Class C shares may be purchased directly only by participants in
the OppenheimerFunds prototype 401(k) plan. Please refer to "How to
Buy Shares" starting on page __ for more details.
o Will I Pay a Sales Charge to Buy Shares? No. Shares of the Fund may be
purchased at their net asset value, which will remain fixed at $1.00 per share
except under extraordinary circumstances. However, Class B and Class C shares of
the Fund may be subject to a contingent deferred sales charge when redeemed, and
Class B and Class C shares are subject to an annual asset-based sales charge.
There can be no assurance that the Fund's net asset value will not vary.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer or by
writing a check against your Fund account(Class A Shares only), or by wire to a
previously designated bank account. Please refer to "How to Sell Shares"
starting on page __. The Fund also offers exchange privileges to other
Oppenheimer funds, described in "How to Exchange Shares" on page __.
o How Has the Fund Performed? The Fund measures its performance by quoting
its "yield" and "compounded effective yield," which measure historical
performance. Those yields can be compared to the yields of other money market
funds. Please remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial information about
the Fund, including per share data and expense ratios and other data based on
the Fund's average net assets. This information has been audited by Deloitte &
Touche LLP, the Fund's independent auditors, whose report on the Fund's
Financial Statements for the fiscal year ended July 31, 1998, is included in the
Statement of Additional Information.
-3-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
---------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED DECEMBER 31,
1998 1997 1996(2) 1995 1994 1993
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------
Income from investment
operations--net investment
income and net realized gain .04 .04 .03 .05 .03 .02
Dividends and distributions to
shareholders (.04) (.04) (.03) (.05) (.03) (.02)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= =======
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(6) 4.61% 4.41% 2.68% 4.84% 3.22% 2.05%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $210,477 $172,970 $170,031 $148,529 $99,361 $70,924
- --------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $186,795 $179,948 $149,889 $105,349 $87,908 $76,910
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.48% 4.33% 4.47%(7) 4.71% 3.25% 1.99%
Expenses, before voluntary
reimbursement by the Manager 1.28% 1.29% 1.06%(7) 1.36% 1.32% 1.55%
Expenses, net of voluntary
reimbursement by the Manager N/A N/A N/A N/A N/A N/A
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to December 31,
1993.
2. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
3. For the period from August 17, 1993 (inception of offering) to December 31,
1993.
4. For the period from January 3, 1989 (commencement of operations) to December
31, 1989.
5. Less than $0.005 per share.
10
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- ------------------------------------------- ---------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED DECEMBER 31,
1992 1991 1990 1989(4) 1998 1997 1996(2) 1995 1994 1993(3)
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------
.03 .06 .07 .08 .04 .04 .02 .04 .03 --(5)
(.03) (.06) (.07) (.08) (.04) (.04) (.02) (.04) (.03) --(5)
- ---------------------------------------------------------------------------------------------------------------
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
===============================================================================================================
3.07% 5.67% 7.60% 8.46% 3.98% 3.82% 2.35% 4.26% 2.54% 0.56%
===============================================================================================================
$ 89,266 $112,883 $44,293 $19,227 $80,005 $54,009 $85,573 $37,378 $46,803 $628
- ---------------------------------------------------------------------------------------------------------------
$104,970 $105,352 $32,637 $ 6,280 $73,003 $67,333 $49,226 $35,360 $21,262 $454
- ---------------------------------------------------------------------------------------------------------------
3.07% 5.13% 7.32% 8.10%(7) 3.93% 3.78% 3.91%(7) 4.15% 3.05% 1.49%(7)
1.42% 1.22% 1.29% 1.74%(7) 1.83% 1.84% 1.61%(7) 1.92% 1.89% 2.12%(7)
1.25% 1.15% 1.00% 1.00%(7) N/A N/A N/A N/A N/A N/A
</TABLE>
6. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total returns
reflect changes in net investment income only.
7. Annualized.
11
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS C
(continued) ------------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED DECEMBER 31,
1998 1997 1996(2) 1995 1994 1993(1)
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------
Income from investment
operations - net investment
income and net realized gain .04 .04 .02 .04 .02 --(5)
Dividends and distributions to
shareholders (.04) (.04) (.02) (.04) (.02) --(5)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= =======
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(6) 3.99% 3.84% 2.35% 4.21% 2.51% 0.14%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $18,101 $ 9,125 $11,717 $5,024 $5,604 $1
- --------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $15,297 $10,930 $ 6,333 $6,040 $2,107 $1
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.94% 3.78% 3.91%(7) 4.12% 3.19% 1.18%(7)
Expenses, before voluntary
reimbursement by the Manager 1.83% 1.85% 1.61%(7) 1.97% 1.90% 2.35%(7)
Expenses, net of voluntary
reimbursement by the Manager N/A N/A N/A N/A N/A N/A
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to December 31,
1993.
2. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
3. For the period from August 17, 1993 (inception of offering) to December 31,
1993.
4. For the period from January 3, 1989 (commencement of operations) to December
31, 1989.
5. Less than $0.005 per share.
6. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total returns
reflect changes in net investment income only.
7. Annualized.
12
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks the maximum current income that is consistent with
stability of principal.
Investment Policies and Strategies. In seeking its objective, the Fund invests
in money market securities meeting specified quality standards consistent with
Rule 2a-7 under the Investment Company Act. Shares of each class may be
purchased at their respective net asset value, which will remain fixed at $1.00
per share except under extraordinary circumstances. There can be no assurance
that the Fund's net asset values will not vary from $1.00 per share or that the
Fund will achieve its investment objective.
o Money Market Securities. The following is a brief description of the
types of money market securities in which the Fund may invest:
o U.S. Government Securities. Obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities.
o Bank Obligations and Instruments Secured Thereby. Time deposits,
certificates of deposit and bankers' acceptances if they are (1) obligations of
a domestic bank with total assets of at least $1 billion or (2) U.S.
dollar-denominated obligations of a foreign bank with total assets of at least
U.S. $1 billion. The Fund may also invest in instruments secured by such
obligations, such as other debt obligations guaranteed by the bank. The term
"bank" includes commercial banks, savings banks, and savings and loan
associations which may or may not be members of the FDIC. The term "foreign
bank" includes foreign branches of U.S. banks (issuers of "Eurodollar"
instruments), U.S. branches and agencies of foreign banks (issuers of "Yankee
dollar" instruments), and foreign branches of foreign banks.
o Commercial Paper. Commercial paper is short-term, unsecured promissory
notes of a domestic or foreign company. The Fund's purchase of commercial paper
is limited to an issuer's direct obligations that at the time of the Fund's
purchase of them are Eligible Securities as that term is defined in Rule 2a-7.
They also must be rated by at least one Rating Organization as that term is
defined in Rule 2a-7 in one of the two highest rating categories for short-term
debt securities. They may also be an issuer's unrated securities judged by the
Manager to be comparable to these other types of rated securities.
o Corporate Obligations. Corporate debt obligations other than commercial
paper are obligations of issuers that at the time of purchase are Eligible
Securities that are rated by at least one Rating Organization in one of the two
highest rating categories for short-term debt securities, or comparable unrated
securities.
o Other Obligations. Obligations other than those listed above if they are
Eligible Securities and they are (1) subject to repurchase agreements or (2)
guaranteed as to principal and interest by a domestic bank having total assets
in excess of $ 1 billion or by a corporation whose commercial paper may be
purchased by the Fund.
o Board-Approved Instruments. These are U.S. dollar-denominated
investments which the Manager, under Board approved procedures, determines
present minimal credit risks and which are of "high quality" as determined by
any Rating Organization or, in the case of an instrument that is not rated, of
comparable quality to an instrument that is an "Eligible Security,". Currently,
such Board-approved instruments include, but are not limited to
dollar-denominated obligations of foreign banks payable in the U.S. or in
London, England, floating or variable rate demand notes, asset- backed
securities, and bank loan participation agreements, subject to restrictions
adopted by the Board. The Board may change its restrictions from time to time.
o Portfolio Quality, Maturity and Diversification. The Fund may buy only
those securities that meet the quality, maturity and diversification standards
set forth in Rule 2a-7 for money market funds. For example, the Fund must
maintain a dollar-weighted portfolio maturity of no more than 90 days. Some of
the Fund's investment restrictions (which are fundamental policies that may be
changed only by shareholder vote) are more restrictive than these standards. As
a matter of fundamental policy, the Fund may not invest in any debt instrument
having a maturity in excess of one year from the date of the purchase, unless
subject to a demand feature not exceeding one year that requires payment on net
more than 30 days' notice.
The Board of Trustees has adopted procedures to evaluate securities for
the Fund's portfolio and the Manager has the responsibility to implement those
procedures when selecting investments for the Fund. In general, those procedures
require that securities be payable in U.S. dollars and rated in one of the two
highest short-term rating categories of two national Rating Organizations. In
some cases, the Fund can buy securities rated by one Rating Organization or
unrated securities that the Manager judges to be comparable in quality to the
two highest rating categories. The procedures also limit the amount of the
Fund's assets that can be invested in the securities of any one issuer (other
than the U.S. government, its agencies and instrumentalities), to spread the
Fund's investment risks.
Appendix A of the Statement of Additional Information contains descriptions
of the rating categories of Rating Organizations. Ratings at the time of
purchase will determine whether securities may be acquired under the
restrictions described above. Subsequent downgrades in ratings may require
reassessments of the credit risks presented by a security and may require their
sale. The rating restrictions described in this Prospectus do not apply to banks
in which the Fund's cash is kept.
o Can the Fund's Investment Objective and Policies Change? The Fund has an
investment objective, described above, as well as investment policies it follows
to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies in
carrying out those investment polices. The Fund's investment policies and
techniques are not "fundamental" unless this Prospectus or the Statement of
Additional Information states that a particular policy is "fundamental." The
Fund's investment objective is a fundamental policy.
The Fund's Board of Trustees may change non-fundamental policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies cannot be changed without
the approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information).
Investment Risks
All investments carry risks to some degree. Funds that invest in debt
obligations for income may be subject to credit risks and interest rate risks.
However, the Fund is a money market fund that seeks income by investing in
short-term debt securities that must meet strict standards set by its Board of
Trustees following special rules for money market funds under federal law. These
include requirements for maintaining high credit quality in the Fund's
portfolio, a short average portfolio maturity to reduce the effects of changes
in interest rates on the value of the Fund's securities and diversifying the
Fund's investments among issuers to reduce the effects of a default by any one
issuer on the value of the Fund's shares. Even so, there is a risk that the
Fund's shares could fall below $1.00 per share.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, markets for securities in which
the Fund invests could be detrimentally affected by computer failures beginning
January 1, 2000. Failure of computer systems used for securities trading could
result in settlement and liquidity problems for the Fund and other investors.
That failure could have a negative impact on handling securities trades, pricing
and accounting services. Data processing errors by government issuers of
securities could result in economic uncertainties, and those issuers may incur
substantial costs in attempting to prevent or fix such errors, all of which
could have a negative effect on the Fund's investments and returns.
The Manager, the Distributor and the Transfer Agent have been working on
necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Funds' custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Fund.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies described below.
These techniques involve certain risks. The Statement of Additional Information
contains more information about some of these practices, including limitations
on their use that are designed to reduce some of the risks.
o Floating Rate/Variable Rate Notes. The Fund may purchase notes with
floating or variable interest rates. Variable rates are adjustable at stated
periodic intervals. Floating rates are adjusted automatically according to a
specified market index for such investments, such as the prime rate of a bank.
If the maturity of such notes is greater than one year, they may be purchased if
they have a demand feature which may not exceed one year and requires payment on
not more than 30 days' notice.
o Obligations of Foreign Banks and Foreign Branches of U.S. Banks. Because
the Fund may invest in U.S. dollar-denominated securities of (1) foreign banks
that are payable in the U.S. or in London, England, and (2) foreign branches of
U.S. banks, the Fund may be subject to additional investment risks different
from those incurred by an investment company that invests only in debt
obligations of domestic branches of U.S. banks. Such risks may include future
political and economic developments of the country in which the bank or branch
is located, possible imposition of withholding taxes on interest income payable
on the securities, possible seizure or nationalization of foreign deposits, the
possible establishment of exchange control regulations, or the adoption of other
governmental restrictions that might affect the payment of principal and
interest on such securities. Additionally, not all U.S. and state banking laws
and regulations applicable to domestic banks (relating to maintenance of
reserves, loan limits and financial soundness) apply to foreign branches of
domestic banks, and none of them apply to foreign banks.
o Bank Loan Participation Agreements. Subject to the provisions of Rule
2a-7 and the limitation on illiquid securities, below, the Fund may invest in
bank loan participation agreements that provide the Fund with an undivided
interest in a loan made by the issuing bank in the proportion the Fund's
interest bears to the total principal amount of the loan. The Fund must look to
the creditworthiness of the borrower obligated to make principal and interest
payments on the loan.
o Asset-Backed Securities. Subject to Rule 2a-7, the Fund may invest in
asset-backed securities which are fractional interests in pools of consumer
loans and other trade receivables. They are issued by trusts and special purpose
corporations. They are backed by a pool of assets, such as credit card or auto
loan receivables, which are the obligations of a number of different parties.
The income from the underlying pool is passed through to holders, such as the
Fund.
These securities are frequently supported by a credit enhancement, such as
a letter of credit, a guarantee or a preference right. However, the extent of
the credit enhancement may be different for different securities and generally
applies to only a fraction of the security's value. A risk of these securities
is that the issuer of the security may have no security interest in the related
collateral.
o Repurchase Agreements. The Fund may enter into repurchase agreements. In
a repurchase transaction, the Fund buys a security and simultaneously sells it
to the vendor for delivery at a future date. Repurchase agreements must be fully
collateralized. However, if the vendor fails to pay the resale price on the
delivery date, the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so. The Fund will
not enter into a repurchase agreement that will cause more than 10% of its net
assets to be subject to repurchase agreements maturing in more than seven days.
There is no limit on the amount of the Fund's net assets that may be subject to
repurchase agreements of seven days or less. See the Statement of Additional
Information for more details.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active trading market,
making it difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on its
resale or which cannot be sold publicly until it is registered under the
Securities Act of 1933. The Fund will not invest more than 10% of its net assets
in illiquid or restricted securities. The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are eligible
for resale to qualified institutional purchasers. The Manager monitors holdings
of illiquid securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity. Illiquid securities include repurchase
agreements maturing in more than 7 days, or certain participation interests
other than those with puts exercisable within 7 days.
Other Investment Restrictions. The Fund has other investment restrictions which
are fundamental policies. Under these fundamental policies, the Fund cannot do
any of the following:
o invest in any debt instrument having a maturity in excess of one year
from the date of purchase, unless purchased subject to a demand feature which
may not exceed one year and requires payment on not more than 30 days' notice;
o enter into a repurchase agreement or purchase a security subject to a
call for redemption if the scheduled repurchase or redemption date is greater
than one year;
o with respect to 75% of its assets, purchase securities issued or
guaranteed by any one issuer (except the U.S. Government or its agencies or
instrumentalities), if more than 5% of the Fund's total assets would be invested
in securities of that issuer or the Fund would then own more than 10% of that
issuer's voting securities;
o concentrate investments to the extent of 25% of its assets in any
industry; except for obligations of foreign banks or foreign branches of
domestic banks, the instruments set forth in "Bank Obligations and Instruments
Secured Thereby" and "U.S. Government Securities" under "Investment Objective
and Policies" are not subject to this limitation;
o make loans, except that the Fund may purchase debt instruments described
in "Investment Objective and Policies" and repurchase agreements, and the Fund
may lend its portfolio securities as described under "Loans of Portfolio
Securities" in the Statement of Additional Information; or
o borrow money in excess of 10% of the value of its total assets or make
any investment when borrowings exceed 5% of the value of its total assets; it
may borrow only as a temporary measure for extraordinary or emergency purposes;
no assets of the Fund may be pledged, mortgaged or assigned to secure a debt.
Unless the Prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund makes an
investment, and the Fund need not sell securities to meet the percentage limits
if the value of the investment increases in proportion to the size of the Fund.
Additional investment restrictions are listed in "Other Investment Restrictions"
in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1988 as a Massachusetts
business trust. The Fund is a diversified, open-end management investment
company with an unlimited number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Fund" in the Statement of Additional Information names the Trustees and
the officers of the Fund and provides more information about them. Although the
Fund will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has three classes of shares, Class A, Class B and
Class C. All classes invest in the same investment portfolio. Each class has its
own dividends and distributions, and pays certain expenses which may be
different for the different classes. Consequently, the dividends paid on Class B
and Class C shares will be lower than the dividends paid on Class A shares. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a class vote as a class on matters that affect
that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the Board
of Trustees, under an Investment Advisory Agreement which states the Manager's
responsibilities, its fees and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment advisor since 1959.
The Manager (including subsidiaries) currently manages investment
companies, including other Oppenheimer funds, with assets of more than $85
billion as of September 30, 1998, held in more than 4 million shareholder
accounts. The Manager is owned by Oppenheimer Acquisition Corp., a holding
company that is owned in part by senior officers of the Manager and controlled
by Massachusetts Mutual Life Insurance Company.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on handling securities trades, pricing and accounting
services. The Manager, the Distributor and Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event,
although there cannot be assurance of success. Additionally, because the
services they provide depend on the interaction of their computer systems with
the computer systems of brokers, information services and other parties, any
failure on the part of the computer systems of those third parties to deal with
the year 2000 may also have a negative effect on the services provided to the
Fund.
o Portfolio Manager. The Manager has designated Carol E. Wolf and Arthur J.
Zimmer as the Portfolio Managers of the Fund, effective June 15, 1998 and August
5, 1998, respectively. They are the individuals principally responsible for the
day-to-day management of the Fund's portfolio. Ms. Wolf and Mr. Zimmer are also
officers of Centennial Asset Management Corporation, an investment advisor
subsidiary of the Manager. Ms. Wolf is a Vice President and Mr. Zimmer is a
Senior Vice President of the Manager. They are officers and portfolio managers
of other Oppenheimer funds.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional assets
as the Fund grows: 0.50% of the first $250 million of net assets; 0.475% of the
next $250 million; 0.45% of the next $250 million; 0.425% of the next $250
million; and 0.40% of net assets in excess of $1 billion. The Fund's management
fee for the fiscal year ended July 31, 1998 was 0.50% of average annual net
assets for Class A, Class B and Class C shares, respectively.
The Fund pays expenses related to its daily operations, such as custodian
fees, certain Trustees' fees, transfer agency fees, legal and auditing costs.
Those expenses are paid out of the Fund's assets and are not paid directly by
shareholders, but are indirectly borne by shareholders through their investment.
More information about the Investment Advisory Agreement and the other expenses
paid by the Fund is contained in the Statement of Additional Information.
o The Distributor. The Fund's shares are sold through dealers and brokers
that have a sales agreement with OppenheimerFunds Distributor, Inc., a
subsidiary of the Manager that acts as the Fund's distributor. The Distributor
also distributes the shares of the other Oppenheimer funds managed by the
Manager, and is sub- distributor for funds managed by a subsidiary of the
Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free number shown on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "yield" and
"compounded effective yield" to illustrate its performance. This performance
information may be useful to help you see how well your investment has done and
to compare it to other money market funds.
It is important to understand that the Fund's yields represent past
performance and should not be considered to be predictions of future
performance. This performance data is described below, but more detailed
information about how yields are calculated is contained in the Statement of
Additional Information, which also contains information about other ways to
measure and compare the Fund's performance. The Fund's investment performance
will vary over time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you acquire. Yields for Class A
shares generally are expected to be higher than those for Class B and Class C
shares because expenses allocable to Class B and Class C shares will generally
be higher.
o Yield. Different types of yields may be quoted to show performance. The
"yield" of each class of shares of the Fund is the net investment income
generated by an investment in a class of shares of the Fund over a seven-day
period, which is then "annualized." In annualizing, the amount of income
generated by the investment during that seven days is assumed to be generated
each week over a 52-week period, and is shown as a percentage of the investment.
o Compounded Effective Yield. The "compounded effective yield" of each
class of shares of the Fund is calculated similarly, but the annualized income
earned by an investment in a class of shares of the Fund is assumed to be
reinvested. The "compounded effective yield" will be slightly higher than the
yield because of the effect of the assumed reinvestment.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund's Class A shares may be purchased without sales
charge. Class B shares may generally be acquired only by exchange of Class B
shares of other Oppenheimer funds.
Class B shares may be purchased directly only by investors who have established
an Asset Builder Plan and by participants in the OppenheimerFunds 401(k) plan.
Requirements for establishing a Class B Asset Builder Plan are described in the
Statement of Additional Information. Class C shares may generally be acquired
only by exchange of Class C shares of other Oppenheimer funds. Class C shares
may be purchased directly only by participants in the OppenheimerFunds prototype
401(k) plan. Participants in such 401(k) plans must request the administrator of
the 401(k) plans to purchase shares of the Fund.
o Class A Shares. You may buy Class A shares without paying a sales charge.
However, if Class A shares acquired by an exchange of Class A shares of other
Oppenheimer funds purchased subject to a Class A contingent deferred sales
charge are redeemed within 18 months of the end of the calendar month of the
initial purchase of the exchanged Class A shares, a Class A contingent deferred
sales charge may be deducted from the proceeds. That sales charge will be equal
to 1.00% of either (1)the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A shares
of all Oppenheimer funds you purchased subject to the Class A contingent
deferred sales charge.
o Class B Shares. If you acquire Class B shares, you pay no sales charge at
the time of purchase. However, if you redeem your shares, a 5.00% contingent
deferred sales charge is normally imposed on shares redeemed within one year of
purchase, declining to 1.00% in the sixth year and eliminated thereafter. Class
B shares are subject to an asset-based sales charge of 0.75%. See "Buying Class
B Shares" and "Distribution and Service Plans for Class B and Class C Shares."
o Class C Shares. If you acquire Class C shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1.00%. Class C
shares are subject to an asset-based sales charge of 0.75%. See "Buying Class C
Shares" and "Distribution and Service Plans for Class B and Class C Shares."
o At What Price Are Shares Sold? The offering price of shares of each
class is the net asset value per share, without an initial sales charge (but
Class B and C shares may be subject to a contingent deferred sales charge when
they are redeemed, as described in the preceding sections). The net asset value
of each class of shares will normally be fixed at $1.00 per share, except under
extraordinary circumstances, which are more fully discussed in "Determination of
Net Asset Value Per Share" in the Statement of Additional Information. The Fund
intends to be as fully invested as practicable to maximize its yield. Therefore,
dividends will accrue on newly-purchased shares only after the purchase order is
accepted by the Distributor, as described below.
Shares are sold at net asset value that is next determined after the
Distributor receives the purchase order in Denver, Colorado, or the order is
received and transmitted to the Distributor by an entity authorized by the Fund
to accept purchase or redemption orders. The Fund has authorized the
Distributor, certain broker-dealers and agents or intermediaries designated by
the Distributor or those broker-dealers to accept orders. In most cases, to
enable you to receive that day's offering price, the Distributor or an
authorized entity must receive your order by the time of day The New York Stock
Exchange closes which is normally 4:00 P.M., New York time, but may be earlier
on some days (all references to time in this Prospectus mean "New York time").
The net asset value of each class of shares is determined as of that time on
each day The New York Stock Exchange is open (which is a "regular business
day"). If you buy shares through a dealer, normally your order must be
transmitted to the Distributor so that it is received before the Distributor's
close of business that day, which is normally 5:00 P.M. The Distributor, in its
sole discretion, may reject any purchase order for the Fund's shares.
o How Are Shares Purchased? You can buy shares several ways --through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, or directly through the Distributor, or automatically from your
bank account through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase and redemption orders. The Distributor
may pay periodic compensation from its own resources to securities dealers or
financial institutions based upon the value of shares of the Fund owned by the
dealer or financial institution for its own account or for its customers.
Purchases of Class B shares through an Asset Builder Plan are subject to certain
requirements and conditions which are described in the Statement of Additional
Information.
o Buying Shares Through Your Dealer. Your broker or dealer will place your
order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
first with a financial advisor to be sure it is appropriate for you.
o Payment by Check. If payment is made by check in U.S. dollars drawn on a
U.S. bank, dividends will begin to accrue on the next regular business day after
the purchase order is accepted by the Distributor.
o Payment by Federal Funds Wire. Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must first call the Distributor's
Wire Department at 1-800-525-7041 to notify the Distributor of the wire, and to
receive further instructions.
o Guaranteed Payment. Broker-dealers that have sales agreements with the
Distributor may place purchase orders with the Distributor before the close of
The New York Stock Exchange on a regular business day, and the order will be
effected that day if the broker-dealer guarantees that the Fund's Custodian Bank
will receive Federal Funds to pay for the purchase by 2:00 P.M., on the next
regular business day. Dividends will begin to accrue on shares purchased in this
way on the regular business day the Federal Funds are received by the required
time.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, or the Transfer Agent can
then send redemption proceeds or transmit dividends and distributions to your
bank account.
Shares are purchased for your account through AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the Application or the dealer settlement instructions used to
establish your account. Please refer to "AccountLink," below for more details.
o Asset Builder Plans. You may purchase Class A shares of the Fund (and up
to four other Oppenheimer funds) automatically each month from your account at a
bank or other financial institution under an Asset Builder Plan with
AccountLink. You may also purchase Class B shares directly under an Asset
Builder Plan. Purchases of Class B shares through an Asset Builder Plan are
subject to certain requirements and conditions which are described in the
Statement of Additional Information.
Buying Class A Shares. You can open a Fund account for Class A shares with a
minimum initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least $25 can be
made by telephone through AccountLink.
Under pension, profit-sharing and 401(k) plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250 (if
your IRA is established under an Asset Builder Plan, the $25 minimum applies),
and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your dealer
or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o Service Plan for Class A Shares. The Fund has adopted a Service Plan for
Class A shares to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of accounts that hold
Class A shares. Reimbursement is made quarterly at an annual rate that may not
exceed 0.20% of the average annual net assets of Class A shares of the Fund. The
Distributor uses all of those fees to compensate dealers, brokers, banks and
other financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the
Fund or the Distributor. Payments are made by the Distributor quarterly at an
annual rate not to exceed 0.20% of the average annual net assets of Class A
shares held in accounts of the service providers or their customers. The
payments under the Plan increase the annual expenses of Class A shares. For more
details, please refer to "Distribution and Service Plans" in the Statement of
Additional Information.
Buying Class B Shares. Class B shares may be acquired at net asset value per
share only by exchange of Class B shares of other Oppenheimer funds, except that
direct purchases are permitted in certain cases, described below. Class B shares
may be purchased directly only by investors who establish an Asset Builder Plan
and by plan administrators or plan sponsors on behalf of plan participants in
OppenheimerFunds prototype 401(k) plans. Purchases of Class B shares through an
Asset Builder Plan are subject to certain requirements and conditions which are
described in the Statement of Additional Information. You may open a Class B
Asset Builder Plan account with minimum initial investment of $5,000. On direct
purchases of the Fund's Class B shares for Asset Builder Plans, and
OppenheimerFunds prototype 401(k) plans, the Distributor pays sales commissions
of 4.00% of the purchases price of Class B shares to dealers from its own
resources at the time of sales. The Distributor retains the Class B asset-based
sales charge in either case. Under certain circumstances, the Distributor may
also pay the Class B asset-based sales charge to the dealer quarterly in lieu of
paying the sales commission at the time of purchase.
If Class B shares are redeemed within 6 years of the direct purchase or
the purchase of the Class B shares of other Oppenheimer funds that were
exchanged for Class B shares of this Fund, a contingent deferred sales charge
will be deducted from the redemption proceeds. That sales charge will not apply
to shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price
(including increases due to the reinvestment of dividends and capital gains
distributions).
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges" below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since
Beginning of Month in Contingent Deferred Sales Charge
which Purchase Order On Redemptions in that Year
Was Accepted (As % of Amount Subject to Charge)
- -------------------------------------------------------------------
0 - 1 5.0%
- -------------------------------------------------------------------
1 - 2 4.0%
- -------------------------------------------------------------------
2 - 3 3.0%
- -------------------------------------------------------------------
3 - 4 3.0%
- -------------------------------------------------------------------
4 - 5 2.0%
- -------------------------------------------------------------------
5 - 6 1.0%
- -------------------------------------------------------------------
6 and following None
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which the
purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares of the Fund or Class B shares of another Oppenheimer fund that
are exchanged for Class B shares of the Fund, those shares will automatically
convert to Class A shares. This conversion feature relieves Class B shareholders
of the asset-based sales charge that applies to Class B shares under the Class B
Distribution and Service Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other charge
is imposed. When Class B shares convert, any other Class B shares that were
acquired by the reinvestment of dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature is subject to
the continued availability of a tax ruling described in "Alternative Sales
Arrangements - Class A, Class B and Class C Shares" in the Statement of
Additional Information.
Buying Class C Shares. Class C shares may be acquired at net asset value per
share only by exchange of Class C shares of other Oppenheimer funds, except that
direct purchases are permitted in certain cases, described below. Class C shares
may be purchased directly only by plan administrators or plan sponsors on behalf
of participants in OppenheimerFunds prototype 401(k) plans. On direct purchases
of the Fund's Class C shares, the Distributor pays sales commissions of 1.00% of
the purchase price to dealers from its own resources at the time of sale. If
Class C shares are redeemed within 12 months of the direct purchase or the
purchase of the Class C shares that were exchanged, a contingent deferred sales
charge of 1.00% will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The contingent deferred sales charge will be based on the
lesser of the net asset value of the redeemed shares at the time of redemption
or the original offering price (which is the original net asset value). The
contingent deferred sales charge is not imposed on the amount of your account
value represented by the increase in net asset value over the initial purchase
price (including increases due to the reinvestment of dividends and capital
gains distributions).
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
All purchases are considered to have been made on the first regular business day
of the month in which the purchase was made.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor in connection with the distribution of Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year on Class B
shares that are outstanding for 6 years or less and on Class C shares. The
Distributor is also authorized to receive a service fee of 0.25% per year. At
present the service fee paid on Class B and Class C shares by the Fund to the
Distributor and by the Distributor to dealers is set at zero. Under each Plan,
both fees are computed on the average annual net assets of shares in the
respective class, determined as of the close of each regular business day during
the period.
The Plans enable the Distributor to offer Class B and Class C shares for
purchase under certain arrangements (See "How to Buy Shares") and to offer an
exchange privilege between Class B and Class C shares of the Fund and Class B
and Class C shares of other Oppenheimer funds, as described below, without
assessing a contingent deferred sales charge at the time of the exchange. The
asset-based sales charge paid to the Distributor by the Fund and the payment of
the contingent deferred sales charges are intended to compensate the Distributor
for its activities related to the offering of Class B and Class C shares of
Oppenheimer funds.
If the service fee were paid, the Distributor would use it to
compensate dealers for providing personal service and account maintenance
services for accounts that hold Class B or Class C shares. Those services are
similar to those provided under the Class A Service Plan, described above. The
asset-based sales charge increases Class B and Class C expenses by 0.75% of
average net assets per year, and if the service fee were paid, it would further
increase each class' expenses by 0.25% of average net assets per year.
Payments to the Distributor under the Plans are at a fixed rate that is
not related to the Distributor's expenses. The Distributor's actual expenses in
selling Class B and Class C shares may be more than the payments it receives
from contingent deferred sales charges collected on redeemed shares and from the
Fund under the Plans. If the Fund terminates either Plan, 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.
On direct purchases of the Fund's Class B shares for Asset Builder Plans,
and OppenheimerFunds prototype 401(k) plans, the Distributor currently pays
sales commissions of 4.00% of the purchase price of Class B shares to dealers
from its own resources at the time of sale. The Distributor retains the Class B
asset-based sales charge in either case. The Distributor may pay Class B service
fee and the asset-based sales charge to the dealer quarterly in lieu of paying
the sales commission and service fee advance at the time of purchase.
On direct purchases of Class C shares, the Distributor currently pays
sales commissions of 1.00% of the purchase price of Class C shares to dealers
from its own resources at the time of sale. The Distributor plans to pay the
asset-based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more. The Distributor may pay
the Class C service fee and asset-based sales charge to the dealer quarterly in
lieu of paying the sales commission and service fee advance at the time of
purchase.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charge will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances as described below. In order to receive a
waiver of the Class B or Class C contingent deferred sales charge, you must
notify the Transfer Agent which conditions apply.
Waivers for Redemptions of Shares in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to retirement plans;
o distributions from retirement plans to make "substantially equal
periodic payments" as permitted in section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request;
o shares redeemed involuntarily as described in "Shareholder Account Rules
and Policies" below;
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans (a)
for hardship withdrawals; (b) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (c) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (d) to make "substantially
equal periodic payments" as permitted in Section 72(t) of the Internal Revenue
Code; (e) for separation from service; or (f) for loans to participants or
beneficiaries; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund is a party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions, including purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after you obtain a
Personal Identification Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds exchange privilege
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer fund account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares"
below for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account.
Please refer to "How to Sell Shares" below for details.
Shareholder Transactions by Fax. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is $5,000 or more, you
can establish an Automatic Withdrawal Plan to receive payments of at least $50
on a monthly, quarterly, semi-annual or annual basis. The checks may be sent to
you or sent automatically to your bank account on AccountLink. You may even set
up certain types of withdrawals of up to $1,500 per month by telephone. You
should consult the Statement of Additional Information for more details. Class B
and Class C shareholders should not establish Automatic Withdrawal Plans because
of the possible imposition of a contingent deferred sales upon redemption of
such shares.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each other
Oppenheimer fund account is $25. These exchanges are subject to the terms of the
exchange privilege, described in "How to Exchange Shares," below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased by exchanging shares from another Oppenheimer fund account on which
you already paid a sales charge, or Class B shares on which you paid a
contingent deferred sales charge when you redeemed them. It does not apply to
Class C shares. You must be sure to ask the Distributor for this privilege when
you send your payment. Please consult the Statement of Additional Information
for more details.
Retirement Plans. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment
o Pension and Profit-Sharing Plans for self-employed persons and small
business owners
o 401(k) Prototype Retirement Plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
OppenheimerFunds Internet Web Site. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. Additionally, certain account
transactions may be requested by any shareholder listed in the registration on
an account as well as by the dealer representative of record, through a special
section of that Web Site. To access that section of the Web Site, you must first
obtain a personal identification number ("PIN") by calling OppenheimerFunds
PhoneLink at 1-800-533-3310. If you do not wish to have Internet account
transactions capability for your account, please call our customer service
representatives at 1-800-525-7048. To find out more information about Internet
transactions and procedures, please visit the Web Site.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular business day. Your shares will be sold at the
next net asset value calculated after your order is received and accepted by the
Transfer Agent. Please call your broker or dealer for more information about
this procedure. The Fund offers you a number of ways to sell your shares: in
writing, by telephone or by wire or by using the Fund's
checkwriting privilege. You can also set up Automatic Withdrawal Plans to redeem
shares on a regular basis, as described above. If you are a participant in an
OppenheimerFunds 401(k) plan, you must request the administrator of the plan to
sell your shares. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as due to
the death of the owner, or from a retirement plan, please call the Transfer
Agent first, at 1-800-525-7048, for assistance.
|X| Retirement Accounts. To sell shares in an OppenheimerFunds retirement
account in your name, call the Transfer Agent for a distribution request form.
There are special income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for you by your employer,
you must arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the Statement of
Additional Information.
|X| Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o you wish to redeem more than $50,000 worth of shares and receive a check
o the redemption check is not payable to all shareholders listed on the
account statement
o the redemption check is not sent to the address of record on your
statement
o shares are being transferred to a Fund account with a different owner or
name
o shares are redeemed by someone other than the owners (such as an
Executor)
|X| Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial institutions,
including: a U.S. bank, trust company, credit union or savings association, or
by a foreign bank that has a U.S. correspondent bank, or by a U.S. registered
dealer or broker in securities, municipal securities or government securities,
or by a U.S. national securities exchange, a registered securities association
or a clearing agency. If you are signing as a fiduciary or on behalf of a
corporation, partnership or other business, you must also include your title in
the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
o your name
o the Fund's name
o your Fund account number (from your account statement)
o the dollar amount or number of shares to be redeemed
o any special payment instructions
o any share certificates for the shares you are selling
o the signatures of all registered owners exactly as the account is
registered, and
o any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Send courier or express mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
o To redeem shares through a service representative, call 1-
800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the address on the
account, or, if you have linked your Fund account to your bank account on
AccountLink, you may have the proceeds wired to that account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account. This service is
not available within 30 days of changing the address on an account.
o Telephone Redemptions Through AccountLink. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH wire to your bank is initiated on the
business day after the redemption. You do not receive dividends on the proceeds
of the shares you redeemed while they are waiting to be transferred.
Selling Shares by Wire. You may also request that redemption proceeds of $2,500
or more be wired in Federal Funds to a previously designated account at a
commercial bank that is a member of the Federal Reserve wire system. There is a
$10 fee for each wire. To place a wire redemption request, call the Transfer
Agent at 1-800-852-8457.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please refer to "Special
Arrangements for Repurchase of Shares from Dealers and Brokers" in the Statement
of Additional Information for more details.
Checkwriting. To be able to write checks against your Fund account, you may
request that privilege on your account Application or you can contact the
Transfer Agent for signature cards, which must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish Checkwriting in one of the other
Oppenheimer funds, you may call 1-800-525-7048 to request Checkwriting for an
account in this Fund that has the same registration as that other fund account.
o Checkwriting privileges are not available for accounts holding Class B
shares or Class C shares, or Class A shares that are subject to a contingent
deferred sales charge.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the Fund's bank or custodian.
o Checks must be written for at least $100.
o Checks cannot be paid if they are written for more than your account
value.
o You may not write a check that would require the Fund to redeem shares
that were purchased by check or Asset Builder Plan payments within the prior 10
days.
o Don't use your checks if you changed your Fund account number. See "How
to Sell Shares - Checkwriting" in the Statement of Additional Information.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of the same class of other
Oppenheimer funds. Fund shares purchased by reinvesting dividends from another
fund, or by exchange of shares from other Oppenheimer fund accounts on which you
paid a sales charge may be exchanged at net asset value per share at the time of
exchange, without sales charge. However, when you exchange other shares of the
Fund, including shares purchased directly and shares purchased by reinvesting
the Fund's dividends or distributions, for shares of Oppenheimer funds that have
a sales charge, you will be subject to that charge. To exchange shares, you must
meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days, you
can exchange shares every regular business day
o You must meet the minimum purchase requirements for the fund you purchase
by exchange
o Before exchanging into a fund, you should obtain and read its prospectus
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered "Class A" shares for this purpose. Participants in an
OppenheimerFunds prototype 401(k) plan must request the administrator of the
plan to exchange their shares. In some cases, sales charges may be imposed on
exchange transactions. Please refer to "How to Exchange Shares" in the Statement
of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
address listed in "How to Sell Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800- 852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or you can obtain this information by
calling a service representative at 1- 800-525-7048. This list can change from
time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request in proper form by the close of The
New York Stock Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. However, either fund may delay the purchase of shares of the fund
you are exchanging into up to 7 days if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the receipt
of multiple exchange requests from a dealer in a "market-timing" strategy might
require the disposition of securities at a time or price disadvantageous to the
Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the Fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For
more information about taxes affecting exchanges, please refer to "How to
Exchange Shares" in the Statement of Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisors permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a result,
those exchanges may be subject to notice requirements, delays and other
limitations that do not apply to shareholders who exchange their shares directly
by calling or writing the Transfer Agent.
Shareholder Account Rules and Policies
o Net asset value per share of each class of the Fund will normally be
maintained at $1.00, except under extraordinary circumstances (see
"Determination of Net Asset Value Per Share" in the Statement of Additional
Information).
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
o Telephone transaction privileges for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it nor the Fund will be liable for losses or
expenses arising out of telephone instructions reasonably believed to be
genuine. If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction and
should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously.
o Payment for redeemed shares is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer, payment will
be forwarded within 3 business days. The Transfer Agent may delay forwarding a
check or processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 10
days from the date the shares were purchased. That delay may be avoided if you
purchase shares by Federal funds wire, certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $200.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to the Statement of Additional
Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security Number or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. The Fund will
charge a $10 transaction fee for sending redemption proceeds by Federal Funds
wire. Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class A,
Class B and Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report and updated
prospectus to shareholders having the same last name and address on the Fund's
records. However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Fund declares dividends daily from net
investment income of each class and pays those dividends to shareholders monthly
as of a date selected by the Board of Trustees. To effect its policy of
maintaining a net asset value of $1.00 per share of each class, under certain
circumstances, the Fund may withhold dividends or make distributions from
capital or capital gains. Dividends paid on Class A shares generally are
expected to be higher than for Class B and Class C shares because expenses
allocable to Class B and Class C shares will generally be higher.
Capital Gains. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the calendar year. Short-term
capital gains are treated as dividends for tax purposes. There can be no
assurance that the Fund will pay any capital gains distributions in a particular
year.
Distribution Options. When you open your account, specify on your application
how you want to receive your distributions. For OppenheimerFunds retirement
accounts, all distributions are reinvested. For other accounts, you have four
options:
o Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares of the
Fund.
o Reinvest Capital Gains Only. You can elect to reinvest capital gains in
the Fund while receiving dividends by check or sent to your bank account on
AccountLink.
o Receive All Distributions in Cash. You can elect to receive a check for
all dividends and capital gains distributions or have them sent to your bank on
AccountLink.
o Reinvest Your Distributions in Another Oppenheimer Fund Account. You can
reinvest all distributions in the same class of shares of another Oppenheimer
fund account you have established. Taxes. If your account is not a tax-deferred
retirement account, you should be aware of the following tax implications of
investing in the Fund. Long-term capital gains are taxable as long-term capital
gains when distributed to shareholders. Dividends paid from short-term capital
gains and net investment income are taxable as ordinary income. Distributions
are subject to Federal income tax and may be subject to state or local taxes.
Your distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you and
the IRS a statement showing the amount of each taxable distribution you received
in the previous year. So that the Fund will not have to pay taxes on the amount
it distributes to shareholders as dividends and capital gains, the Fund intends
to manage its investments so that it will qualify as a "regulated investment
company" under the Internal Revenue Code, although it reserves the right not to
qualify in a particular year.
o Taxes on Transactions. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is the
difference, if any, between the price you paid for the shares and the price you
received when you sold them.
o Returns of Capital. In certain cases distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
-4-
<PAGE>
Oppenheimer Cash Reserves
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
OppenheimerFunds Internet Web Site
http://www.oppenheimerfunds.com
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202-4918
No broker, dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc., OppenheimerFunds
Distributor, Inc. or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such
offer in such state.
<PAGE>
Oppenheimer Cash Reserves
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated November 27, 1998
This Statement of Additional Information of Oppenheimer Cash Reserves is
not a Prospectus. This document contains additional information about the Fund
and supplements information in the Prospectus dated November 27, 1998. It should
be read together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Transfer Agent at the toll-free number shown
above.
Contents
Page
About the Fund
Investment Objective and Policies.............................................
Investment Policies and Strategies.......................................
Other Investment Techniques and Strategies....................................
Other Investment Restrictions.................................................
How the Fund is Managed.......................................................
Organization and History.................................................
Trustees and Officers of the Fund........................................
The Manager and Its Affiliates...........................................
Performance of the Fund.......................................................
Distribution and Service Plans................................................
About Your Account
How To Buy Shares.............................................................
How To Sell Shares............................................................
How To Exchange Shares........................................................
Dividends, Capital Gains and Taxes............................................
Additional Information About the Fund.........................................
Financial Information About the Fund
Independent Auditors' Report..................................................
Financial Statements..........................................................
Appendices
Appendix A: Description of Securities Ratings..............................A-1
Appendix B: Industry Classifications.......................................B-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
may invest, as well as the strategies the Fund may use to try to achieve its
objective. Certain capitalized terms used in this Statement of Additional
Information are defined in the Prospectus.
The Fund's objective is to seek maximum current income that is consistent
with stability of principal. The Fund will not make investments with the
objective of seeking capital growth. However, the value of the securities held
by the Fund may be affected by changes in general interest rates. Because the
current value of debt securities varies inversely with changes in prevailing
interest rates, if interest rates increase after a security is purchased, that
security would normally decline in value. Conversely, should interest rates
decrease after a security is purchased, its value would rise. However, those
fluctuations in value will not generally result in realized gains or losses to
the Fund since the Fund does not usually intend to dispose of securities prior
to their maturity. A debt security held to maturity is redeemable by its issuer
at full principal value plus accrued interest. To a limited degree, the Fund may
engage in short-term trading to attempt to take advantage of short-term market
variations, or may dispose of a portfolio security prior to its maturity if, on
the basis of a revised credit evaluation of the issuer or other considerations,
the Fund believes such disposition advisable or it needs to generate cash to
satisfy redemptions. In such cases, the Fund may realize a capital gain or loss.
o Ratings of Securities - Portfolio Quality and Diversification. Under
Rule 2a-7 of the Investment Company Act, the Trust uses the amortized cost
method to value its portfolio securities to determine the Trust's net asset
value per share. Rule 2a-7 places restrictions on a money market fund's
investments. Under that Rule, the Trust may purchase only those securities that
the Manager, under Board-approved procedures, has determined have minimal credit
risks and are Eligible Securities. The rating restrictions described in the
Prospectus and this Statement of Additional Information do not apply to banks in
which the Trust's cash is kept.
An Eligible Security is one that has been rated in one of the two highest
short-term rating categories by any two nationally-recognized statistical rating
organizations. That term is defined in Rule 2a-7 and they are referred to as
"Rating Organizations" in this Statement of Additional Information. If only one
Rating Organization has rated that security, it must have been rated in one of
the two highest rating categories by that Rating Organization. An unrated
security that is judged by the Manager to be of comparable quality to Eligible
Securities rated by Rating Organizations may also be an "Eligible Security."
Rule 2a-7 permits the Trust to purchase any number of "First Tier
Securities." These are Eligible Securities that have been rated in the highest
rating category for short-term debt obligations by at least two Rating
Organizations. If only one Rating Organization has rated a particular security,
it must have been rated in the highest rating category by that Rating
Organization. Comparable unrated securities may also be First Tier Securities.
Under Rule 2a-7, the Trust may invest only up to 5% of its assets in
"Second Tier Securities." Second Tier are Eligible Securities that are not First
Tier Securities. In addition, the Trust may not invest more than:
o 5% of its total assets in the securities of any one issuer (other than
the U.S. Government, its agencies or instrumentalities) or
o 1% of its total assets or $1 million (whichever is greater) in Second
Tier Securione issuer.
Additionally, under Rule 2a-7, the Trust must maintain a dollar-weighted
average portfolio maturity of not more than 90 days, and the maturity of any
single portfolio investment may not exceed 397 days. Some of the Trust's
existing investment restrictions (which are fundamental policies that may be
changed only by shareholder vote) are more restrictive than the provisions of
Rule 2a-7. For example, as a matter of fundamental policy, the Trust may not
invest in any debt instrument having a maturity in excess of one year from the
date of the investment. The Board regularly reviews reports from the Manager to
show the Manager's compliance with the Trust's procedures and with the Rule.
If a security's rating is downgraded, the Manager and/or the Board may
have to reassess the security's credit risk. If a security has ceased to be a
First Tier Security, the Manager will promptly reassess whether the security
continues to present minimal credit risk. If the Manager becomes aware that any
Rating Organization has downgraded its rating of a Second Tier Security or rated
an unrated security below its second highest rating category, the Trust's Board
of Trustees shall promptly reassess whether the security presents minimal credit
risk and whether it is in the best interests of the Trust to dispose of it. If
the Trust disposes of the security within five days of the Manager learning of
the downgrade, the Manager will provide the Board with subsequent notice of such
downgrade. If a security is in default, or ceases to be an Eligible Security, or
is determined no longer to present minimal credit risks, or if an event of
insolvency as defined in Rule 2a-7 occurs, the Trust must dispose of the
security as soon as practicable unless, the Board determines it would be in the
best interests of the Trust to dispose of the security.
The Rating Organizations currently designated as nationally-recognized
statistical rating organizations by the Securities and Exchange Commission are
Standard & Poor's Corporation, Moody's Investors Service, Inc., IBCA Fitch, Duff
and Phelps, Inc., and Thomson BankWatch, Inc. Appendix A to this Statement of
Additional Information contains descriptions of the rating categories of those
Rating Organizations. Ratings at the time of purchase will determine whether
securities may be acquired under the restrictions described above.
o U.S. Government Securities. U.S. Government Securities are obligations
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
and include Treasury Bills (which mature within one year of the date they are
issued) and Treasury Notes and Bonds (which are issued with longer maturities).
The Fund does not generally intend to routinely invest a significant portion of
its assets in U.S. Government Securities. All Treasury securities are backed by
the full faith and credit of the United States. U.S. Government agencies and
instrumentalities that issue or guarantee securities include, but are not
limited to, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration, Bank
for Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Maritime
Administration, the Tennessee Valley Authority and the District of Columbia
Armory Board.
Securities issued or guaranteed by U.S. Government agencies and
instrumentalities are not always supported by the full faith and credit of the
United States. Some, such as securities issued by the Federal Home Loan Banks,
are backed by the ability of the agency or instrumentality to borrow from the
U.S. Treasury. Others, such as securities issued by the Federal National
Mortgage Association ("Fannie Mae"), are supported only by the credit of the
instrumentality and not by the U.S. Treasury. If the securities are not backed
by the full faith and credit of the United States, the owner of the securities
must look to the agency issuing the obligation for repayment and will not be
able to assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment.
Among the U.S. Government Securities that may be purchased by the Fund are
"mortgage-backed securities" of Fannie Mae, the Government National Mortgage
Association ("Ginnie Mae") and the Federal Home Loan Mortgage Association
("Freddie Mac"). These mortgage-backed securities include "pass-through"
securities and "participation certificates"; both are similar, representing
pools of mortgages that are assembled, with interests sold in the pool. Payments
of principal and interest by individual mortgagors are "passed through" to the
holders of the interests in the pool. Another type of mortgage-backed security
is the "collateralized mortgage obligation," which is similar to a conventional
bond and is secured by groups of individual mortgages. Timely payment of
principal and interest on Ginnie Mae pass-throughs is guaranteed by the full
faith and credit of the United States. Freddie Mac and Fannie Mae are both
instrumentalities of the U.S. Government, but their obligations are not backed
by the full faith and credit of the United States.
Mortgage-backed securities and collateralized mortgage obligations are
subject to prepayments as interest rates decline, which shortens the weighted
average life of the Mortgage Backed Securities or Collateralized Mortgage
Obligations. Conversely, if interest rates increase, prepayments of the
underlying mortgages may decline, which would extend the weighted average
life of the Mortgage Backed Securities or Collateralized Mortgage Obligations.
All of these mortgage-backed securities and collateralized obligations must meet
the standards required under Rule 2a-7.
o Asset-Backed Securities. These securities, issued by trusts and special
purpose corporations, are backed by pools of assets, primarily automobile and
credit-card receivables and home equity loans, which pass through the payments
on the underlying obligations to the security holders (less servicing fees paid
to the originator or fees for any credit enhancement). These securities must
meet the standards required under Rule 2a-7. The value of an asset-backed
security is affected by changes in the market's perception of the asset backing
the security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has been exhausted.
Payments of principal and interest passed through to holders of asset-backed
securities are typically supported by some form of credit enhancement, such as a
letter of credit, surety bond, limited guarantee by another entity or having a
priority to certain of the borrower's other securities. The degree of credit
enhancement varies, and generally applies to only a fraction of the asset-backed
security's par value until exhausted. If the credit enhancement of an
asset-backed security held by the Fund has been exhausted, and if any required
payments of principal and interest are not made with respect to the underlying
loans, the Fund may experience losses or delays in receiving payment. The risks
of investing in asset-backed securities are ultimately dependent upon payment of
consumer loans by the individual borrowers. As a purchaser of an asset-backed
security, the Fund would generally have no recourse to the entity that
originated the loans in the event of default by a borrower. The underlying loans
are subject to prepayments, which shorten the weighted average life of
asset-backed securities and may lower their return, in the same manner as
described above for prepayments of a pool of mortgage loans underlying
mortgage-backed securities. However, asset- backed securities do not have the
benefit of the same security interest in the underlying collateral as do
mortgage backed securities.
o Floating Rate/Variable Rate Obligations. The Fund may invest in
instruments with floating or variable interest rates. The interest rate on a
floating rate obligation is based on a stated prevailing market rate, such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of return on
commercial paper or bank certificates of deposit, or some other standard, and is
adjusted automatically each time such market rate is adjusted. The interest rate
on a variable rate obligation is also based on a stated prevailing market rate
but is adjusted automatically at a specified interval of no more than one year.
Some variable rate or floating rate obligations in which the Fund may invest
have a demand feature entitling the holder to demand payment at an amount
approximately equal to amortized cost or the principal amount thereof plus
accrued interest at any time, or at specified intervals not exceeding one year.
These notes may or may not be backed by bank letters of credit.
o Master Demand Notes. Variable rate demand notes may include master
demand notes which are obligations that permit the Fund to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Fund, as the note purchaser, and the issuer of the note. The
interest rates on these notes fluctuate from time to time. The issuer of such
obligations normally has a corresponding right, after a given period, to prepay
in its discretion the outstanding principal amount of the obligations plus
accrued interest upon a specified number of days' notice to the holders of such
obligations. Generally, the changes in the interest rate on such securities
reduce the fluctuation in their market value. As interest rates decrease or
increase, the potential for capital appreciation or depreciation is less than
that for fixed-rate obligations of the same maturity. Because these obligations
are direct lending arrangements between the note purchaser and issuer of the
note, it is not contemplated that such instruments generally will be traded, and
there generally is no established secondary market for these obligations,
although they are redeemable at face value. Accordingly, where these obligations
are not secured by letters of credit or other credit support arrangements, the
Fund's right to redeem is dependent on the ability of the note issuer to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies and the Fund may invest in obligations which are not so
rated only if the Manager determines that at the time of investment the
obligations are of comparable quality to the other obligations in which the Fund
may invest. The Manager, on behalf of the Fund, will consider on an ongoing
basis the creditworthiness of the issuers of the floating and variable rate
obligations in the Fund's portfolio.
o Insured Bank Obligations. The Federal Deposit Insurance Corporation
("FDIC") insures the deposits of banks and savings and loan associations
(collectively referred to as "banks") up to $100,000. The Fund may purchase bank
obligations which are fully insured as to principal by the FDIC. To remain fully
insured as to principal, these investments must currently be limited to $100,000
per bank. If the principal amount and accrued interest together exceed $100,000,
then the amount in excess of that $100,000 will not be insured.
o Bank Loan Participation Agreements. The Fund may invest in bank loan
participation agreements, subject to the investment limitation set forth in
"Investment Objective and Policies" in the Prospectus as to investments in
illiquid securities. These participation agreements provide the Fund an
undivided interest in a loan made by the bank issuing the participation interest
in the proportion that the Fund's participation interest bears to the total
principal amount of the loan. The issuing bank may have no obligation to the
Fund other than to pay it principal and interest on the loan if and when
received by the bank. Thus, the Fund must look to the creditworthiness of the
borrower, which is obligated to make payments of principal and interest on the
loan. If the borrower fails to pay scheduled principal or interest payments, the
Fund may experience a reduction in income or principal, or both.
Other Investment Techniques and Strategies
o Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a U.S.
commercial bank, or the U.S. branch of a foreign bank or a broker-dealer which
has been designated a primary dealer in government securities, which must meet
the credit requirements set forth by the Fund's Board of Trustees from time to
time), for delivery on an agreed-upon future date. The resale price exceeds the
purchase price by an amount that reflects an agreed-upon interest rate effective
for the period during which the repurchase agreement is in effect. The majority
of these transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act of 1940 (the
"Investment Company Act"), collateralized by the underlying security. The Fund's
repurchase agreements require that at all times while the repurchase agreement
is in effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally, the Manager will
impose creditworthiness requirements to confirm that the vendor is financially
sound, and the Manager will continuously monitor the collateral's value.
o Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities to certain types of eligible borrowers
approved by the Board of Trustees. The Fund must receive collateral for such
loans. After any loan, the value of the securities loaned must not exceed 25% of
the value of the Fund's total assets. There are some risks in connection with
securities lending. The Fund might experience a delay in receiving additional
collateral to secure a loan, or a delay in recovery of the loaned securities.
The Fund presently does not intend to lend its securities, but if it does, the
value of securities loaned is not expected to exceed 5% of the value of the
Fund's total assets.
Under applicable regulatory requirements (which are subject to change),
the loan collateral must, on each business day, at least equal the market value
of the loaned securities and must consist of cash, bank letters of credit, U.S.
Government securities or other cash equivalents in which the Fund is permitted
to invest. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Fund receives an amount equal to the dividends or interest on loaned securities
and also receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such loan collateral; either type of interest may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian,
administrative or other fees in connection with such a loan, and will not lend
its portfolio securities to any officer, trustee, employee or affiliate of the
Fund or its Manager. The terms of the Fund's loans must meet certain tests under
the Internal Revenue Code and permit the Fund to reacquire loaned securities on
five business days notice or in time to vote on any important matter.
o Illiquid and Restricted Securities. Illiquid securities in which the
Fund may invest include issues which only may be redeemed by the issuer upon
more than seven days notice or at maturity, repurchase agreements maturing in
more than seven days, fixed time deposits subject to withdrawal penalties which
mature in more than seven days, and other securities which cannot be sold freely
due to legal or contractual restrictions on resale. Contractual restrictions on
the resale of illiquid securities might prevent or delay their sale by the Fund
at a time when such sale would be desirable. Restricted securities that are not
illiquid, in which the Fund may invest, include certain master demand notes
redeemable on demand, and short-term corporate debt instruments that are not
related to current transactions of the issuer and therefore are not exempt from
registration as commercial paper.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund must
follow that are also fundamental policies. Fundamental policies and the Fund's
investment objective cannot be changed without the vote of a "majority" of the
Fund's outstanding voting securities. Under the Investment Company Act, such a
"majority" vote is defined as the vote of the holders of the lesser of: (1) 67%
or more of the shares present or represented by proxy at a shareholder meeting,
if the holders of more than 50% of the outstanding shares are present, or (2)
more than 50% of the outstanding shares.
Under these additional restrictions, which are fundamental policies, the
Fund cannot:
o invest in commodities or commodity contracts, or invest in interests in
oil, gas, or other mineral exploration or development programs;
o invest in real estate; however, the Fund may purchase debt securities
issued by companies which invest in real estate or interests therein;
o purchase securities on margin or make short sales of securities;
o invest in or hold securities of any issuer if those officers and
trustees or directors of the Fund or its Manager who beneficially own
individually more than 1/2 of 1% of the securities of such issuer together own
more than 5% of the securities of such issuer;
o underwrite securities of other companies except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in connection with the
disposition of portfolio securities;
o invest more than 5% of its total assets in securities of companies that
have operated less than three years, including the operations of predecessors;
or
o purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization.
For purposes of the Fund's policy not to concentrate in securities of
issuers as described in "Other Investment Restrictions" in the Prospectus, the
Fund has adopted the industry classifications set forth in Appendix B to this
Statement of Additional Information. This is not a fundamental policy.
How the Fund is Managed
Organization and History. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may take
such other action as set forth under Section 16(c) of the Investment Company
Act.
The Fund has three classes of shares. Shares of each class are freely
transferable. Each share has one vote at shareholder meetings, with fractional
shares voting proportionally on matters submitted to a vote of shareholders.
There are no preemptive or conversion rights and shares participate equally in
the assets of the Fund upon liquidation.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Fund, and any shareholder of
the Fund, agrees under the Fund's Declaration of Trust to look solely to the
assets of the Fund for satisfaction of any claim or demand which may arise out
of any dealings with the Fund, and the Trustees shall have no personal liability
to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations during the past five years are
set forth below. All Trustees are also Trustees, Directors, or Managing General
Partners of Centennial America Fund, L.P., Centennial California Tax Exempt
Trust, Centennial New York Tax Exempt Trust, Centennial Government Trust,
Centennial Tax Exempt Trust, Centennial Money Market Trust, Oppenheimer Champion
Income Fund, Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund,
Oppenheimer Integrity Funds, Oppenheimer International Bond Fund, Oppenheimer
Limited-Term Government Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Municipal Fund, Oppenheimer Real Asset Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Total Return Fund, Inc., Oppenheimer Variable Account Funds,
Panorama Series Fund, Inc. and The New York Tax Exempt Income Fund, Inc. (all of
the foregoing funds are collectively referred to as the "Denver- based
Oppenheimer funds") except for Ms. Macaskill and Mr. Bowen, who are Trustees,
Directors or Managing General Partners of all the Denver-based Oppenheimer funds
except Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund,
Oppenheimer Variable Account Funds and Panorama Series Fund Inc. and Messrs.
Bowen and Fossel who are Trustees, Directors and Managing General Partners of
all the Denver-based funds except Centennial New York Tax Exempt Trust and
Centennial America Fund, L.P. Ms. Macaskill is President and Mr. Swain is
Chairman and Chief Executive Officer of the Denver Oppenheimer funds. All of the
officers except Ms. Wolf and Mr. Zimmer hold similar positions with each of the
Denver-based Oppenheimer funds. As of November 16, 1998, the Trustees and
officers of the Fund as a group owned of record or beneficially less than 1% of
each class of shares of the Fund. The foregoing statement does not reflect
ownership of shares held of record by an employee benefit plan for employees of
the Manager (for which plan two of the officers listed below, Ms. Macaskill and
Mr. Donohue, are trustees), other than the shares beneficially owned under that
plan by the officers of the Fund listed below.
ROBERT G. AVIS, Trustee*, Age 67
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards,
Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G.
Edwards Trust Company (its affiliated investment adviser and trust company,
respectively).
WILLIAM A. BAKER, Trustee, Age 83
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
GEORGE C. BOWEN, Vice President, Treasurer, Assistant Secretary and Trustee*,
Age 62 6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView Asset Management Corporation ("HarbourView"); Senior
Vice President (since February 1992), Treasurer (since July 1991) and a director
(since December 1991) of Centennial Asset Management Corporation, an investment
adviser subsidiary of the Manager ("Centennial"); President, Treasurer and a
director of Centennial Capital Corporation (since June 1989); Vice President and
Treasurer (since August 1978) and Secretary (since April 1981) of Shareholder
Services, Inc. ("SSI"); Vice President, Treasurer and Secretary of Shareholder
Financial Services, Inc. ("SFSI") (since November 1989); Assistant Treasurer of
Oppenheimer Acquisition Corp. ("OAC") (since March 1998); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer; Treasurer of OppenheimerFunds International Ltd.,
an offshore fund manager subsidiary of the Manager ("OFIL") and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds; formerly Treasurer of OAC (June 1990 - March 1998).
CHARLES CONRAD, JR., Trustee, Age 68
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services management
company); formerly Vice President of McDonnell Douglas Space Systems Co. and
associated with the National Aeronautics and Space Administration.
JON S. FOSSEL, Trustee, Age 56
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a director of
OAC, the Manager's parent holding company, and SSI and SFSI, transfer agent
subsidiaries of the Manager.
SAM FREEDMAN, Trustee, Age 58
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer and director of SFSI, Vice President and director of OAC
and a director of OppenheimerFunds, Inc.
RAYMOND J. KALINOWSKI, Trustee, Age 69
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products training
company).
C. HOWARD KAST, Trustee, Age 76
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
ROBERT M. KIRCHNER, Trustee, 77
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
BRIDGET A. MACASKILL, President and Trustee*, Age 50
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OFIL; Chairman, President and a director of Oppenheimer Millennium
Funds plc (since October 1997); President and a director of other Oppenheimer
funds; Member, Board of Governors, NASD, Inc.; a director of Hillsdown Holdings
plc (a U.K. food company); formerly an Executive Vice President of the Manager,
a director of NASDQ Stock Market, Inc.
NED M. STEEL, Trustee, Age 83
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
JAMES C. SWAIN, Chairman, Chief Executive Officer and Trustee*, Age 65 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager (since
September 1988); formerly President and a director of Centennial, and Chairman
of the Board of SSI.
ANDREW J. DONOHUE, Vice President and Secretary, Age 48
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc.
(since September 1995) and a director of Centennial (since September 1995);
President, General Counsel and a director of Oppenheimer Real Asset Management,
Inc. (since July 1996); General Counsel (since May 1996) and Secretary (since
April 1997) of OAC; Vice President and a director of OFIL and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
CAROL E. WOLF, Vice President and Portfolio Manager, Age 46
Vice President of the Manager and Centennial (since June 1990); an officer of
other Oppenheimer funds.
ARTHUR J. ZIMMER, Vice President and Portfolio Manger, Age 52
Senior Vice President of the Manager (since June 1997); Vice President of
Centennial (since June 1997); an officer of other Oppenheimer funds; formerly
Vice President of the Manager (October 1990-June 1997).
ROBERT J. BISHOP, Assistant Treasurer, Age 40
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
SCOTT T. FARRAR, Assistant Treasurer, Age 34
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
ROBERT G. ZACK, Assistant Secretary, Age 50
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of OFIL and Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds.
- -------------------
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
o Remuneration of Trustees. The officers of the Fund and certain Trustees of
the Fund (Ms. Macaskill and Messrs. Bowen and Swain) who are affiliated with the
Manager receive no salary or fee from the Fund. The compensation from the Fund
was paid during its fiscal year ended July 31, 1998. The compensation from all
the Denver-based Oppenheimer funds includes the Fund and is compensation as a
director, trustee, Managing Partner or member of a committee of the Board during
the calendar year 1997.
Total
Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund OppenheimerFunds(1)
Robert G. Avis $256 $63,501
Trustee
William A. Baker $313 $77,502
Audit and Review
Committee Ex-Officio Member(2)
and Trustee
Charles Conrad, Jr.(3) $291 $72,000
Trustee
Jon Fossel $255 $63,277
Trustee
Sam Freedman $268 $66,501
Audit and Review Committee
Member(2)
and Trustee
Raymond J. Kalinowski $289 $71,561
Audit and Review Committee
Member(2) and Trustee
C. Howard Kast $309 $76,503
Audit and Review Committee
Chairman(2) and Trustee
Robert M. Kirchner (3) $290 $72,000
Trustee
Ned M. Steel $256 $63,501
Trustee
- -------------------------------------
(1) For the 1997 calendar year.
(2) Committee positions effective July 1, 1997.
(3) Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
o Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested Trustees that enables Trustees to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under this plan, the compensation deferred by a Trustee
is periodically adjusted as though an equivalent amount had been invested in
shares of one or more Oppenheimer funds selected by the Trustee. The amount paid
to the Trustee under this plan will be determined based upon the performance of
the selected funds. Deferral of Trustees' fees under this plan will not
materially affect the Fund's assets, liabilities or net income per share. The
plan will not obligate the Fund to retain the services of any Trustee or to pay
any particular amount of compensation to any Trustee. Pursuant to an Order
issued by the Securities and Exchange Commission, the Fund may, without
shareholder approval and not withstanding its fundamental policy restricting
investment in other open-end investment companies, as described in the Fund's
Statement of Additional Information, invest in the funds selected by the Trustee
under the plan for the limited purpose of determining the value of the Trustees'
deferred fee accounts.
o Major Shareholders. As of November 16, 1998, no person owned of record or
was known by the Fund to own beneficially 5% or more of any class of the Fund's
outstanding shares.
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned by certain of the Manager's directors
and officers, some of whom may also serve as officers of the Fund and two of
whom (Ms. Macaskill and Mr. Swain) serve as Trustees of the Fund.
o The Investment Advisory Agreement. The Investment Advisory Agreement
between the Manager and the Fund requires the Manager, at its expense, to
provide the Fund with adequate office space, facilities and equipment, and to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective administration for the Fund, including
the compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy materials
and registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the Investment
Advisory Agreement or by the Distributor under the General Distributor's
Agreement are paid by the Fund. The Investment Advisory Agreement lists examples
of expenses paid by the Fund, the major categories of which relate to interest,
taxes, fees to certain Trustees, legal and audit expenses, custodian and
transfer agent expenses, share issuance costs, certain printing and registration
costs and non-recurring expenses, including litigation costs.
During the fiscal period of January 1, 1996 to July 31, 1996 and the
fiscal years ended July 31, 1997 and July 31, 1998, the fees paid by the Fund to
the Manager were $596,591, $1,286,675 and $1,368,194, respectively.
The Investment Advisory Agreement contains no expense limitation. However,
because of state regulations limiting the fund expenses that previously applied,
the Manager had voluntarily undertaken that the Fund's total expenses in any
fiscal year (including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would not exceed the
most stringent state regulatory limitation applicable to the Fund. Due to
changes in federal securities laws, such state regulations no longer apply and
the Manager's undertaking is therefore inapplicable and has been withdrawn.
During the Fund's last fiscal year, the Fund's expenses did not exceed the most
stringent state regulatory limit and the voluntary undertaking was not invoked.
The Investment Advisory Agreement provides that the Manager is not liable
for any loss sustained by reason of good faith errors or omissions in connection
with matters to which the Investment Advisory Agreement relates, except a loss
resulting by reason of its willful misfeasance, bad faith, gross negligence in
the performance of its duties or reckless disregard for its obligations and
duties thereunder. The Investment Advisory Agreement permits the Manager to act
as investment advisor for any other person, firm or corporation, and to use the
name "Oppenheimer" in connection with other investment companies for which it
may act as investment advisor or general distributor. If the Manager shall no
longer act as investment advisor to the Fund, the right of the Fund to use the
name "Oppenheimer" as part of its name may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the Fund,
the Distributor is the Fund's principal underwriter in the continuous public
offering of the Fund's Class A, Class B and Class C shares but is not obligated
to sell a specific number of shares. Expenses normally attributable to sales,
including advertising and the cost of printing and mailing prospectuses, other
than those furnished to existing shareholders, and other than paid under the
Distribution and Service Plans, are borne by the Distributor. During the Fund's
fiscal year ended July 31, 1998, the contingent deferred sales charges on the
Fund's Class B shares totaled $547,120, all of which was received and retained
by the Distributor. During the Fund's fiscal year ended July 31, 1998, the
contingent deferred sales charges on the Fund's Class C shares totaled $114,479,
all of which was received and retained by the Distributor. For additional
information about distribution of the Fund's shares and the expenses connected
with such activities, please refer to "Distribution and Service Plans," below.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
o Portfolio Transactions. Portfolio decisions are based upon the
recommendations and judgment of the Manager subject to the overall authority of
the Board of Trustees. As most purchases made by the Fund are principal
transactions at net prices, the Fund incurs little or no brokerage costs. The
Fund did not incur any brokerage costs during the fiscal period from January 1,
1996 to July 31, 1996 or the fiscal years ended July 31, 1997 and July 31, 1998.
The Fund deals directly with the selling or purchasing principal or market maker
without incurring charges for the services of a broker on its behalf unless it
is determined that a better price or execution may be obtained by using the
services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked prices.
The Fund seeks to obtain prompt execution of orders at the most favorable
net price. If brokers are used for portfolio transactions, transactions may be
directed to brokers for their execution and research services. The research
services provided by a particular broker may be useful only to one or more of
the advisory accounts of the Manager and its affiliates, and investment research
received for the commissions of those other accounts may be useful both to the
Fund and one or more of such other accounts. Such research, which may be
supplied by a third party at the instance of a broker, includes information and
analyses on particular companies and industries as well as market or economic
trends and portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products and
services. If a research service also assists the Manager in a non-research
capacity (such as bookkeeping or other administrative functions), then only the
percentage or component that provides assistance to the Manager in the
investment decision-making process may be paid in commission dollars.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager, by making available additional views for
consideration and comparisons, and enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase.
No portfolio transactions will be handled by any securities dealer
affiliated with the Manager. The Fund's policy of investing in short-term debt
securities with maturities of less than one year results in high portfolio
turnover and may increase the Fund's transaction costs. However, since brokerage
commissions, if any, are usually small, high turnover does not normally have an
appreciable adverse effect upon the income of the Fund.
Performance of the Fund
o Yield Information. The current yield of each class is determined in
accordance with regulations adopted under the Investment Company Act. Yield is
calculated for a seven day period of time as follows. First, a base period
return is calculated for the seven-day period by determining the net change in
the value of a hypothetical pre-existing account having one share at the
beginning of the seven day period. The change includes dividends declared on the
original share and dividends declared on any shares purchased with dividends on
that share, but such dividends are adjusted to exclude any realized or
unrealized capital gains or losses affecting the dividends declared. Next, the
base period return is multiplied by 365/7 to obtain the current yield to the
nearest hundredth of one percent. The compounded effective yield for a seven-day
period is calculated by (a) adding 1 to the base period return (obtained as
described above), (b) raising the sum to a power equal to 365 divided by 7, and
(c) subtracting 1 from the result. The "current yield" on Class A, Class B and
Class C shares for the seven days ended July 31, 1998 was 4.54%, 3.97% and
3.93%, respectively. The "compounded effective yield" for that period on Class
A, Class B and Class C shares was 4.65%, 4.05% and 4.01%, respectively.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. Since the calculation of yield under either
procedure described above does not take into consideration any realized or
unrealized gains or losses on the Fund's portfolio securities which may affect
dividends, the return on dividends declared during a period may not be the same
on an annualized basis as the yield for that period.
o Other Performance Comparisons. Yield information may be useful to
investors in reviewing the Fund's performance. The Fund may make comparisons
between its yields and that of other investments by citing various indices such
as The Bank Rate Monitor National Index (provided by Bank Rate Monitor(TM)),
which measures the average rate paid on bank money market accounts, NOW accounts
and certificates of deposit by the 100 largest banks and thrift institutions in
various metropolitan areas. However, a number of factors should be considered
before using yield information as a basis for comparison with alternative
investments. An investment in the Fund is not insured. Its yields are not
guaranteed and normally will fluctuate on a daily basis. The yields for any
given past period are not an indication or representation by the Fund of future
yields or rates of return on its shares. The Fund's yields are affected by
portfolio quality, portfolio maturity, the types of instruments held, and the
operating expenses of each class. When comparing the Fund's yields and
investment risk with that of other investments, investors should understand that
certain other investment alternatives, such as certificates of deposit, U.S.
government securities, money market instruments or bank accounts may provide
fixed yields or yields that may vary above a stated minimum, and may be insured
or guaranteed. Certain types of bank accounts may not pay interest when the
balance falls below a specified level and may limit the number of withdrawals by
check per month.
Distribution and Service Plans
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 pursuant to which the Fund compensates the Distributor for its
services in connection with the distribution and/or servicing of the shares of
that class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class. For the Distribution and
Service Plans for Class B and Class C shares, that vote was cast by the Manager
as the then-sole initial holder of such shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in their
sole discretion from time to time may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform. The Distributor and the Manager may, in
their sole discretion, increase or decrease the amount of payments they make to
Recipients from their own resources.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding shares of that class.
No Plan may be amended to increase materially the amount of payments to be made
unless such amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically convert
into Class A shares after six years, the Fund is required by a Securities and
Exchange Commission rule to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to the Class A Plan that would materially
increase payments under the Class A Plan. Such approval must be by a "majority"
of the Class A and Class B shares (as defined in the Investment Company Act),
voting separately by class. All material amendments must be approved by the
Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly on
the amount of all payments made pursuant to each Plan, the purpose for which the
payments were made and the services rendered in connection with the distribution
of the Fund's shares. Those reports will be subject to the review and approval
of the Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination of
those Trustees of the Fund who are not "interested persons" of the Fund is
committed to the discretion of the Independent Trustees. This does not prevent
the involvement of others in such selection and nomination if the final decision
on any such selection or nomination is approved by a majority of such
Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any quarter
if the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
The Board of Trustees has set the service fee and the asset-based sales charge
at the maximum rate and set no minimum amount.
Any unreimbursed expenses incurred by the Distributor with respect to
Class A shares for any fiscal year may not be recovered in later periods.
Payments received by the Distributor under the Plan for Class A shares will not
be used to pay any interest expense, carrying charges, or other financial costs,
or allocation of overhead by the Distributor.
Service fee payments made under the Class A Plan for the fiscal year ended
July 31, 1998 totaled $367,827 of which $92,868 was paid to MML Investor
Services, Inc., an affiliate of the Distributor. Asset-based sales charge
payments made under the Class B Plan and Class C Plan during the fiscal year
ended July 31, 1998 totaled $547,120 and $114,479, respectively.
Currently, the service fee paid on Class B and Class C shares is set at
zero. If service fee payments are paid in the future, the Class B and Class C
Plans allow the service fee payment to be paid by the Distributor to Recipients
in advance for the first year Class B and Class C shares are outstanding, and
thereafter on a quarterly basis, as described in the Prospectus. Any advance
service fee payment is based on the net asset value of shares sold. An exchange
of shares does not entitle the Recipient to an advance service fee payment. In
the event Class B and Class C shares are redeemed during the first year such
shares are outstanding, the Recipient would be obligated to repay a pro rata
portion of such advance payment to the Distributor.
A minimum holding period may be established from time to time under each
Plan by the Board. The Board has set no minimum holding period under any Plan.
All payments under the Plans are subject to the limitations imposed by the
Conduct Rules of the National Association of Securities Dealers, Inc. on
payments of asset-based sales charges and service fees.
If the Fund terminates either the Class B or Class C Plan, the Trustees may
allow the Fund to continue payments of the service fee and asset-based sales
charge to the Distributor for distributing shares before the Plan terminated.
The Class B and Class C Plans enable the Distributor to offer Class B and Class
C shares for purchase under certain arrangements as described in the Prospectus
and to offer an exchange privilege between Class B and Class C shares of the
Fund and Class B and Class C shares of other Oppenheimer funds, respectively,
without assessing a contingent deferred sales charge at the time of purchase or
exchange. The asset-based sales charge paid to the Distributor by the Fund and
the payment of the contingent deferred sales charges are intended to compensate
the Distributor for its activities related to the offering of Class B and Class
C shares of Oppenheimer funds. Such payments may also be used to pay for the
following expenses in connection with the distribution of Class B and Class C
shares of Oppenheimer funds: (i) financing the advance of any service fee
payment to Recipients, (ii) compensation and expenses of personnel employed by
the Distributor to support distribution of shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those furnished to current
shareholders) and state "blue sky" registration fees.
The Distributor may enter into Supplemental Distribution Assistance
Agreements (the "Agreements") under the Class A Plan with selected dealers
distributing shares of the Fund, Centennial New York Tax Exempt Trust,
Centennial California Tax Exempt Trust, Centennial Government Trust, Centennial
Tax Exempt Trust and Centennial America Fund, L.P. Quarterly payments by the
Distributor (which are not a Fund expense) will range from 0.10% to 0.30%,
annually, of the average net asset value of Class A shares of the
above-mentioned funds owned during the quarter beneficially or of record by the
dealer or its customers. However, no payment shall be made to any dealer for any
quarter during which the average value of Class A shares of the above-mentioned
funds' shares owned during that quarter by the dealer or its customers is less
than $5 million.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. As stated
in the Prospectus, Class B and Class C shares of the Fund may only be acquired
by exchange of Class B and Class C shares, respectively, of other Oppenheimer
funds or directly through the Oppenheimer prototype 401(k) plan, or for Class B
shares, pursuant to Asset Builder Plans. Investors should understand that the
purpose and function of the deferred sales charge and asset-based sales charge
with respect to Class B and Class C shares are the same as those of the initial
sales charge with respect to Class A shares of Oppenheimer funds other than the
money market funds. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different compensation with
respect to one class of shares than the other. The Distributor will not accept
any exchange order for $500,000 or more of Class B shares or $1 million or more
of Class C shares on behalf of a single investor (not including dealer "street
name" or omnibus accounts) because generally it will be more advantageous for
that investor to purchase Class A shares of the other Oppenheimer funds instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on Class B and Class C shares will be reduced
by incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of a private letter ruling from the Internal Revenue
Service, or an opinion of counsel or tax advisor, to the effect that the
conversion of Class B shares does not constitute a taxable event for the holder
under Federal income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in which event no
further conversions of Class B shares would occur while such suspension remained
in effect. Although Class B shares could then be exchanged for Class A shares on
the basis of relative net asset value of the two classes, without the imposition
of a sales charge or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to be subject to
the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to any
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's total net assets, and
then equally to each outstanding share within a given class. These general
expenses include (i) management fees, (ii) legal, bookkeeping and audit fees,
(iii) printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses, (vi)
share issuance costs, (vii) organization and start-up costs, (viii) interest,
taxes and any brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to a class are
allocated equally to each outstanding share within that class. Such expenses
include (i) Distribution and/or Service Plan fees, (ii) transfer and shareholder
servicing agent fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per share of
Class A, Class B and Class C shares of the Fund are determined as of the close
of The New York Stock Exchange (the "Exchange") on each day that the Exchange is
open by dividing the value of the Fund's net assets attributable to that class
by the total number of shares outstanding. The Exchange normally closes at 4:00
P.M., New York time, but may close earlier on some days (for example, in case of
weather emergencies or on days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states that it will
close New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
It may also close on other days.
The Fund will seek to maintain a net asset value of $1.00 per share for
purchases and redemptions. There can be no assurance that the Fund will do so.
The Fund operates under Rule 2a-7, pursuant to which the Fund may use the
amortized cost method of valuing its shares. The fund's board of Trustees has
adopted procedures for that purpose. The amortized cost method values a security
initially at its cost and thereafter assumes a constant amortization of any
premium or accretion of any discount, regardless of the impact of fluctuating
interest rates on the market value of the security. This method does not take
into account unrealized capital gains or losses.
The Fund's Board of Trustees has established procedures intended to
stabilize the Fund's net asset value at $1.00 per share. If the Fund's net asset
value per share were to deviate from $1.00 by more than 0.5%, Rule 2a-7 requires
the Board promptly to consider what action, if any, should be taken. If the
Trustees find that the extent of any such deviation may result in material
dilution or other unfair effects on shareholders, the Board will take whatever
steps it considers appropriate to eliminate or reduce such dilution or unfair
effects, including, without limitation, selling portfolio securities prior to
maturity, shortening the average portfolio maturity, withholding or reducing
dividends, reducing the outstanding number of Fund shares without monetary
consideration, or calculating net asset value per share by using available
market quotations.
As long as the Fund uses Rule 2a-7, the Fund must abide by certain
conditions described in the Prospectus which limit the maturity of securities
the Fund buys. Under Rule 2a-7, the maturity of an instrument is generally
considered to be its stated maturity (or in the case of an instrument called for
redemption, the date on which the redemption payment must be made), with special
exceptions for certain variable rate demand and floating rate instruments.
Repurchase agreements and securities loan agreements are, in general, treated as
having a maturity equal to the period scheduled until repurchase or return, or
if subject to demand, equal to the notice period.
While amortized cost method provides certainty in valuation, there may be
periods during which the value of an instrument, as determined by amortized
cost, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of the Fund may tend to be lower (and net investment income and daily
dividends higher) than market prices or estimates of market prices for its
portfolio. Thus, if the use of amortized cost by the funds resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values, and existing investors in
the Fund would receive less investment income than if the Fund were priced at
market value. Conversely, during periods of rising interest rates, the daily
yield on Fund shares will tend to be higher and its aggregate value lower than
that of a portfolio priced at market value. A prospective investor would receive
a lower yield than from an investment in a portfolio priced at market value,
while existing investors in the Fund would receive more investment income than
if the Fund were priced at market value.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House transfer to
buy shares. Dividends will begin to accrue on shares purchased by the proceeds
of ACH transfers on the business day the Fund receives Federal Funds for the
purchase through the ACH system before the close of The New York Stock Exchange.
The Exchange normally closes at 4:00 P.M., but may close earlier on certain
days. If Federal Funds are received on a business day after the close of the
Exchange, the shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are normally received
by the Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting from
delays in ACH transmissions.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described under
"Checkwriting" in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of the Fund to use those accounts for monthly automatic
purchases of shares of up to four other Oppenheimer funds. If you make payments
from your bank account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor
nor the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission. The foregoing
discussion does not apply to Asset Builder Plans in Class B shares of the Fund.
Investors who wish to purchase Class B shares of other Oppenheimer funds
by dollar-cost averaging may do so by establishing an Asset Builder Plan in
Class B shares of the Fund and directing that the entire amount invested in
Class B shares of the Fund be reinvested in Class B shares of other Oppenheimer
funds over a period that may not exceed 24 months. Investors who establish Asset
Builder Plans may purchase Class B shares of the Fund directly. The minimum
initial investment for Class B Asset Builder Plans is $5,000 and the maximum
initial investment is $500,000. Any redemption of Class B shares of the Fund or
any other Oppenheimer fund within 6 years of investment may be subject to a
contingent deferred sales charge, as further described in the Fund's Prospectus.
There are sales charges applicable to the purchase of certain Oppenheimer
funds. An application should be obtained from the Distributor, completed and
returned, and a prospectus of the selected fund(s) should be obtained from the
Distributor or your financial advisor before initiating Asset Builder payments.
The amount of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer Agent. A
reasonable period (approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves the right to
amend, suspend, or discontinue offering such plans at any time without prior
notice.
o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-Distributor and include
the following:
Limited Term New York Municipal Fund
Oppenheimer Bond Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer California Municipal Fund
Oppenheimer Champion Income Fund
Oppenheimer Convertible Securities Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer MidCap Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Rochester Fund Municipals
the following "Money Market Funds":
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below supplements the terms and conditions for redemptions set forth
in the Prospectus.
o Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. This
enables the shareholder to continue receiving dividends on those shares until
the check is presented to the Fund. Checks may not be presented for payment at
the offices of the Bank or the Fund's Custodian. This limitation does not affect
the use of checks for the payment of bills or to obtain cash at other banks. The
Fund reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
By choosing the Checkwriting privilege, whether you do so by signing the
Account Application or by completing a Checkwriting card, the individuals
signing (1) represent that they are either the registered owner(s) of the shares
of the Fund, or are an officer, general partner, trustee or other fiduciary or
agent, as applicable, duly authorized to act on behalf of such registered
owner(s); (2) authorize the Fund, its Transfer Agent and any bank through which
the Fund's drafts ("checks") are payable (the "Bank"), to pay all checks drawn
on the Fund account of such person(s) and to effect a redemption of sufficient
shares in that account to cover payment of such checks; (3) specifically
acknowledge(s) that if you choose to permit a single signature on checks drawn
against joint accounts, or accounts for corporations, partnerships, trusts or
other entities, the signature of any one signatory on a check will be sufficient
to authorize payment of that check and redemption from an account even if that
account is registered in the names of more than one person or even if more than
one authorized signature appears on the Checkwriting card or the Application, as
applicable; and (4) understand(s) that the Checkwriting privilege may be
terminated or amended at any time by the Fund and/or the Bank and neither shall
incur any liability for such amendment or termination or for effecting
redemptions to pay checks reasonably believed to be genuine, or for returning or
not paying checks which have not been accepted for any reason.
o Selling Shares by Wire. The wire of redemptions proceeds may be delayed
if the Fund's custodian bank is not open for business on a day when the Fund
would normally authorize the wire to be made, which is usually the Fund's next
regular business day following the redemption. In those circumstances, the wire
will not be transmitted until the next bank business day on which the Fund is
open for business. No dividends will be paid on the proceeds of redeemed shares
awaiting transfer by wire.
o Payments "In Kind." The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, if the Board of
Trustees of the Fund determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash, the Fund may pay the redemption
proceeds in whole or in part by a distribution "in kind" of securities from the
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the Securities and Exchange Commission. The Fund has elected to be governed by
Rule 18f-1 under the Investment Company Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net assets of the Fund during any 90-day period for any one shareholder. If
shares are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing securities
used to make redemptions in kind will be the same as the method the Fund uses to
value it portfolio securities described above under "Determination of Net Asset
Value Per Share" and such valuation will be made as of the time the redemption
price is determined.
o Involuntary Redemptions. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of such shares is less than $200 or such lesser amount
as the Board may fix. The Board of Trustees will not cause the involuntary
redemption of shares in an account if the aggregate net asset value of such
shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or may set
requirements to increase the investment, and other terms and conditions so that
the shares would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares of other
Oppenheimer funds that were purchased subject to an initial sales charge, or
shares on which a contingent deferred sales charge was paid, or (ii) Class B
shares that were subject to the Class B contingent deferred sales charge when
redeemed. It does not apply to Class C shares. The reinvestment may be made
without sales charge only in Class A shares of the Fund or any of the other
Oppenheimer funds into which shares of the Fund are exchangeable as described
below, at the net asset value next computed after receipt by the Transfer Agent
of the reinvestment order. The shareholder must ask the Distributor for such
privilege at the time of reinvestment. Any capital gain that was realized when
the shares were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending on the
timing and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds within 90
days of payment of the sales charge, the shareholder's basis in the shares of
the Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B or Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds- sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants (other than self-employed
persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension, profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under those plans.
The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding requirements
under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer
Agent) must be submitted to the Transfer Agent with the distribution request, or
the distribution may be delayed. Unless the shareholder has provided the
Transfer Agent with a certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, the
Trustee and the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the receipt of an order
placed by such dealer or broker, except that if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customer prior
to the time the Exchange closes (normally, that is 4:00 P.M., but may be earlier
on some days) and the order was transmitted to and received by the Distributor
prior to its close of business that day (normally 5:00 P.M.). Ordinarily, for
accounts redeemed by a broker-dealer under this procedure, payment will be made
within three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in proper form, with
the signature(s) of the registered owners guaranteed on the redemption documents
as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check, are payable to all shareholders of record and
sent to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of a payment on the date requested and reserves the right to
amend, suspend or discontinue offering such plans at any time without prior
notice. Shares are normally redeemed pursuant to an Automatic Withdrawal Plan
three business days before the date you select in the Account Application. If a
contingent deferred sales charge applies to the redemption, the amount of the
check or payment will be reduced accordingly. Class B shareholders should not
establish withdrawal plans and Class C shareholders should not establish
withdrawal plans that would require the redemption of shares held less than 12
months, because of the imposition of the contingent deferred sales charge on
such withdrawals (except where the contingent deferred sales charge is waived).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below as
well as in the Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments will
automatically apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic Withdrawal Plan
(the "Plan") as agent for the investor (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. The Transfer
Agent and the Fund shall incur no liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased for and held
under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated shares needed
to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of an Oppenheimer fund
having more than one class of shares may be exchanged only for shares of the
same class of other Oppenheimer funds. Shares of Oppenheimer funds that have a
single class without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, B and C shares, except
Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust, Centennial
Tax Exempt Trust, Centennial Government Trust, Centennial New York Tax Exempt
Trust and Centennial America Fund, L.P., which only offer Class A shares, and
Oppenheimer Main Street California Municipal Fund, which only offers Class A and
Class B shares. A current list of funds showing which funds offer which classes
may be obtained by calling the Distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of other Money Market Funds. Shares of a Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). Class A shares of this Fund acquired by reinvestment of dividends
or distributions from any other of the Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made with the
Distributor may be exchanged at net asset value for shares of any of the
Oppenheimer funds. Shares of this Fund acquired by reinvested dividends and
distributions may be exchanged for shares of other Oppenheimer funds upon
payment of the sales charge, if applicable, or may be used to purchase shares
subject to a contingent deferred sales charge, if applicable. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares. The Class B contingent deferred sales charge of 5% is imposed
on Class B shares redeemed within one year of the initial purchase of the
exchanged Class B shares, declining to 4% during the second year, 3% in the
third and fourth years, 2% in the fifth year, 1% in the sixth year, and
eliminated thereafter. The Class C contingent deferred sales charge of 1% is
imposed on Class C shares redeemed within 12 months of the initial purchase of
the exchanged Class C shares.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Convertible Securities Fund are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or the Fund that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any Oppenheimer fund
into Class M shares are permitted.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or Class C contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
class must specify whether they intend to exchange Class A, Class B or Class C
shares.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For Federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege" above includes
discussion of some of the tax consequences of reinvestment of redemption
proceeds in such cases. The Fund, the Distributor, and the Transfer Agent are
unable to provide investment, tax or legal advice to a shareholder in connection
with an exchange request or any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Under the
Internal Revenue Code, by December 31 each year, the Fund must distribute 98% of
its taxable investment income earned from January 1 through December 31 of that
year and 98% of its capital gains realized in the period from November 1 of the
prior year through October 31 of the current year, or else the Fund must pay an
excise tax on the amounts not distributed. While it is presently anticipated
that the Fund will meet those requirements, the Fund's Board and the Manager
might determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the required levels
and to pay the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to shareholders.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of this Fund as promptly as possible
after the return of such checks to the Transfer Agent, in order to enable the
investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "The Oppenheimer Funds"
above. To elect this option, a shareholder must notify the Transfer Agent in
writing and either have an existing account in the fund selected for
reinvestment or must obtain a prospectus for that fund and an application from
the Distributor to establish an account. The investment in shares of the
selected fund will be made in the case of Class B or Class C shares at the net
asset value per share, and in the case of Class A shares, will be made at the
public offering price (i.e. net asset value plus any sales charge that applies)
in effect at the close of business on the payable date of the dividend or
distribution. Dividends and/or distributions from shares of other Oppenheimer
funds may be invested in shares of this Fund at net asset value.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. The Manager has represented to the Fund that the banking relationships
between the Manager and the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the Custodian in
excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for the Manager and certain other funds advised by the Manager and its
affiliates.
-2-
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Cash Reserves:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Cash Reserves as of July 31, 1998,
the related statement of operations for the year then ended, the statements of
changes in net assets for the years ended July 31, 1998 and 1997, and the
financial highlights for the period January 1, 1993, to July 31, 1998. 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 generally accepted
auditing standards. 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 at July 31, 1998, 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, such financial statements and financial
highlights present fairly, in all material respects, the financial position of
Oppenheimer Cash Reserves at July 31, 1998, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Denver, Colorado
August 21, 1998
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
=============================================================================================
<S> <C> <C>
Certificates of Deposit--2.3%
- ---------------------------------------------------------------------------------------------
Deutsche Bank AG, 5.65%, 1/22/99 $ 3,000,000 $ 3,000,000
- ---------------------------------------------------------------------------------------------
Societe Generale, 5.87%, 9/30/98 4,000,000 4,000,121
-----------
Total Certificates of Deposit 7,000,121
=============================================================================================
Direct Bank Obligations--2.6%
- ---------------------------------------------------------------------------------------------
Abbey National North America Corp., 5.47%, 10/30/98 3,000,000 2,958,975
- ---------------------------------------------------------------------------------------------
National Westminster Bank of Canada, 5.523%, 11/2/98 5,000,000 4,928,661
-----------
Total Direct Bank Obligations 7,887,636
=============================================================================================
Letters of Credit--15.6%
- ---------------------------------------------------------------------------------------------
ABN Amro Bank PLC, guaranteeing commercial paper of Formosa
Plastics Corp., USA, Series A, 5.52%, 9/18/98 4,200,000 4,169,088
- ---------------------------------------------------------------------------------------------
Barclays Bank PLC, guaranteeing commercial paper of:
Banca Serfin SA, Institucion de Banca Multiple, Group Financiero
Serfin, 5.42%, 11/23/98 4,000,000 3,931,220
Banco de Credito Nacionale, SA, Series B, 5.42%, 8/11/98 8,000,000 7,987,956
Nacionale Financiera, SNC, 5.525%, 11/19/98 2,500,000 2,457,795
- ---------------------------------------------------------------------------------------------
Bayerische Vereinsbank AG, guaranteeing commercial paper of:
Banco de Galicia y Buenos Aires SA, 5.47%, 9/18/98 3,000,000 2,978,120
Unibanco-Unia de Bancos Brasilieros SA, Series C, 5.52%, 10/19/98 3,000,000 2,963,660
- ---------------------------------------------------------------------------------------------
Credit Suisse, guaranteeing commercial paper of:
Daewoo International (America) Corp., 5.52%, 12/2/98 3,000,000 2,943,420
Minmetals Capitals & Securities, Inc., 5.40%, 8/24/98 10,800,000 10,762,516
- ---------------------------------------------------------------------------------------------
Societe Generale, guaranteeing commercial paper of PEMEX
Capital, Inc., Series A, 5.52%, 10/2/98 5,000,000 4,952,467
- ---------------------------------------------------------------------------------------------
Swiss Bank Corp., guaranteeing commercial paper of PEMEX
Capital, Inc., 5.52%, 9/18/98 5,000,000 4,963,200
-----------
Total Letters of Credit 48,109,442
</TABLE>
8 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
=========================================================================================
<S> <C> <C>
Short-Term Notes--75.7%
- -----------------------------------------------------------------------------------------
Asset-Backed--14.1%
Asset Backed Capital Finance, Inc.:
5.68%, 9/23/98(1)(2) $ 2,500,000 $ 2,500,047
5.73%, 8/24/98(1)(2) 4,000,000 4,000,000
- -----------------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers, Series A, 5.47%, 9/1/98 3,500,000 3,483,514
- -----------------------------------------------------------------------------------------
CXC, Inc.:
5.50%, 12/16/98(3) 5,000,000 4,895,347
5.515%, 12/7/98(3) 5,000,000 4,901,956
5.523%, 11/16/98(3) 3,000,000 2,950,753
- -----------------------------------------------------------------------------------------
Falcon Asset Securitization Corp., 5.70%, 8/4/98(3) 5,000,000 4,997,625
- -----------------------------------------------------------------------------------------
Preferred Receivables Funding Corp., 5.49%, 11/23/98(3) 3,000,000 2,947,845
- -----------------------------------------------------------------------------------------
RACERS, Series 1998-MM-3-5, 5.563%, 8/31/98(1)(2) 5,000,000 5,000,000
- -----------------------------------------------------------------------------------------
Sigma Finance, Inc.:
5.44%, 10/15/98(3) 3,000,000 2,966,000
5.44%, 9/10/98(3) 5,000,000 4,969,778
-----------
43,612,865
- -----------------------------------------------------------------------------------------
Beverages--3.5%
Coca-Cola Enterprises, Inc.:
5.48%, 10/23/98(3) 5,000,000 4,936,828
5.48%, 10/28/98(3) 2,000,000 1,973,209
5.50%, 12/21/98(3) 4,000,000 3,913,222
-----------
10,823,259
- -----------------------------------------------------------------------------------------
Broker/Dealers--21.2%
Bear Stearns Cos., Inc.:
5.45%, 10/22/98 4,000,000 3,950,344
5.47%, 10/28/98 5,000,000 4,933,144
5.505%, 12/17/98 5,000,000 4,894,487
- -----------------------------------------------------------------------------------------
Goldman Sachs Group, LP, 5.51%, 9/24/98 5,000,000 4,958,675
- -----------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 5.52%, 12/8/98 5,000,000 4,901,100
- -----------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.:
5.43%, 10/14/98 4,000,000 3,955,353
5.49%, 11/6/98 5,000,000 4,926,038
5.607%, 10/8/98(1) 3,000,000 3,000,000
- -----------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 5.69%, 8/3/98(1) 10,000,000 10,000,000
- -----------------------------------------------------------------------------------------
Republic New York Securities Corp., 5.94%, 8/3/98(1) 8,000,000 8,000,000
- -----------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc.:
5.50%, 11/16/98 7,000,000 6,885,569
5.717%, 10/20/98(1) 5,000,000 5,000,000
-----------
65,404,710
</TABLE>
9 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Finance--9.2%
CIT Group Holdings, Inc., 5.50%, 9/14/98 $ 5,000,000 $ 4,966,389
- ----------------------------------------------------------------------------------------
Countrywide Home Loans:
5.54%, 8/25/98 4,700,000 4,682,641
5.60%, 8/21/98 3,500,000 3,489,111
- ----------------------------------------------------------------------------------------
FINOVA Capital Corp.:
5.67%, 9/11/98 4,000,000 3,974,808
5.55%, 11/13/98 4,000,000 3,935,867
- ----------------------------------------------------------------------------------------
Heller Financial, Inc., 5.58%, 11/30/98 7,500,000 7,359,338
-----------
28,408,154
- ----------------------------------------------------------------------------------------
Consumer Finance--6.5%
Beneficial Corp.:
5.505%, 9/23/98 5,000,000 4,959,477
5.55%, 8/6/98 5,000,000 4,996,146
- ----------------------------------------------------------------------------------------
Island Finance Puerto Rico, Inc.:
5.51%, 9/24/98 5,000,000 4,958,675
5.57%, 8/4/98 5,000,000 4,997,679
-----------
19,911,977
- ----------------------------------------------------------------------------------------
Diversified Financial--3.2%
General Motors Acceptance Corp., 5.50%, 2/19/99 5,000,000 4,845,694
- ----------------------------------------------------------------------------------------
Household Finance Corp., 5.637%, 9/9/98(1) 5,000,000 5,000,000
-----------
9,845,694
- ----------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.6%
Baxter International, Inc., 5.56%, 8/5/98(3) 5,000,000 4,996,911
- ----------------------------------------------------------------------------------------
Insurance--10.4%
AIG Life Insurance Co., 5.668%, 8/3/98(1)(2) 7,000,000 7,000,000
- ----------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Co., 5.667%, 8/3/98(1)(2) 5,000,000 5,000,000
- ----------------------------------------------------------------------------------------
Protective Life Insurance Co., 5.698%, 8/3/98(1) 5,000,000 5,000,000
- ----------------------------------------------------------------------------------------
Security Benefit Life Insurance Co., 5.686%, 8/15/98(1) 10,000,000 10,000,000
- ----------------------------------------------------------------------------------------
TransAmerica Life Insurance & Annuity Co., 5.668%, 8/3/98(1) 5,000,000 5,000,000
-----------
32,000,000
- ----------------------------------------------------------------------------------------
Leasing & Factoring--2.4%
American Honda Finance Corp.:
5.51%, 12/4/98 2,550,000 2,501,214
5.687%, 10/20/98(1)(3) 5,000,000 5,000,000
-----------
7,501,214
</TABLE>
10 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Nondurable Household Goods--2.0%
Newell Co., 5.70%, 8/3/98(3) $ 6,200,000 $ 6,198,037
- ----------------------------------------------------------------------------------------
Oil-Integrated--1.6%
Fina Oil & Chemical Co., 5.52%, 8/14/98(3) 5,000,000 4,990,033
------------
Total Short-Term Notes 233,692,854
========================================================================================
Foreign Government Obligations--1.6%
- ----------------------------------------------------------------------------------------
Comision Federal de Electricidad, Series A, 5.56%, 8/25/98 5,000,000 4,981,467
- ----------------------------------------------------------------------------------------
Total Investments, at Value 97.8% 301,671,520
- ----------------------------------------------------------------------------------------
Other Assets Net of Liabilities 2.2 6,911,136
----------- ------------
Net Assets 100.0% $308,582,656
=========== ============
</TABLE>
Short-term notes, direct bank obligations and letters of credit are generally
traded on a discount basis; the interest rate is the discount rate received by
the Fund at the time of purchase. Other securities normally bear interest at the
rates shown.
(1) Floating or variable rate obligation. The interest rate, which is based on
specific, or an index of, market interest rates, is subject to change
periodically and is the effective rate on July 31, 1998. This instrument may
also have a demand feature which allows, on up to 30 days' notice, the recovery
of principal at any time, or at specified intervals not exceeding one year.
Maturity date shown represents effective maturity based on variable rate and, if
applicable, demand feature.
(2) Represents a restricted security which is considered illiquid, by virtue of
the absence of a readily available market or because of legal or contractual
restrictions on resale. Such securities amount to $23,500,047, or 7.62% of the
Fund's net assets. The Fund may not invest more than 10% of its net assets
(determined at the time of purchase) in illiquid securities.
(3) Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $60,637,544, or 19.65% 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.
11 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities July 31, 1998
- --------------------------------------------------------------------------------
===============================================================================
Assets
Investments, at value $ 301,671,520
- -------------------------------------------------------------------------------
Cash 621,237
- --------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 8,158,051
Interest 642,966
- -------------------------------------------------------------------------------
Other 32,246
-------------
Total assets 311,126,020
===============================================================================
Liabilities Payables and other liabilities:
Shares of beneficial interest redeemed 1,860,246
Dividends 417,265
Transfer and shareholder servicing agent fees 170,955
Distribution and service plan fees 31,002
Other 63,896
-------------
Total liabilities 2,543,364
===============================================================================
Net Assets $ 308,582,656
=============
===============================================================================
Composition of Net Assets
Paid-in capital $ 308,587,651
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (4,995)
-------------
Net assets $ 308,582,656
=============
12 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $210,476,996 and 210,538,153 shares of
beneficial interest outstanding) $1.00
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $80,004,517 and
80,003,530 shares of beneficial interest outstanding) $1.00
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $18,101,143 and
18,100,638 shares of beneficial interest outstanding) $1.00
See accompanying Notes to Financial Statements.
13 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended July 31, 1998
- --------------------------------------------------------------------------------
================================================================================
Investment Income
Interest $15,850,050
================================================================================
Expenses
Management fees--Note 3 1,368,194
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 3 1,186,442
- --------------------------------------------------------------------------------
Distribution and service plan fees--Note 3:
Class A 367,827
Class B 547,120
Class C 114,479
- --------------------------------------------------------------------------------
Shareholder reports 214,706
- --------------------------------------------------------------------------------
Registration and filing fees 142,371
- --------------------------------------------------------------------------------
Custodian fees and expenses 28,567
- --------------------------------------------------------------------------------
Legal, auditing and other professional fees 15,602
- --------------------------------------------------------------------------------
Insurance expenses 4,845
- --------------------------------------------------------------------------------
Trustees' fees and expenses 2,527
- --------------------------------------------------------------------------------
Other 8,659
-----------
Total expenses 4,001,339
================================================================================
Net Investment Income 11,848,711
================================================================================
Net Realized Gain on Investments 522
================================================================================
Net Increase in Net Assets Resulting from Operations $11,849,233
===========
See accompanying Notes to Financial Statements.
14 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended July 31,
1998 1997
=====================================================================================
<S> <C> <C>
Operations
Net investment income $ 11,848,711 $ 10,745,370
- -------------------------------------------------------------------------------------
Net realized gain 522 2,265
- -------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 11,849,233 10,747,635
=====================================================================================
Dividends and Distributions to Shareholders
Class A (8,374,810) (7,785,359)
Class B (2,871,927) (2,546,870)
Class C (601,974) (413,141)
=====================================================================================
Beneficial Interest Transactions Net increase (decrease) in net assets resulting
from beneficial interest transactions--Note 2:
Class A 37,506,804 2,937,563
Class B 25,995,434 (31,565,083)
Class C 8,976,542 (2,592,039)
=====================================================================================
Net Assets
Total increase (decrease) 72,479,302 (31,217,294)
- -------------------------------------------------------------------------------------
Beginning of period 236,103,354 267,320,648
------------- -------------
End of period $ 308,582,656 $ 236,103,354
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------
Year Ended July 31,
1998 1997 1996(2)
=============================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .04 .04 .03
Dividends and distributions to shareholders (.04) (.04) (.03)
- -----------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
===== ===== =====
=============================================================================
Total Return(5) 4.61% 4.41% 2.68%
=============================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $210,477 $172,970 $170,031
- -----------------------------------------------------------------------------
Average net assets (in thousands) $186,795 $179,948 $149,889
- -----------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.48% 4.33% 4.47%(6)
Expenses 1.28% 1.29% 1.06%(6)
</TABLE>
(1) For the period from December 1, 1993 (inception of offering) to December 31,
1993.
(2) For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
(3) For the period from August 17, 1993 (inception of offering) to December 31,
1993. Oppenheimer Cash Reserves
(4) Less than $.005 per share.
16 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B
------------------------------ -----------------------------
Year Ended December 31, Year Ended July 31,
1995 1994 1993 1998 1997 1996(2)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .05 .03 .02 .04 .04 .02
Dividends and distributions to shareholders (.05) (.03) (.02) (.04) (.04) (.02)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
==============================================================================================================
Total Return(5) 4.84% 3.22% 2.05% 3.98% 3.82% 2.35%
==============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $148,529 $99,361 $70,924 $80,005 $54,009 $85,573
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $105,349 $87,908 $76,910 $73,003 $67,333 $49,226
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.71% 3.25% 1.99% 3.93% 3.78% 3.91%(6)
Expenses 1.36% 1.32% 1.55% 1.83% 1.84% 1.61%(6)
</TABLE>
(5) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total returns
reflect changes in net investment income only.
(6) Annualized.
17 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Class B (continued)
-----------------------------
Year Ended December 31,
1995 1994 1993(3)
==========================================================================
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00
- --------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .04 .03 --(4)
Dividends and distributions to shareholders (.04) (.03) --(4)
- --------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
===== ===== =====
==========================================================================
Total Return(5) 4.26% 2.54% 0.56%
==========================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $37,378 $46,803 $628
- --------------------------------------------------------------------------
Average net assets (in thousands) $35,360 $21,262 $454
- --------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.15% 3.05% 1.49%(6)
Expenses 1.92% 1.89% 2.12%(6)
(1) For the period from December 1, 1993 (inception of offering) to December 31,
1993.
(2) For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
(3) For the period from August 17, 1993 (inception of offering) to December 31,
1993.
(4) Less than $.005 per share.
18 Oppenheimer Cash Reserves
<PAGE>
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------
Year Ended July 31, Year Ended December 31,
1998 1997 1996(2) 1995 1994 1993(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .04 .04 .02 .04 .02 --(4)
Dividends and distributions to shareholders (.04) (.04) (.02) (.04) (.02) --(4)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
==============================================================================================================
Total Return(5) 3.99% 3.84% 2.35% 4.21% 2.51% 0.14%
==============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $18,101 $9,125 $11,717 $5,024 $5,604 $1
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $15,297 $10,930 $6,333 $6,040 $2,107 $1
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.94% 3.78% 3.91%(6) 4.12% 3.19% 1.18%(6)
Expenses 1.83% 1.85% 1.61%(6) 1.97% 1.90% 2.35%(6)
</TABLE>
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total returns
reflect changes in net investment income only.
6. Annualized.
See accompanying Notes to Financial Statements.
19 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Cash Reserves (the Fund) is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The Fund's investment objective is to seek the maximum current income
that is consistent with stability of principal by investing in "money market"
securities meeting specified quality standards. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class
C shares. Class B and Class C shares may be subject to a contingent deferred
sales charge. All classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution and/or
service plan, expenses directly attributable to that class and exclusive voting
rights with respect to matters affecting that class. 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.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued on the basis of amortized
cost, which approximates market value.
- --------------------------------------------------------------------------------
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 to shareholders. Therefore, no federal
income or excise tax provision is required.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly. To
effect its policy of maintaining a net asset value of $1.00 per share, the Fund
may withhold dividends or make distributions of net realized gains.
20 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Realized gains and losses on investments 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. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended July 31, 1998 Year Ended July 31, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 724,810,258 $ 724,810,258 539,202,800 $ 539,202,800
Dividends and distributions
reinvested 7,669,695 7,669,695 7,258,877 7,258,877
Redeemed (694,973,149) (694,973,149) (543,524,114) (543,524,114)
------------ ------------- ------------ -------------
Net increase 37,506,804 $ 37,506,804 2,937,563 $ 2,937,563
============ ============= ============ =============
- ------------------------------------------------------------------------------------------
Class B:
Sold 298,115,568 $ 298,115,568 228,968,814 $ 228,968,814
Dividends and distributions
reinvested 2,362,655 2,362,655 2,072,482 2,072,482
Redeemed (274,482,789) (274,482,789) (262,606,379) (262,606,379)
------------ ------------- ------------ -------------
Net increase (decrease) 25,995,434 $ 25,995,434 (31,565,083) $ (31,565,083)
============ ============= ============ =============
- ------------------------------------------------------------------------------------------
Class C:
Sold 166,744,272 $ 166,744,272 72,171,736 $ 72,171,736
Dividends and distributions
reinvested 490,146 490,146 343,761 343,761
Redeemed (158,257,876) (158,257,876) (75,107,536) (75,107,536)
------------ ------------- ------------ -------------
Net increase (decrease) 8,976,542 $ 8,976,542 (2,592,039) $ (2,592,039)
============ ============= ============ =============
</TABLE>
21 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
3. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.50% on the first
$250 million of average annual net assets, 0.475% of the next $250 million,
0.45% of the next $250 million, 0.425% of the next $250 million and 0.40% of
average annual net assets in excess of $1 billion.
Sales charges advanced to broker/dealers by OFDI on sales of the
Fund's Class B and Class C shares totaled $457,869 and $9,700, respectively, of
which $32,713 was paid to an affiliated broker/dealer for Class B shares.
OppenheimerFunds Services (OFS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund and for other
registered investment companies. OFS's total costs of providing such services
are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.20% of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares. During the year ended July
31, 1998, OFDI paid $92,868 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B
and Class C shares to compensate OFDI for its costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B and Class C shares,
for its services rendered in distributing Class B and Class C shares. OFDI is
also authorized to receive a service fee of 0.25% per year to compensate dealers
providing personal services for accounts that hold Class B and Class C shares.
At present, these service fees are set at zero for Class B and Class C shares.
Each fee is computed on the average annual net assets of Class B and Class C
shares, determined as of the close of each regular business day. During the year
ended July 31, 1998, OFDI retained $547,120 and $114,479, respectively, as
compensation for Class B and Class C sales commissions and service fee advances,
as well as financing costs. If either Plan is terminated by the Fund, the Board
of Trustees may allow the Fund to continue payments of the asset-based sales
charge to OFDI for distributing shares before the Plan was terminated.
22 Oppenheimer Cash Reserves
1
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Below is a description of the two highest rating categories for Short Term Debt
and Long Term Debt by the "Nationally-Recognized Statistical Rating
Organizations" which the Manager evaluates in purchasing securities on behalf of
the Fund. The ratings descriptions are based on information supplied by the
ratings organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's"): The following rating designations
for commercial paper (defined by Moody's as promissory obligations not having
original maturity in excess of nine months), are judged by Moody's to be
investment grade, and indicate the relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling
market positions in well-established industries; (b) high
rates of return on funds employed; (c) conservative
capitalization structures with moderate reliance on debt and
ample asset protection; (d) broad margins in earning coverage
of fixed financial charges and high internal cash generation;
and (e) well established access to a range of financial
markets and assured sources of alternate liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced
by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation.
Capitalization characteristics, while still appropriate, may
be more affected by external conditions. Ample alternate
liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are designated
"Moody's Investment Grade" ("MIG"). Short-term notes which have demand features
may also be designated as "VMIG".
These rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection
by established cash flows, superior liquidity
support or demonstrated broad-based access to the
market for refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample although not so large
as in the preceding group.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no more
than 365 days) assess the likelihood
- -----------------------------
of payment:
A-1: Strong capacity for timely payment. Those issues determined to
possess extremely strong safety characteristics are denoted
with a plus sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the relative degree
of safety is not as high as for issues designated "A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand or
double feature as part of their provisions. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second rating
addresses only the demand feature. With short-term demand debt, S&P's note
rating symbols are used with the commercial paper symbols (for example,
"SP-1+/A- 1+").
IBCA Fitch. ("Fitch"): Fitch assigns the following short-term ratings to debt
obligations that are payable on demand or have original maturities of generally
up to three years, including commercial paper, certificates of deposit,
medium-term notes, and municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is only
slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned "F-1+"
or "F-1" ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities, when issued, of
under one year), asset-backed commercial paper, and certificates of deposit (the
ratings cover all obligations of the institution with maturities, when issued,
of under one year, including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.
Duff 1-: High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply to
commercial paper, certificates of deposit, unsecured notes, and other securities
having a maturity of one year or less.
- -----------------------
TBW-1: The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated "TBW-1".
Long Term Debt Ratings. These ratings are relevant for securities purchased by
the Fund with a remaining maturity of 397 days or less, or for rating issuers of
short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong positions of such
issues.
Aa: Judged to be of high quality by all standards. Together with the "Aaa"
group they comprise what are generally known as high-grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large as
in "Aaa" securities or fluctuations of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the security ranks in the higher
end of its generic rating category; the modifier "2" indicates a mid-range
ranking; and the modifier "3" indicates that the issue ranks in the lower end of
its generic rating category.
Standard & Poor's: Bonds (including municipal bonds) are rated as follows:
AAA: The highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and differ from
"AAA" rated issues only in small degree.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions. Plus (+) and
minus (-) signs are used in the "AA" category to indicate the relative position
of a credit within that category.
TBW: TBW issues the following ratings for companies. These ratings assess the
likelihood of receiving payment of principal and interest on a timely basis and
incorporate TBW's opinion as to the vulnerability of the company to adverse
developments, which may impact the market's perception of the company, thereby
affecting the marketability of its securities.
A: Possesses an exceptionally strong balance sheet and earnings record,
translating into an excellent reputation and unquestioned access to
its natural money markets. If weakness or vulnerability exists in
any aspect of the company's business, it is entirely mitigated by
the strengths of the organization.
A/B: The company is financially very solid with a favorable track record
and no readily apparent weakness. Its overall risk profile, while low, is not
quite as favorable as for companies in the highest rating category.
A-1
<PAGE>
Appendix B
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Asset-Backed
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Insurance Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
2
<PAGE>
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian Bank
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
PX 0760.001.1198
