Oppenheimer
Cash Reserves
Prospectus dated November 28, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
Oppenheimer Cash Reserves is a money market mutual fund. Its goal is to seek the
maximum current income that is consistent with stability of principal. The Fund
invests in short-term, high-quality "money market" investments.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
(logo) OppenheimerFunds
The Right Way to Invest
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CONTENTS
A B O U T T H E F U N D
3 The Fund's Investment Objective and Strategies
3 Main Risks of Investing in the Fund
4 The Fund's Past Performance
5 Fees and Expenses of the Fund
7 About the Fund's Investments
10 How the Fund is Managed
A B O U T Y O U R A C C O U N T
11 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares
17 Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
19 How to Sell Shares
By Mail
By Telephone
By Wire
By Checkwriting
22 How to Exchange Shares
23 Shareholder Account Rules and Policies
25 Dividends and Taxes
26 Financial Highlights
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A B O U T T H E F U N D
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks the maximum current
income that is consistent with stability of principal.
WHAT DOES THE FUND INVEST IN? The Fund invests in a variety of high-quality
money market investments to seek current income. The money market instruments
that the Fund invests in include, for example, bank obligations, repurchase
agreements, commercial paper, other corporate debt obligations and government
debt obligations.
"High-quality" instruments generally must be rated in one of the two
highest credit-quality categories for short-term securities by
nationally-recognized rating organizations. If unrated, they must be determined
by the Fund's investment Manager, OppenheimerFunds, Inc., to be of comparable
quality to rated securities.
WHO IS THE FUND DESIGNED FOR? The Fund is designed for investors who want to
earn income at current money market rates while seeking to preserve the value of
their investment. The Fund tries to keep its share price stable at $1.00. Income
on money market instruments tends to be lower than income on longer-term debt
securities, so the Fund's yield will likely be lower than the yield on
longer-term fixed income funds. The Fund also offers easy access to your money
through checkwriting and wire redemption privileges. The Fund does not invest to
seek capital appreciation and is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. Funds that invest in debt obligations
for income may be subject to credit risks and interest rate risks. However, the
Fund's investments must meet strict standards set by its Board of Trustees
following special rules for money market funds under federal law. Those
standards include requirements for maintaining high credit quality in the Fund's
portfolio, a short average portfolio maturity to reduce the effects of changes
in prevailing interest rates on the value of the Fund's securities and
diversifying the Fund's investments among issuers to reduce the effects of a
default by any one issuer on the Fund's overall portfolio and the value of the
Fund's shares.
Even so, there are risks that any of the Fund's holdings could have its
credit rating downgraded, or the issuer could default, or that interest rates
could rise sharply, causing the value of the Fund's investments (and its share
price) to fall. As a result, there is a risk that the Fund's shares could fall
below $1.00 per share. If there is a high redemption demand for the Fund's
shares that was not anticipated, portfolio securities might have to be sold
prior to their maturity at a loss. Also, there is the risk that the value of
your investment could be eroded over time by the effects of inflation, and that
poor security selection could cause the Fund to underperform other funds that
have a similar objective.
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An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
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The Fund's Past Performance
The bar chart and table below show how the Fund's returns may vary over time, by
showing changes in the Fund's performance (for its Class A shares) from year to
year for the last ten calendar years and its average annual total returns for
the 1-, 5- and 10- year periods. Variability of returns is one measure of the
risks of investing in a money market fund. The Fund's past investment
performance does not predict how the Fund will perform in the future.
Annual Total Returns (as of 12/31 each year)
[See appendix to prospectus for annual total return data for bar chart.]
For the period from 1/1/00 through 9/30/00, the cumulative total return (not
annualized) for Class A shares was 4.06%. During the period shown in the bar
chart, the highest return (not annualized) for a calendar quarter was 1.87% (4Q
`90) and the lowest return (not annualized) for a calendar quarter was 0.48% (2Q
`93).
Average Annual Total Returns 10 Years
for the periods ended December (or life of class,
31, 1999 1 Year 5 Years if less)
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Class A Shares (inception 1/3/89) 4.40% 4.56% 4.43%
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Class B Shares (inception: 3.82% 3.97% 3.63%
8/17/93)
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Class C Shares (inception: 3.82% 3.96% 3.69%
12/1/93)
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The Fund's average annual total returns include the applicable sales charge: for
Class B, the contingent deferred sales charges of 5% (1-year) and 2% (5-years)
and for Class C, the contingent deferred sales charges of 1% for the 1-year
period. Because Class B shares convert to Class A shares 72 months after
purchase, Class B "life-of-class" performance does not include any contingent
deferred sales charge and uses Class A performance for the period after
conversion. The Fund's returns measure the performance of a hypothetical account
and assume that all distributions have been reinvested in additional shares.
Class N shares were not publicly offered during the period shown.
The total returns are not the Fund's current yield. The Fund's yield more
closely reflects the Fund's current earnings. To obtain the Fund's current 7-day
yield information, please call the Transfer Agent toll-free at 1.800.525.7048.
Fees and Expenses of the Fund
The following tables are meant to help you understand the fees and expenses you
may pay if you buy and hold shares of the Fund. The Fund pays a variety of
expenses directly for investment management, administration and other services.
Those expenses are subtracted from the Fund's assets to calculate the Fund's net
asset values per share. All shareholders therefore pay those expenses
indirectly. The numbers below are based upon the Fund's expenses during its
fiscal year ended July 31, 2000. Class N shares were not offered for sale during
the Fund's fiscal year ended July 31, 2000. Accordingly, expenses shown for
Class N shares are estimates based on amounts that would have been payable in
that period assuming the Class N shares were outstanding during such fiscal
year.
Shareholder Fees (charges paid directly from your investment):
Class A Shares Class B Class C Shares Class N Shares
Shares
Maximum Sales Charge on
purchases (as % of None None None None
offering price)
Maximum Deferred Sales
Charge (as % of the
lower of the original None1 5%2 1%3 1%4
offering price or
redemption proceeds)
1. A contingent deferred sales charge may apply if you redeem Class A shares of
the Fund that were purchased by exchanging Class A shares of another
Oppenheimer fund that were purchased subject to a contingent deferred sales
charge, as described in "How to Sell Shares."
2. Applies to redemptions in the first year after purchase. The contingent
deferred sales charge declines to 1% in the sixth year and is eliminated
after that.
3. Applies to shares redeemed within 12 months of purchase.
4. A contingent deferred sales charge may apply to shares redeemed within 18
months of purchase. See "How to Buy Shares" for details.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
Class A Class B Class C Shares Class N Shares
Shares Shares
---------------------------
Management Fees 0.48% 0.48% 0.48% 0.48%
---------------------------
Distribution and/or 0.20% 0.75% 0.75% 0.25%
Service (12b-1) Fees
---------------------------
Other Expenses 0.38% 0.38% 0.38% 0.38%
---------------------------
Total Annual Operating 1.06% 1.61% 1.61% 1.11%
Expenses
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Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
EXAMPLES. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and then reinvest your dividends and distributions
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower, because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
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If shares are redeemed 1 Year 3 Years 5 Years 10 Years1
Class A Shares $108 $337 $585 $1,294
Class B Shares $664 $808 $1,076 $1,630
Class C Shares $264 $508 $876 $1,911
Class N Shares $213 $353 $612 $1,352
If shares are not redeemed 1 Year 3 Years 5 Years 10 Years1
Class A Shares $108 $337 $585 $1,294
Class B Shares $164 $508 $876 $1,630
Class C Shares $164 $508 $876 $1,911
Class N Shares $113 $353 $612 $1,352
In the first example, expenses include the applicable Class B, Class C or Class
N contingent deferred sales charges. In the second example, the Class B, Class C
and Class N expenses do not include the contingent deferred sales charges.
1. Class B expenses for years 7 through 10 are based on Class A expenses, since
Class B shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among different types of investments will vary over time based upon the
Manager's evaluation of economic and market trends. The Fund's portfolio might
not always include all of the different types of investments described below.
The Statement of Additional Information contains more detailed information about
the Fund's investment policies and risks.
The Fund invests in short-term money market instruments that must meet
quality, maturity and diversification standards established by its Board of
Trustees as well as rules that apply to money market funds under the Investment
Company Act. The Fund's Manager tries to reduce risks by diversifying
investments and by carefully researching investments before the Fund buys them.
The rate of the Fund's income will vary from day to day, generally reflecting
changes in overall short-term interest rates. There is no assurance that the
Fund will achieve its investment objective.
What Does the Fund Invest In? The Fund invests in a variety of money market
instruments. They may have fixed, variable or floating interest rates.
Below is a brief description of the types of money market instruments the
Fund invests in.
o U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities. Some are direct obligations of the U.S. Treasury and are
supported by the full faith and credit of the United States. Other U.S.
government securities issued by some agencies and instrumentalities of the
government are also supported by the full faith and credit of the U.S.
government. Some U.S. government securities issued by agencies or
instrumentalities of the U.S. government are supported by the right of the
issuer to borrow from the U.S. Treasury. Others may be supported only by
the credit of the instrumentality.
o Bank Obligations. The Fund can buy time deposits, certificates of deposit
and bankers' acceptances. These obligations must be denominated in U.S.
dollars, even if issued by a foreign bank.
o Commercial Paper. Commercial paper is a short-term, unsecured promissory
note of a domestic or foreign company or other financial firm. The Fund
may buy commercial paper only if it matures in nine months or less from
the date of purchase.
o Corporate Debt Obligations. The Fund can invest in other short-term
corporate debt obligations, besides commercial paper, including debt
obligations that either mature within one year of the date of purchase or
that are subject to a repurchase agreement that calls for delivery in one
year or less.
o Other Money Market Instruments. The Fund may invest in money market
obligations other than those listed above if they are subject to repurchase
agreements or guaranteed as to their principal and interest by a domestic
bank or a corporation whose commercial paper may be purchased by the Fund.
A bank whose money market instruments the Fund buys must meet credit
criteria set by the Fund's Board of Trustees.
Additionally, the Fund may buy other money market instruments that its
Board of Trustees approves from time to time. They must be U.S.
dollar-denominated short-term investments that are determined to have
minimal credit risks.
The Board has approved the Fund's purchase of 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. Their purchase may be subject to
restrictions adopted by the Board from time to time.
What Credit Quality and Maturity Standards Apply to the Fund's Investments? The
Fund may buy only those investments that meet standards set by the Board
of Trustees and standards prescribed by the Investment Company Act for
money market funds. The Fund's Board has adopted evaluation procedures for
the Fund's portfolio investments, and the Manager has the responsibility
to implement those procedures when selecting investments for the Fund.
In general, the Fund buys only high-quality investments that the Manager
believes present minimal credit risk at the time of purchase.
"High-quality" investments are:
o rated in one of the two highest short-term rating categories by two
nationally-recognized rating organization, or
o rated by one rating organization in one of its two highest rating
categories (if only one rating organization has rated the investment),
or
o unrated investments that the Manager determines are comparable in
quality to instruments rated in the two highest rating categories.
The procedures also limit the amount of the Fund's assets that can be
invested in the securities of any one issuer (other than the U.S.
government, its agencies and instrumentalities), to spread the Fund's
investment risks. Some of the Fund's investment restrictions are more
restrictive than the standards that apply to all money market funds. For
example, as a fundamental policy, the Fund may not invest in any debt
instrument having a maturity in excess of one year from the date of the
investment unless it is
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subject to a demand feature not exceeding one year that requires payment
on not more than 30 days notice.* In addition, the Fund must maintain a
dollar-weighted average portfolio maturity of not more than 90 days, to
reduce interest rate risks
* The Fund's shareholders have been asked to approve replacement of this policy
by a policy permitting the Fund, in accordance with the Investment Company Act,
to invest in debt instruments having a remaining maturity of 397 days or less.
If the Fund's shareholders approve this proposed policy change, the prospectus
will be supplemented to reflect the new policy.
Can the Fund's Investment Objective and Policies Change? The Fund's Board of
Trustees can change non-fundamental policies without shareholder approval,
although significant changes will be described in amendments to this Prospectus.
Fundamental policies cannot be changed without the approval of a majority of the
Fund's outstanding voting shares. The Fund's investment objective is a
fundamental policy. Some investment restrictions that are fundamental policies
are listed in the Statement of Additional Information. An investment policy is
not fundamental unless this Prospectus or the Statement of Additional
Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can use the
investment techniques and strategies described below. The Fund might not always
use all of them. These techniques involve risks. The Statement of Additional
Information contains more information about some of these practices, including
limitations on their use that are designed to reduce some of the risks.
Floating Rate/Variable Rate Notes. The Fund can purchase notes with floating or
variable interest rates. Variable rates are adjustable at stated periodic
intervals. Floating rates are adjusted automatically according to a
specified market rate or benchmark, such as the prime rate of a bank.
Obligations of Foreign Banks and Foreign Branches of U.S. Banks. The
Fund can invest in U.S. dollar-denominated money market instruments of
foreign banks that are payable in the U.S. or in London, England. It
can also buy dollar-denominated securities of foreign branches of U.S.
banks. These instruments have investment risks different from
obligations of domestic branches of U.S. banks. Some of the risks that
may affect a foreign bank's ability to pay its debt include:
o political and economic developments in the country in which the bank or
branch is located,
o imposition of withholding taxes on interest income payable on the
securities,
o seizure or nationalization of foreign deposits,
o the establishment of exchange control regulations and
o the adoption of other governmental restrictions that might affect
the payment of principal and interest on those securities.
Additionally, not all of the U.S. and state banking laws and regulations
that apply to domestic banks and that are designed to protect depositors
and investors apply to foreign branches of domestic banks. None of those
U.S. and state regulations apply to foreign banks.
Bank Loan Participation Agreements. The Fund can invest in bank loan
participation agreements. They provide the Fund an undivided interest in a
loan made by the issuing bank in the proportion the Fund's interest bears
to the total principal amount of the loan. In evaluating the risk of these
investments, the Fund looks to the creditworthiness of the borrower that
is obligated to make principal and interest payments on the loan.
Asset-Backed Securities. The Fund can invest in asset-backed money market
instruments. These are fractional interests in pools of consumer loans and
other trade receivables, which are the obligations of a number of
different parties. The income from the underlying pool is passed through
to investors, such as the Fund.
These investments might be supported by a credit enhancement, such as a
letter of credit, a guarantee or a preference right. However, the credit
enhancement typically applies only to a fraction of the security's value.
If the issuer of the security has no security interest in the related
collateral, there is the risk that the Fund could lose money if the issuer
defaults.
Repurchase Agreements. The Fund may enter into repurchase agreements. In a
repurchase transaction, the Fund buys a security and simultaneously sells
it to the vendor for delivery at a future date. Repurchase agreements must
be fully collateralized. However, if the vendor fails to pay the resale
price on the delivery date, the Fund may incur costs in disposing of the
collateral and may experience losses if there is any delay in its ability
to do so. The Fund will not enter into a repurchase agreement that will
cause more than 10% of its net assets to be subject to repurchase
agreements maturing in more than 7 days. There is no limit on the amount
of the Fund's net assets that may be subject to repurchase agreements of 7
days or less.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security is
one that has a contractual limit on resale or which cannot be sold
publicly until it is registered under federal securities laws. The Fund
will not invest more than 10% of its net assets in illiquid or restricted
securities. That limit generally 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. Difficulty in selling a security may result in a loss
to the Fund or additional costs.
How the Fund is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Trustees, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
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The Manager has been an investment advisor since January 1960. The Manager
(including subsidiaries) managed more than $125 billion in assets as of October
31, 2000 including other Oppenheimer funds, with more than 5 million shareholder
accounts. The Manager is located at Two World Trade Center, 34th Floor, New
York, New York 10048-0203.
Portfolio Manager. The portfolio manager of the Fund is Carol E. Wolf.
She is the person principally responsible for the day-to-day
management of the Fund's portfolio. Ms. Wolf was co-portfolio manager
of the Fund from June 15, 1998 until April 1, 2000, when she became
the sole portfolio manager. She is a Senior Vice President of the
Manager and a Vice President of the Fund. Ms. Wolf is an officer and
portfolio manager of other Oppenheimer funds.
Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines as the Fund's
assets grow: 0.500% of the first $250 million of average annual net
assets, 0.475% of the next $250 million, 0.450% of the next $250 million,
0.425% of net assets of the next $250 million, and 0.400% of net assets in
excess of $1 billion. The Fund's management fee for the fiscal year ended
July 31, 2000 was 0.48% of the Fund's average annual net assets for each
class of shares.
A B O U T Y O U R A C C O U N T
How to Buy Shares
HOW DO you buy SHARES? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.
BuyingShares Through Your Dealer. You can buy shares through any dealer,
broker, or financial institution that has a sales agreement with the
Distributor. Your dealer will place your order with the Distributor on
your behalf.
o Guaranteed Payment Procedures. Some broker-dealers may have arrangements
with the Distributor to enable them to place purchase orders for shares on
a regular business day with a guarantee that the Fund's custodian bank
will receive Federal Funds to pay for the shares by 2:00 P.M. on the next
regular business day. The shares will start to accrue dividends starting
on the day the Federal Funds are received by 2:00 P.M.
Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to
"OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver,
Colorado 80217. Your check must be in U.S. dollars and drawn on a U.S.
bank. If you don't list a dealer on the application, the Distributor
will act as your agent in buying the shares. However, we recommend
that you discuss your investment with a financial advisor before you
make a purchase to be sure that the Fund is appropriate for you.
<PAGE>
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
pay for shares by electronic funds transfers from your bank account.
Shares are purchased for your account by a transfer of money from your
bank account through the Automated Clearing House (ACH) system. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. Please refer to "AccountLink," below for
more details. Dividends begin to accrue on shares purchased this way on
the business day after the Fund receives the ACH payment from your bank.
o Buying Shares Through Asset Builder Plans. You may purchase 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. Details are in the Asset Builder
Application and the Statement of Additional Information.
How Much Must You Invest? You can buy Fund shares with a minimum initial
investment of $1,000. You can make additional investments at any time with as
little as $25. There are reduced minimum investments under special investment
plans.
o With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments
for as little as $25. You can make additional purchases of at least $25
through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your
IRA is started as an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be for as little as $25.
o The minimum investment requirement does not apply to reinvesting dividends
from the Fund or other Oppenheimer funds (a list of them appears in the
Statement of Additional Information, or you can ask your dealer or call
the Transfer Agent), or reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price, which is
the net asset value per share without any initial sales charge. The net asset
value per share will normally remain fixed at $1.00 per share. However, there is
no guarantee that the Fund will maintain a stable net asset value of $1.00 per
share.
The offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the Distributor
receives the purchase order at its offices in Colorado, or after any agent
appointed by the Distributor receives the order and sends it to the Distributor.
Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time."
The net asset value per share is determined by dividing the value of the
Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. Under a policy adopted by the Fund's Board of
Trustees, the Fund uses the amortized cost method to value its securities
to determine net asset value.
The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
BuyingThrough a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's
close of business on a regular business day (normally 5:00 P.M.) to
receive that day's offering price. Otherwise, the order will receive the
next offering price that is determined.
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses. When you buy shares, be sure to specify the class of shares.
If you do not choose a class, your investment will be made in Class A shares.
Class A Shares. If you buy Class A shares there is no initial sales
charge on your purchase.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within 12 months of buying them, you will normally pay a
contingent deferred sales charge of 1%, as described in "How Can You Buy
Class C Shares?" below.
Class N Shares. Class N shares are offered only through retirement plans that
purchase $500,000 or more of Class N shares of one or more Oppenheimer
funds or that have assets of $500,000 or more or 100 or more eligible plan
participants. Non-retirement plan investors cannot buy Class N shares
directly.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. If your goals and objectives change over time and you
plan to purchase additional shares, you should re-evaluate those factors to see
if you should consider another class of shares. The Fund's operating costs that
apply to a class of shares and the effect of the different types of sales
charges on your investment will vary your investment results over time.
The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B, Class C or Class N shareholders.
Other features may not be advisable (because of the effect of the
contingent deferred sales charge) for Class B, Class C or Class N
shareholders. Therefore, you should carefully review how you plan to use
your investment account before deciding which class of shares to buy.
Additionally, the dividends payable to Class B, Class C and Class N
shareholders will be reduced by the additional expenses borne by those
classes that are not borne by Class A shares, such as the Class B, Class C
or Class N asset-based sales charge described below and in the Statement
of Additional Information. Share certificates are not available for Class
B, Class C and Class N shares, and if you are considering using your
shares as collateral for a loan, that may be a factor to consider. Also,
checkwriting is not available on accounts subject to a contingent deferred
sales charge.
How Do Share Classes Affect Payments to My Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. The Distributor may pay additional compensation
from its own resources to securities dealers or financial institutions
based upon the value of shares of the Fund owned by the dealer or
financial institution for its own account or for its customers.
Special Sales Charge Arrangements and Waivers. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special condition
applies.
HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering price,
which is the net asset value per share without any initial sales charge.
Will You Pay a Sales Charge When You Sell Class A Shares? The Fund
does not charge a fee when you redeem Class A shares of this Fund that
you bought either directly or by reinvesting dividends or
distributions from another Oppenheimer fund. Generally, you will not
pay a fee when you redeem Class A shares of this Fund you bought by
exchange of Class A shares of another Oppenheimer fund. However,
o if you bought shares of this Fund by exchanging Class A shares of another
Oppenheimer fund that were subject to the Class A contingent deferred
sales charge of that fund, and
o if those shares remain subject to that Class A contingent deferred sales
charge when you exchange them into this Fund,
o then, you will pay the contingent deferred sales charge if you redeem
those shares from this Fund within 18 months of the purchase date of the
shares of the fund you exchanged.
HOW CAN YOU BUY CLASS B SHARES? You can acquire Class B shares by exchanging
Class B shares of other Oppenheimer funds. Direct purchases are permitted only
in certain cases:
o by plan administrators or plan sponsors on behalf of plan participants in
qualified retirement plans.
o by investors who establish 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. You may open a Class B Asset Builder Plan account with
minimum initial investment of $5,000.
Class B shares are sold at net asset value per share without an initial
sales charge. However, if Class B shares are redeemed within 6 years of the
beginning of the calendar month of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. The Class B contingent
deferred sales charge is paid to compensate the Distributor for its expenses of
providing distribution-related services to the Fund in connection with the sale
of Class B shares.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule for the Class B contingent deferred sales
charge holding period:
<PAGE>
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Redemptions in That Year
Purchase Order 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. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. This conversion feature
relieves Class B shareholders of the asset-based sales charge that applies
to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value
of the two classes, and no sales load or other charge is imposed. When any
Class B shares you hold convert, any other Class B shares that were
acquired by reinvesting dividends and distributions on the converted
shares will also convert to Class A shares. For further information on the
conversion feature and its tax implications, see "Class B Conversion" in
the Statement of Additional Information.
HOW CAN YOU BUY CLASS C SHARES? Class C shares may be acquired at net asset
value per share only by exchange of Class C shares of other Oppenheimer funds,
except that direct purchases are permitted by plan administrators or plan
sponsors on behalf of participants in qualified retirement plans. If Class C
shares are redeemed within a holding period of 12 months from the end of the
calendar month of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. The Class C contingent deferred
sales charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class C
shares.
WHO CAN BUY CLASS N SHARES? Class N shares are offered only through retirement
plans that purchase $500,000 or more of Class N shares of one or more
Oppenheimer funds or that have assets of $500,000 or more or 100 or more
eligible plan participants. Individual investors cannot buy Class N shares
directly. A contingent deferred sales charge of 1.00% will be imposed if:
o the retirement plan is terminated or Class N shares of all Oppenheimer
funds are terminated as an investment option of the plan within 18 months
after the plan's first purchase of Class N shares of any Oppenheimer fund,
or,
o with respect to an individual retirement plan, if you redeem your shares
within 18 months of the plan's first purchase of Class N shares of any
Oppenheimer fund.
Retirement plans that offer Class N shares may impose charges on plan
participant accounts. The procedures for buying, selling, exchanging and
transferring the Fund's other classes of shares (other than the time those
orders must be received by the Distributor or Transfer Agent in Colorado) and
the special account features applicable to purchasers of those other classes of
shares described elsewhere in this prospectus do not apply to Class N shares.
Instructions for purchasing, redeeming, exchanging or transferring Class N
shares must be submitted by the plan, not by plan participants for whose benefit
the shares are held.
Distribution and Service (12b-1) Plans
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.20% of the average annual
net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class
N shares to pay the Distributor for its services and costs in distributing
Class B, Class C and Class N shares and servicing accounts. Under the
plans, the Fund pays the Distributor an annual asset-based sales charge of
0.75% per year on Class B shares and on Class C shares, and the Fund pays
the Distributor an annual asset-based sales charge of 0.25% per year on
Class N shares. The Distributor is entitled to receive a service fee of
0.25% per year under each plan, but the Board of Trustees has not
authorized the Fund to pay the service fees at this time.
The asset-based sales charge increases Class B and Class C expenses by
0.75% and increases Class N expenses by 0.25% of the net assets per year
of the respective class. Because these fees are paid out of the Fund's
assets on an on-going basis, over time these fees will increase the cost
of your investment and may cost you more than other types of sales
charges. If the service fees were paid, the Distributor would use them to
pay dealers for providing personal services for accounts that hold Class
B, Class C or Class N shares.
The Distributor currently pays a sales concession 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.
The Distributor currently pays a sales concession of 1.00% of the purchase
price of Class C shares to dealers from its own resources at the time of
sale. The Distributor pays the asset-based sales charge as an ongoing
concession to the dealer on Class C shares that have been outstanding for
a year or more.
The Distributor currently pays a sales concession of 1.00% of the purchase
price of Class N shares to dealers from its own resources at the time of
sale. The Distributor retains the asset-based sales charge on Class N
shares.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.
You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1.800.852.8457. The purchase payment
will be debited from your bank account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1.800.533.3310.
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.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone automatically by calling the
PhoneLink number and the Fund will send the proceeds directly to your
AccountLink bank account. Please refer to "How to Sell Shares," below for
details.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048. At times, the web site may be inaccessible or
its transaction features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund that were purchased by reinvesting dividends or distributions
from another Oppenheimer fund or by exchanging shares from another Oppenheimer
fund on which you paid a sales charge, you have up to 6 months to reinvest all
or part of the redemption proceeds in Class A shares of other Oppenheimer funds
without paying a sales charge. This privilege does not apply to Class C or Class
N shares. You must be sure to ask the Distributor for this privilege when you
send your payment.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your order
is received in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter, by wire, by using the Fund's checkwriting
privilege or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special situation,
such as due to the death of the owner or from a retirement plan account, please
call the Transfer Agent first, at 1.800.525.7048, for assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem more than $100,000 and receive a check o The
redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different
owner or name
o Shares are being redeemed by someone (such as an Executor) other
than the owners
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities, or
o a U.S. national securities exchange, a registered securities
association or a clearing agency.
If you are signing on behalf of a corporation, partnership or other
business or as a fiduciary, you must also include your title in the
signature.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of Class A, Class B or Class C
shares you sell sent by Federal Funds wire to a bank account you
designate. It must be a commercial bank that is a member of the Federal
Reserve wire system. The minimum redemption you can have sent by wire is
$2,500. There is a $10 fee for each wire. To find out how to set up this
feature on your account or to arrange a wire, call the Transfer Agent at
1.800.852.8457.
HOW DO you SELL SHARES BY MAIL? Write a letter of instruction that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered, and
o Any special documents requested by the Transfer Agent to assure
proper authorization of the person asking to sell the shares.
Use the following address for Send courier or express mail
Requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver Colorado 80217 Denver, Colorado 80231
HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The 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 account 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 statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
in any 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 statement. This
service is not available within 30 days of changing the address on an
account.
Telephone Redemptions Through AccountLink or by Wire. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
If you have requested Federal Funds wire privileges for your account, the
wire of the redemption proceeds will normally be transmitted on the next
bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the fund to sell
securities to pay the redemption proceeds. No dividends are accrued or
paid on the proceeds of shares that have been redeemed and are awaiting
transmittal by wire.
Checkwriting. To write checks against your Fund account, request that privilege
on your account application, or contact the Transfer Agent for signature cards.
They must be signed (with a signature guarantee) by all owners of the account
and returned to the Transfer Agent so that checks can be sent to you to use.
Shareholders with joint accounts can elect in writing to have checks paid over
the signature of one owner. If you previously signed a signature card to
establish checkwriting in another Oppenheimer fund, simply call 1.800.525.7048
to request checkwriting for an account in this Fund with the same registration
as the other account.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the bank the checks are payable through or the Fund's custodian
bank.
o Checkwriting privileges are not available for accounts holding shares that
are subject to a contingent deferred sales charge.
o Checks must be written for at least $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, until you
receive new checks.
CAN YOU SELL SHARES THROUGH YOUR DEALER? The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer. how contingent
deferred sales charges affect redemptions. If you purchase shares subject to a
Class A, Class B or Class C contingent deferred sales charge and redeem any of
those shares during the applicable holding period for the class of shares, the
contingent deferred sales charge will be deducted from the redemption proceeds,
unless you are eligible for a waiver of that sales charge based on the
categories listed in Appendix C to the Statement of Additional Information and
you advise the Transfer Agent of your eligibility for the waiver when you place
your redemption request.
A contingent deferred sales charge will be based on the lesser of the net
asset value of the redeemed shares at the time of redemption or the original net
asset value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether a contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for the holding period that applies to the class, and
3. shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
If a retirement plan that owns Class N shares terminates or Class N shares
of all Oppenheimer funds are terminated as an investment option of the plan
within 18 months after the plan's first purchase of Class N shares of any
Oppenheimer fund, a 1% contingent deferred sales charge will be imposed.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of both funds must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for
at least 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 whose shares
you purchase by exchange.
o Before exchanging into a fund, you must obtain and read its prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another
fund. You may pay a sales charge when you exchange Class A shares of this
Fund. Because Class A shares of this Fund are sold without sales charge,
in some cases you may pay a sales charge when you exchange Class A shares
of this Fund for shares of other Oppenheimer funds that are sold subject
to a sales charge. You will not pay a sales charge when you exchange
shares of this Fund purchased by reinvesting dividends or distributions
from other Oppenheimer funds, or shares of this Fund purchased by exchange
of shares on which you paid a sales charge.
For tax purposes, exchanges of shares involve a sale of the shares of the
fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. Since shares of this Fund normally
maintain a $1.00 net asset value, in most cases you should not realize a
capital gain or loss when you sell or exchange your shares. Please refer
to "How to Exchange Shares" in the Statement of Additional Information for
more details.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1.800.525.7048. That list can change from time to time.
HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or by
telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
Telephone Exchange Requests. Telephone exchange requests may be made either by
calling a service representative 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.
ARE THERE LIMITATIONS ON EXCHANGES? 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 that conforms to the
policies described above. It must be received by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days. However, either fund may delay the purchase of shares of the
fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a disadvantageous time or price.
o Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes 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. The Fund will provide you notice whenever it is required to do so by
applicable law, but it may impose changes at any time for emergency
purposes.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures for buying, selling,
and exchanging shares is contained in the Statement of Additional Information.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is in
the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
the Transfer Agent receives cancellation instructions from an owner of the
account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients by participating in
NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of
the Fund if the dealer performs any transaction erroneously or improperly.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or through AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name
of a broker-dealer, payment will normally be forwarded within three
business days after redemption.
The Transfer Agent may delay forwarding a check or processing a payment via
AccountLink or Federal Funds wire for recently purchased shares, but only
until the purchase payment has cleared. That delay may be as much as 10
days from the date the shares were purchased. That delay may be avoided if
you purchase shares by Federal Funds wire or certified check, or arrange
with your bank to provide telephone or written assurance to the Transfer
Agent that your purchase payment has cleared.
Involuntary Redemptions of Small Accounts may be made by the Fund if the account
value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus, annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
The consolidation of these mailings, called householding, benefits the
Fund through reduced mailing expense.
If you want to receive multiple copies of these materials, you may call
the Transfer Agent at 1.800.525.7048. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses and reports will be
sent to you within 30 days after the Transfer Agent receives your request
to stop householding.
Dividends and Taxes
DIVIDENDS. The Fund intends to declare dividends from net investment income each
regular business day and to pay those dividends to shareholders monthly on a
date selected by the Board of Trustees. To maintain a net asset value of $1.00
per share, the Fund might withhold dividends or make distributions from capital
or capital gains.
The Fund intends to be as fully invested as possible to maximize its
yield. Therefore, newly-purchased shares normally will begin to accrue dividends
after the Distributor accepts your purchase order, starting on the business day
after the Fund receives Federal Funds from your purchase payment.
CAPITAL GAINS. The Fund normally holds its securities to maturity and therefore
will not usually pay capital gains. Although the Fund does not seek capital
gains, it could realize capital gains on the sale of portfolio securities. If it
does, it may make distributions out of any net short-term or long-term capital
gains in December of each year. The Fund may make supplemental distributions of
dividends and capital gains following the end of its fiscal year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving the other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Dividends paid from net investment income and short-term capital gains are
taxable as ordinary income. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders, and may be taxable at different
rates depending on how long the Fund holds the asset. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of each taxable distribution you received in the previous year. Any
long-term capital gains distributions will be separately identified in the tax
information the Fund sends you after the end of the calendar year.
Returns of Capital Can Occur. In certain cases, distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If that
occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 6 fiscal periods. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP, the
Fund's independent auditors, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available on request. Class N shares were not publicly offered during any of the
periods shown. Therefore, information on Class N shares is not included in the
following tables or in the Fund's other financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class A 2000 1999
1998 1997 1996(1) 1995
===================================================================================================================
<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 .04
.04 .04 .03 .05
Dividends and/or distributions
to shareholders (.05) (.04)
(.04) (.04) (.03) (.05)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
$1.00 $1.00 $1.00
======================================================================
===================================================================================================================
Total Return(2) 5.10% 4.30%
4.61% 4.41% 2.68% 4.84%
===================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $317,198 $264,632 $210,477
$172,970 $170,031 $148,529
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $312,440 $245,622 $186,795
$179,948 $149,889 $105,349
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 5.00% 4.22%
4.48% 4.33% 4.47% 4.71%
Expenses 1.06% 1.10%
1.28%(4) 1.29%(4) 1.06%(4) 1.36%(4)
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31. 2. Assumes a $1,000 hypothetical initial
investment on the business day before the first day of the fiscal period (or
inception of offering), with all dividends 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. 3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
| OPPENHEIMER CASH RESERVES
<PAGE>
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class B 2000 1999
1998 1997 1996(1) 1995
===================================================================================================================
<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
.04 .04 .02 .04
Dividends and/or distributions
to shareholders (.04) (.04)
(.04) (.04) (.02) (.04)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
$1.00 $1.00 $1.00
======================================================================
===================================================================================================================
Total Return(2) 4.52% 3.72%
3.98% 3.82% 2.35% 4.26%
===================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $172,345 $204,081 $80,005
$54,009 $85,573 $37,378
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $225,824 $170,068 $73,003
$67,333 $49,226 $35,360
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 4.40% 3.67%
3.93% 3.78% 3.91% 4.15%
Expenses 1.61% 1.65%
1.83%(4) 1.84%(4) 1.61%(4) 1.92%(4)
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31. 2. Assumes a $1,000 hypothetical initial
investment on the business day before the first day of the fiscal period (or
inception of offering), with all dividends 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. 3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
| OPPENHEIMER CASH RESERVES
<PAGE>
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class C 2000 1999
1998 1997 1996(1) 1995
===================================================================================================================
<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
.04 .04 .02 .04
Dividends and/or distributions
to shareholders (.04) (.04)
(.04) (.04) (.02) (.04)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
$1.00 $1.00 $1.00
======================================================================
===================================================================================================================
Total Return(2) 4.52% 3.73%
3.99% 3.84% 2.35% 4.21%
===================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $49,382 $49,607 $18,101 $
9,125 $11,717 $5,024
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $59,556 $37,244 $15,297
$10,930 $ 6,333 $6,040
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 4.44% 3.67%
3.94% 3.78% 3.91% 4.12%
Expenses 1.61% 1.65%
1.83%(4) 1.85%(4) 1.61%(4) 1.97%(4)
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends 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.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
| OPPENHEIMER CASH RESERVES
<PAGE>
INFORMATION AND SERVICES
For More Information on Oppenheimer Cash Reserves
The following additional information about the Fund is available without charge
upon request:
STATEMENT OF ADDITIONAL INFORMATION This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information:
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
----------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.525.7048
----------------------------------------------------------------------------
----------------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
----------------------------------------------------------------------------
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On the Internet: You can send us a request by e-mail or
read or down-load documents on the
OppenheimerFunds website:
http://www.oppenheimerfunds.com
----------------------------------------------------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1. 202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected], or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by: [logo] OppenheimerFunds Distributor, Inc.
SEC File No. 811-5582
PR0760.001.1100 Printed on recycled paper.
<PAGE>
APPENDIX TO THE PROSPECTUS OF OPPENHEIMER CASH RESERVES
Graphic material included in Prospectus of Oppenheimer Cash Reserves (the
"Fund") under the heading: "Annual Total Returns (as of 12/31 each year)."
Bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the Fund
for each of the ten most recent calendar years without deducting sales charges.
Set forth below are the relevant data points that will appear on the bar chart.
--------------------------------------------------------------------
Calendar Year Ended: Annual Total Returns
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/90 7.60%
--------------------------------------------------------------------
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12/31/91 5.67%
--------------------------------------------------------------------
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12/31/92 3.07%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/93 2.05%
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--------------------------------------------------------------------
12/31/94 3.22%
--------------------------------------------------------------------
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12/31/95 4.84%
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12/31/96 4.51%
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12/31/97 4.48%
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12/31/98 4.57%
--------------------------------------------------------------------
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12/31/99 4.40%
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--------------------------------------------------------------------------------
<PAGE>
Oppenheimer Cash Reserves
--------------------------------------------------------------------------------
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048
Statement of Additional Information dated November 28, 2000
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated November 28, 2000. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217, by calling the Transfer Agent at the toll-free number shown above, or by
downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents Page
About the Fund
Additional Information about the Fund's Investment Policies and Risks........2
The Fund's Investment Policies..........................................2
Other Investment Strategies.............................................6
Investment Restrictions.................................................8
How the Fund is Managed.....................................................10
Organization and History...............................................10
Trustees and Officers of the Fund......................................11
The Manager............................................................16
Distribution and Service Plans..............................................18
Performance of the Fund.....................................................21
About Your Account
How To Buy Shares...........................................................24
How To Sell Shares..........................................................27
How To Exchange Shares......................................................32
Dividends and Taxes.........................................................35
Additional Information About the Fund.......................................36
Financial Information About the Fund
Independent Auditors' Report................................................37
Financial Statements........................................................38
Appendix A: Securities Ratings.............................................A-1
Appendix B: Industry Classifications.......................................B-1
Appendix C: Special Sales Charge Arrangements and Waivers..................C-1
--------------------------------------------------------------------------------
<PAGE>
A B O U T T H E F U N D
--------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective and the principal investment policies of the Fund are
described in the Prospectus. This Statement of Additional Information contains
supplemental information about those policies and the types of securities that
the Fund's investment Manager, OppenheimerFunds, Inc. will select for the Fund.
Additional explanations are also provided about the strategies the Fund may use
to try to achieve its objective.
The Fund's Investment Policies. The Fund's objective is to seek the maximum
current income that is consistent with stability of principal. The Fund will not
make investments with the objective of seeking capital growth. However, the
value of the securities held by the Fund may be affected by changes in general
interest rates. Because the current value of debt securities varies inversely
with changes in prevailing interest rates, if interest rates increase after a
security is purchased, that security would normally decline in value.
Conversely, if interest rates decrease after a security is purchased, its value
would rise. However, those fluctuations in value will not generally result in
realized gains or losses to the Fund since the Fund does not usually intend to
dispose of securities prior to their maturity. A debt security held to maturity
is redeemable by its issuer at full principal value plus accrued interest.
The Fund may sell securities prior to their maturity, to attempt to take
advantage of short-term market variations, or because of a revised credit
evaluation of the issuer or other considerations. The Fund may also do so to
generate cash to satisfy redemptions of Fund shares. In such cases, the Fund may
realize a capital gain or loss on the security.
o Ratings of Securities -- Portfolio Quality, Maturity and
Diversification. Under Rule 2a-7 of the Investment Company Act, the Fund uses
the amortized cost method to value its portfolio securities to determine the
Fund's net asset value per share. Rule 2a-7 places restrictions on a money
market fund's investments. Under that Rule, the Fund may purchase only those
securities that the Manager, under Board-approved procedures, has determined
have minimal credit risks and are "Eligible Securities." The rating restrictions
described in the Prospectus and this Statement of Additional Information do not
apply to banks in which the Fund's cash is kept.
An "Eligible Security" is one that has been rated in one of the two
highest short-term rating categories by any two "nationally-recognized
statistical rating organizations." That term is defined in Rule 2a-7 and they
are referred to as "Rating Organizations" in this Statement of Additional
Information. If only one Rating Organization has rated that security, it must
have been rated in one of the two highest rating categories by that Rating
Organization. An unrated security that is judged by the Manager to be of
comparable quality to Eligible Securities rated by Rating Organizations may also
be an "Eligible Security."
Rule 2a-7 permits the Fund to purchase any number of "First Tier
Securities." These are Eligible Securities that have been rated in the highest
rating category for short-term debt obligations by at least two Rating
Organizations. If only one Rating Organization has rated a particular security,
it must have been rated in the highest rating category by that Rating
Organization. Comparable unrated securities may also be First Tier Securities.
Under Rule 2a-7, the Fund may invest only up to 5% of its total assets in
"Second Tier Securities." Those are Eligible Securities that are not "First Tier
Securities." In addition, the Fund may not invest more than:
o 5% of its total assets in the securities of any one issuer (other than the
U.S. government, its agencies or instrumentalities) or
o 1% of its total assets or $1 million (whichever is greater) in Second Tier
Securities of any one issuer.
Under Rule 2a-7, the Fund must maintain a dollar-weighted average
portfolio maturity of not more than 90 days, and the maturity of any single
portfolio investment may not exceed 397 days. As a fundamental policy, the Fund
will not invest in debt securities having a maturity in excess of one year from
the date of purchase, unless subject to a demand feature not exceeding one year
that requires payment on not more than 30 day's notice. The Board regularly
reviews reports from the Manager to show the Manager's compliance with the
Fund's procedures and with the Rule.
If a security's rating is downgraded, the Manager 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 Fund's Board
of Trustees shall promptly reassess whether the security presents minimal credit
risk and whether it is in the best interests of the Fund to dispose of it. If
the Fund 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, the Board must
determine whether it would be in the best interests of the Fund to dispose of
the security.
The Rating Organizations currently designated as nationally-recognized
statistical rating organizations by the Securities and Exchange Commission are
Standard & Poor's Ratings Services, Moody's Investors Service, Inc., Fitch,
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. They include Treasury Bills (which mature within one year of
the date they are issued) and Treasury Notes and Bonds (which are issued with
longer maturities). All Treasury securities are backed by the full faith and
credit of the United States.
U.S. government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, General
Services Administration, Bank for Cooperatives, Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks, Maritime Administration, the Tennessee Valley Authority and the District
of Columbia Armory Board.
Securities issued or guaranteed by U.S. government agencies and
instrumentalities are not always backed by the full faith and credit of the
United States. Some, such as securities issued by the Federal National Mortgage
Association ("Fannie Mae"), are backed by the right of the agency or
instrumentality to borrow from the Treasury. Others, such as securities issued
by the Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported
only by the credit of the instrumentality and not by the Treasury. If the
securities are not backed by the full faith and credit of the United States, the
purchaser must look principally to the agency issuing the obligation for
repayment and may not be able to assert a claim against the United States if the
issuing agency or instrumentality does not meet its commitment.
Among the U.S. government securities that may be purchased by the Fund are
"mortgage-backed securities" of Fannie Mae, Government National Mortgage
Association ("Ginnie Mae") and Freddie Mac. Timely payment of principal and
interest on Ginnie Mae pass-throughs is guaranteed by the full faith and credit
of the United States. These mortgage-backed securities include "pass-through"
securities and "participation certificates." Both types of securities are
similar, in that they represent pools of mortgages that are assembled by a
vendor who sells interests in the pool. Payments of principal and interest by
individual mortgagors are passed through to the holders of the interests in the
pool. Another type of mortgage-backed security is the "collateralized mortgage
obligation." It is similar to a conventional bond and is secured by groups of
individual mortgages.
o Time Deposits and Other Bank Obligations. The types of "banks" whose
securities the Fund may buy include commercial banks, savings banks, and savings
and loan associations, which may or may not be members of the Federal Deposit
Insurance Corporation. The Fund may also buy securities of "foreign banks" that
are:
o foreign branches of U.S. banks ( which may be issuers of "Eurodollar" money
market instruments),
o U.S. branches and agencies of foreign banks (which may be issuers of "Yankee
dollar" instruments), or
o foreign branches of foreign banks.
The Fund may invest in fixed time deposits. These are non-negotiable
deposits in a bank for a specified period of time at a stated interest rate.
They may or may not be subject to withdrawal penalties. However, the Fund's
investments in time deposits that are subject to penalties (other than time
deposits maturing in less than 7 days) are subject to the 10% investment
limitation for investing in illiquid securities, set forth in "Illiquid and
Restricted Securities" in the Prospectus. The Fund will buy bank obligations
only from a domestic bank with total assets of at least $2.0 billion or from a
foreign bank with total assets of at least $30.0 billion. Those asset
requirements apply only at the time the obligations are acquired.
o Insured Bank Obligations. The Federal Deposit Insurance Corporation
("FDIC") insures the deposits of banks and savings and loan associations up to
$100,000 per investor. Within the limits set forth in the Prospectus, the Fund
may purchase bank obligations that are fully insured as to principal by the
FDIC. To remain fully insured as to principal, these investments must currently
be limited to $100,000 per bank. If the principal amount and accrued interest
together exceed $100,000, then the accrued interest in excess of that $100,000
will not be insured.
o Bank Loan Participation Agreements. The Fund may invest in bank loan
participation agreements, subject to the investment limitation set forth in the
Prospectus as to investments in illiquid securities. Participation agreements
provide an undivided interest in a loan made by the bank issuing the
participation interest in the proportion that the buyer's investment bears to
the total principal amount of the loan. Under this type of arrangement, the
issuing bank may have no obligation to the buyer other than to pay principal and
interest on the loan if and when received by the bank. Thus, the Fund must look
to the creditworthiness of the borrower, which is obligated to make payments of
principal and interest on the loan. If the borrower fails to pay scheduled
principal or interest payments, the Fund may experience a reduction in income.
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. They pass through the payments on
the underlying obligations to the security holders (less servicing fees paid to
the originator or fees for any credit enhancement). The value of an asset-backed
security is affected by changes in the market's perception of the asset backing
the security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit
enhancement.
Payments of principal and interest passed through to holders of
asset-backed securities are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guarantee by
another entity or having a priority to certain of the borrower's other
securities. The degree of credit enhancement varies, and generally applies to
only a fraction of the asset-backed security's par value until exhausted. If the
credit enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest are not made
with respect to the underlying loans, the Fund may experience losses or delays
in receiving payment.
The risks of investing in asset-backed securities are ultimately dependent
upon payment of consumer loans by the individual borrowers. As a purchaser of an
asset-backed security, the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower. The underlying
loans are subject to prepayments, which shorten the weighted average life of
asset-backed securities and may lower their return, in the same manner as for
prepayments of a pool of mortgage loans underlying mortgage-backed securities.
However, asset-backed securities do not have the benefit of the same security
interest in the underlying collateral as do mortgage-backed securities.
o Repurchase Agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor for delivery
on an agreed-upon future date. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect. An approved vendor may be a
U.S. commercial bank, the U.S. branch of a foreign bank, or a broker-dealer
which has been designated a primary dealer in government securities. These
entities must meet the credit requirements set forth by the Fund's Board of
Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days of the
purchase. The Fund will not enter into a repurchase agreement that will cause
more than 10% of its net assets to be subject to repurchase agreements maturing
in more than seven days.
Repurchase agreements are considered "loans" under the Investment Company
Act, collateralized by the underlying security. The Fund's repurchase agreements
require that at all times while the repurchase agreement is in effect, the
collateral's value must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will monitor
the vendor's creditworthiness to confirm that the vendor is financially sound
and will continuously monitor the collateral's value. However, if the vendor
fails to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay in
its ability to do so.
Other Investment Strategies
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. The
rate on the investment is adjusted automatically each time the market rate is
adjusted. The interest rate on a variable rate obligation is also based on a
stated prevailing market rate but is adjusted automatically at a specified
interval of not less than one year. Some variable rate or floating rate
obligations in which the Fund may invest have a demand feature entitling the
holder to demand payment of an amount approximately equal to the amortized cost
of the instrument or the principal amount of the instrument plus accrued
interest at any time, or at specified intervals not exceeding one year. These
notes may or may not be backed by bank letters of credit.
Variable rate demand notes may include master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts in a note. The
amount may change daily without penalty, pursuant to direct arrangements between
the Fund, as the note purchaser, and the issuer of the note. The interest rates
on these notes fluctuate from time to time. The issuer of this type of
obligation normally has a corresponding right in its discretion, after a given
period, to prepay the outstanding principal amount of the obligation plus
accrued interest. The issuer must give a specified number of days' notice to the
holders of those obligations. Generally, the changes in the interest rate on
those securities reduce the fluctuation in their market value. As interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than that for fixed-rate obligations having the same maturity.
Because these types of obligations are direct lending arrangements between
the note purchaser and issuer of the note, these instruments generally will not
be traded. Generally, there is no established secondary market for these types
of obligations, although they are redeemable from the issuer at face value.
Accordingly, where these obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to redeem them is dependent
on the ability of the note issuer to pay principal and interest on demand. These
types of obligations usually are not rated by credit rating agencies. The Fund
may invest in obligations that are not rated only if the Manager determines at
the time of investment that the obligations are of comparable quality to the
other obligations in which the Fund may invest. The Manager, on behalf of the
Fund, will monitor the creditworthiness of the issuers of the floating and
variable rate obligations in the Fund's portfolio on an ongoing basis.
o Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions. These loans are limited to not more than 25% of the value of the
Fund's total assets and are subject to other conditions described below. There
are some risks in lending securities. The Fund could experience a delay in
receiving additional collateral to secure a loan, or a delay in recovering the
loaned securities. The Fund presently does not intend to lend its securities,
but if it does, the value of securities loaned is not expected to exceed 5% of
the value of the Fund's total assets.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the market value of the loaned
securities. The collateral must consist of cash, bank letters of credit, U.S.
government securities or other cash equivalents in which the Fund is permitted
to invest. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives from the borrower an amount
equal to the interest paid or the dividends declared on the loaned securities
during the term of the loan. It may also receive negotiated loan fees and the
interest on the collateral securities, less any finders', custodian bank,
administrative or other fees the Fund pays in connection with the loan. The Fund
may share the interest it receives on the collateral securities with the
borrower as long as it realizes at least a minimum amount of interest required
by the lending guidelines established by its Board of Trustees.
The Fund will not lend its portfolio securities to any officer, Trustee,
employee or affiliate of the Fund or its Manager. The terms of the Fund's loans
must meet certain tests under the Internal Revenue Code and permit the Fund to
reacquire loaned securities on five business days notice or in time to vote on
any important matter.
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.
Illiquid securities the Fund can buy include issues that may be redeemed
only by the issuer upon more than seven days notice or at maturity, repurchase
agreements maturing in more than seven days, fixed time deposits subject to
withdrawal penalties which mature in more than seven days, and other securities
that cannot be sold freely due to legal or contractual restrictions on resale.
Contractual restrictions on the resale of illiquid securities might prevent or
delay their sale by the Fund at a time when such sale would be desirable.
Illiquid securities include repurchase agreements maturing in more than 7 days,
or certain participation interests other than those with puts exercisable within
7 days.
There are restricted securities that are not illiquid that the Fund can
buy. They include certain master demand notes redeemable on demand, and
short-term corporate debt instruments that are not related to current
transactions of the issuer and therefore are not exempt from registration as
commercial paper. Investment Restrictions
o What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
o 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or
o more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
o Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund:
o The Fund cannot invest in commodities or commodity contracts, or invest in
interests in oil, gas, or other mineral exploration or development programs;
o The Fund cannot invest in real estate; however, the Fund may purchase debt
securities issued by companies which invest in real estate or interests therein;
o The Fund cannot purchase securities on margin or make short sales of
securities;
o The Fund cannot invest in or hold securities of any issuer if those officers
and trustees or directors of the Fund or its Manager who beneficially own
individually more than 1/2 of 1% of the securities of such issuer together own
more than 5% of the securities of such issuer;
o The Fund cannot underwrite securities of other companies except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in connection
with the disposition of portfolio securities;
o The Fund cannot invest more than 5% of its total assets in securities of
companies that have operated less than three years, including the operations of
predecessors;
o The Fund cannot purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
o The Fund cannot issue "senior securities," but this does not prohibit certain
investment activities for which assets of the Fund are designated as segregated,
or margin, collateral or escrow arrangements are established, to cover the
related obligations;
o The Fund cannot 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 The Fund cannot 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, the Fund cannot purchase securities issued
or guaranteed by any one issuer (except the U.S. Government or its agencies or
instrumentalities), if more than 5% of the Fund's total assets would be invested
in securities of that issuer or Fund would then own more than 10% of that
issuer's voting securities;
o The Fund cannot concentrate investments to the extent of 25% of its assets in
any industry; except for obligations of foreign banks or foreign branches of
domestic banks, time deposits, other bank obligations and U.S. government
securities as described in the Prospectus and Statement of Additional
Information;
o The Fund cannot make loans, except that the Fund may purchase debt instruments
and repurchase agreements as described in the Prospectus and Statement of
Additional Information, and the Fund may lend its portfolio securities as
described under "Loans of Portfolio Securities" in the Statement of Additional
Information; or
o The Fund cannot borrow money in excess of 10% of the value of its total assets
or make any investment when borrowings exceed 5% of the value of its total
assets; it may borrow only as a temporary measure for extraordinary or emergency
purposes; no assets of the Fund may be pledged, mortgaged or assigned to secure
a debt.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. The Fund need not sell securities to meet
the percentage limits if the value of the investment increases in proportion to
the size of the Fund.
For purposes of the Fund's policy not to concentrate its investments in
securities of issuers, the Fund has adopted the industry classifications set
forth in Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
The Board of Trustees has proposed that shareholders approve a number of
changes to the fundamental policies listed above. Specifically, that proposal
would eliminate the third, fourth, sixth, seventh, ninth and tenth policies
listed above. The proposal would also amend the first policy to eliminate only
the restriction of investing in oil, gas or mineral-related programs and leases.
The Trustees have also proposed amendments to the fundamental policies of the
Fund with respect to lending and borrowing. There can be no assurance that the
proposals submitted to shareholders will be approved. If adopted, these proposed
changes are not expected to change the operation of the Fund in any material
manner. Nonetheless, the Statement of Additional Information may be supplemented
to reflect these changes if and when they are approved and implemented.
How the Fund Is Managed
Organization and History. The Fund is an open-end diversified management company
organized as a Massachusetts business trust in 1988, with an unlimited number of
authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager.
o Classes of Shares. 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 four classes of
shares: Class A, Class B, Class C and Class N shares. All classes invest in the
same investment portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and
o votes as a class on matters that affect that class alone.
Shares 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 Trustees are authorized to create new series and classes of shares.
The Trustees may reclassify unissued shares of the Fund's series or classes into
additional series or classes of shares. The Trustees also may divide or combine
the shares of a class into a greater or lesser number of shares without changing
the proportionate beneficial interest of a shareholder in the Fund. Shares do
not have cumulative voting rights or preemptive or subscription rights. Shares
may be voted in person or by proxy at shareholder meetings.
|X| Meetings of Shareholders. As a Massachusetts business trust, the Fund
is not required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders.
The Trustees will call a meeting of shareholders to vote on the removal of
a Trustee upon the written request of the record holders of 10% of its
outstanding shares. If the Trustees receive a request from at least 10
shareholders stating that they wish to communicate with other shareholders to
request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense. The shareholders making
the request must have been shareholders for at least six months and must hold
shares of the Fund valued at $25,000 or more or constituting at least 1% of the
Fund's outstanding shares, whichever is less, The Trustees may take such other
action as is permitted under the Investment Company Act.
o Shareholder and Trustee Liability. The Trust's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's or the Trust's obligations. It also provides for indemnification and
reimbursement of expenses out of the Trust's property for any shareholder held
personally liable for its obligations. The Declaration of Trust also states that
upon request, the Trust shall assume the defense of any claim made against a
shareholder for any act or obligation of the Trust and shall satisfy any
judgment on that claim. Massachusetts law permits a shareholder of a business
trust (such as the Trust) to be held personally liable as a "partner" under
certain circumstances. However, the risk that a Fund shareholder will incur
financial loss from being held liable as a "partner" of the Fund's parent Trust
is limited to the relatively remote circumstances in which the Trust would be
unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under the Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. 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
listed below. Trustees denoted with an asterisk (*) below are deemed to be
"interested persons" of the Fund under the Investment Company Act. All of the
Trustees are trustees or directors of the following Denver-based Oppenheimer
funds1:.
1 Ms. Macaskill and Mr. Bowen are not Trustees or Directors of Oppenheimer
Integrity Funds, Panorama Series Fund, Inc. or Oppenheimer Strategic Income
Fund. Messrs. Fossel and Bowen are not Trustees of Centennial New York Tax
Exempt Trust or Managing General Partners of Centennial America Fund, L.P.
Messrs. Armstrong, Cameron, and Marshall are not Trustees or Directors of
any of the Centennial Trusts, Oppenheimer Main Street Funds, Inc. or
Oppenheimer Cash Reserves or Managing General Partners of Centennial
America Fund, L.P. Messrs. Cameron and Marshall are not Trustees or
Directors of Oppenheimer Integrity Funds, Oppenheimer Limited-Term
Government Fund, Oppenheimer Municipal Fund, Panorama Series Fund, Inc., or
Oppenheimer Strategic Income Fund. Additionally, Mr. Marshall is not a
Trustee or Director of Oppenheimer Senior Floating Rate Fund or Oppenheimer
Total Return Fund, Inc.
Oppenheimer Cash Reserves Oppenheimer Senior Floating Rate Fund
Oppenheimer Champion Income Fund Oppenheimer Strategic Income Fund
Oppenheimer Capital Income Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer High Yield Fund Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund Panorama Series Fund, Inc.
Oppenheimer Integrity Funds Centennial America Fund, L. P.
Oppenheimer Limited-Term Government
Fund Centennial California Tax Exempt Trust
Oppenheimer Main Street Funds, Inc. Centennial Government Trust
Oppenheimer Main Street Opportunity
Fund Centennial Money Market Trust
Oppenheimer Main Street Small Cap
Fund Centennial New York Tax Exempt Trust
Oppenheimer Municipal Fund Centennial Tax Exempt Trust
Oppenheimer Real Asset Fund
Ms. Macaskill and Messrs. Bishop, Donohue, Farrar, Wixted and Zack, who
are officers of the Fund, respectively hold the same offices with the other
Denver-based Oppenheimer funds as with the Fund. As of November 1, 2000, the
Trustees and officers of the Fund as a group owned less than 1% of the
outstanding shares of the Fund. The foregoing statement does not reflect
ownership of shares held of record by an employee benefit plan for employees of
the Manager, other than the shares beneficially owned under that plan by the
officers of the Fund listed below. Ms. Macaskill and Mr. Donohue, are trustees
of that plan.
James C. Swain*, Chairman, Chief Executive Officer and Trustee, Age: 67. \
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager (since September 1988); formerly President and a
director of Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager and Chairman of the Board of Shareholder Services,
Inc.
Bridget A. Macaskill*, President and Trustee, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Chairman (since August 2000), Chief Executive Officer (since September 1995) and
a director (since December 1994).of the Manager; President, Chief Executive
Officer and a director (since March 2000) of OFI Private Investments, Inc., an
investment adviser subsidiary of the Manager; Chairman and a director of
Shareholder Services, Inc. (since August 1994) and Shareholder Financial
Services, Inc. (since September 1995), transfer agent subsidiaries of the
Manager; President (since September 1995) and a director (since October 1990) of
Oppenheimer Acquisition Corp., the Manager's parent holding company; President
(since September 1995) and a director (since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding company subsidiary of the Manager;
President and a director (since October 1997) of OppenheimerFunds International
Ltd., an offshore fund management subsidiary of the Manager and of Oppenheimer
Millennium Funds plc; a director of HarbourView Asset Management Corporation
(since July 1991) and of Oppenheimer Real Asset Management, Inc. (since July
1996), investment adviser subsidiaries of the Manager; a director (since April
2000) of OppenheimerFunds Legacy Program, a charitable trust program established
by the Manager; a director of Prudential Corporation plc (a U.K. financial
service company); President and a trustee of other Oppenheimer funds; formerly
President of the Manager (June 1991 - August 2000).
Robert G. Avis*, Trustee, Age: 69.
One North Jefferson Ave., St. Louis, Missouri 63103
Director and President of A.G. Edwards Capital, Inc. (General Partner of
private equity funds), formerly, until March 2000, Chairman, President and
Chief Executive Officer of A.G. Edwards Capital, Inc.; formerly, until March
1999, Vice Chairman and Director of A.G. Edwards and Vice Chairman of A.G.
Edwards & Sons, Inc. (its brokerage company subsidiary); until March 1999,
Chairman of A.G. Edwards Trust Company and A.G.E. Asset Management (investment
advisor); until March 2000, a Director of A.G. Edwards & Sons and A.G. Edwards
Trust Company.
George C. Bowen, Trustee, Age: 64.
9224 Bauer Ct., Lone Tree, Colorado 80124
Formerly (until April 1999) Mr. Bowen held the following positions: 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; Senior Vice President (since
February 1992), Treasurer (since July 1991) Assistant Secretary and a director
(since December 1991) of Centennial Asset Management Corporation; 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.; Vice President, Treasurer and Secretary of
Shareholder Financial Services, Inc. (since November 1989); Assistant Treasurer
of Oppenheimer Acquisition Corp. (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); Treasurer of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997).
Jon S. Fossel, Trustee, Age: 58.
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly (until October 1990) Chairman and a director of the Manager, President
and a director of Oppenheimer Acquisition Corp., the Manager's parent holding
company, and Shareholder Services, Inc. and Shareholder Financial Services,
Inc., transfer agent subsidiaries of the Manager.
Sam Freedman, Trustee, Age: 60.
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly (until October 1994) Chairman and Chief Executive Officer of
OppenheimerFunds Services, Chairman, Chief Executive Officer and a director of
Shareholder Services, Inc., Chairman, Chief Executive Officer and director of
Shareholder Financial Services, Inc., Vice President and director of Oppenheimer
Acquisition Corp. and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee, Age: 71.
44 Portland Drive, St. Louis, Missouri 63131
Formerly a director of Wave Technologies International, Inc. (a computer
products training company), self-employed consultant (securities matters).
C. Howard Kast, Trustee, Age: 78.
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee, Age: 79.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Carol E. Wolf, Vice President and Portfolio Manager, Age: 48
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since June 2000) and Vice President of
Centennial Asset Management Corporation (since June 1990); formerly Vice
President of the Manager (June 1990 - June 2000); an officer of other
Oppenheimer funds.
Andrew J. Donohue, Vice President and Secretary, Age: 50.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a director (since September 1995) of the Manager; Executive Vice
President (since September 1993) and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director (since
September 1995) of HarbourView Asset Management Corporation, Shareholder
Services, Inc., Shareholder Financial Services, Inc. and Oppenheimer Partnership
Holdings, Inc., of OFI Private Investments, Inc. (since March 2000), and of
PIMCO Trust Company (since May 2000); President and a director of Centennial
Asset Management Corporation (since September 1995) and of Oppenheimer Real
Asset Management, Inc. (since July 1996); Vice President and a director (since
September 1997) of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc; a director (since April 2000) of OppenheimerFunds Legacy
Program, a charitable trust program established by the Manager; General Counsel
(since May 1996) and Secretary (since April 1997) of Oppenheimer Acquisition
Corp.; an officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer, Principal Financial and Accounting Officer, Age: 41.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer
(since March 1999) of HarbourView Asset Management Corporation, Shareholder
Services, Inc., Oppenheimer Real Asset Management Corporation, Shareholder
Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc., of OFI
Private Investments, Inc. (since March 2000) and of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since May 2000);
Treasurer and Chief Financial Officer (since May 2000) of PIMCO Trust Company;
Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and of
Centennial Asset Management Corporation; an officer of other Oppenheimer funds;
formerly Principal and Chief Operating Officer, Bankers Trust Company - Mutual
Fund Services Division (March 1995 - March 1999); Vice President and Chief
Financial Officer of CS First Boston Investment Management Corp. (September 1991
- March 1995).
Robert G. Zack, Assistant Secretary, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of Shareholder Services, Inc. (since
May 1985), Shareholder Financial Services, Inc. (since November 1989);
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age: 42.
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: 35.
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.
o Remuneration of Trustees. The officers of the Fund and two of the
Trustees of the Fund (Ms. Macaskill and Mr. Swain) are affiliated with the
Manager and receive no salary or fee from the Fund. The remaining Trustees of
the Fund received the compensation shown below. The compensation from the Fund
was paid during its fiscal year ended July 31, 2000. The compensation from all
of the Denver-based Oppenheimer funds includes the Fund and is compensation
received as a director, trustee or member of a committee of the Board during the
calendar year 1999.
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Total Compensation
from all Denver-Based
Aggregate Compensation Oppenheimer Funds
Trustee's Name and Position from Fund (38 Funds)1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Robert G. Avis $168 $67,998
-----------------------------------------------------------------------------
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George Bowen $100 $23,879
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Jon. S. Fossel
Review Committee Member $174 $66,586
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Sam Freedman
Chairman, Review
Committee $187 $73,998
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Raymond J. Kalinowski $173 $73,248
Former Audit Committee
Member
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
C. Howard Kast $202 $78,873
Chairman, Audit Committee
and Review Committee
Member and
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Robert M. Kirchner $178 $69,248
Audit Committee Member
-----------------------------------------------------------------------------
* Effective July 1, 2000 William A. Baker and Ned M. Steel resigned as
Trustees of the Fund and subsequently became Trustees Emeritus of the Fund.
For the fiscal year ended July 31, 2000 Messrs. Baker and Steele each received
$147 aggregate compensation from the Fund and for the calendar year ended
December 31, 1999, they each received $67,998 total compensation from all
Denver-based Oppenheimer funds.
1. For the 1999 calendar year.
o Deferred Compensation Plan for Trustees. The Board of Trustees has
adopted a Deferred Compensation Plan for disinterested Trustees that enables
them to elect to defer receipt of all or a portion of the annual fees they are
entitled to receive from the Fund. Under the plan, the compensation deferred by
a Trustee is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Trustee. The
amount paid to the Trustee under this plan will be determined based upon the
performance of the selected funds.
Deferral of Trustees' fees under this plan will not materially affect the
Fund's assets, liabilities or net income per share. This plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under this plan without shareholder approval for the limited purpose of
determining the value of the Trustees' deferred fee accounts.
o Major Shareholders. As of November 1, 2000 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. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the Distributor have a Code
of Ethics. It is designed to detect and prevent improper personal trading by
certain employees, including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
The portfolio manager of the Fund is principally responsible for the
day-to-day management of the Fund's investment portfolio. Other members of the
Manager's fixed-income portfolio department, particularly security analysts,
traders and other portfolio managers, have broad experience with fixed-income
securities. They provide the Fund's portfolio manager with research and support
in managing the Fund's investments.
o The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The agreement requires
the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment. It also requires the Manager to provide and supervise
the activities of all administrative and clerical personnel required to provide
effective administration for the Fund. Those responsibilities include the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy materials
and registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the investment
advisory agreement are paid by the Fund. The investment advisory agreement lists
examples of expenses paid by the Fund. The major categories relate to interest,
taxes, fees to unaffiliated Trustees, legal and audit expenses, custodian bank
and transfer agent expenses, share issuance costs, certain printing and
registration costs and non-recurring expenses, including litigation costs. The
management fees paid by the Fund to the Manager are calculated at the rates
described in the Prospectus.
-----------------------------------------------------------------------------
Fiscal Year ended 7/31 Management Fee Paid to OppenheimerFunds, Inc.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1998 $1,368,194
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1999 $2,211,132
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2000 $2,880,791
-----------------------------------------------------------------------------
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss the Fund sustains for any
investment, adoption of any investment policy, or the purchase, sale or
retention of any security.
The agreement permits the Manager to act as investment advisor for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
advisor or general distributor. If the Manager shall no longer act as investment
advisor to the Fund, the Manager may withdraw the right of the Fund to use the
name "Oppenheimer" as part of its name.
Portfolio Transactions. Portfolio decisions are based upon recommendations and
judgment of the Manager subject to the overall authority of the Board of
Trustees. Most purchases made by the Fund are principal transactions at net
prices, so the Fund incurs little or no brokerage costs. The Fund deals directly
with the selling or purchasing principal or market maker without incurring
charges for the services of a broker on its behalf unless the Manager determines
that a better price or execution may be obtained by using the services of a
broker. Purchases of portfolio securities from underwriters include a commission
or concession paid by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked prices.
The Fund seeks to obtain prompt execution of orders at the most favorable
net price. If dealers are used for portfolio transactions, transactions may be
directed to dealers for their execution and research services. The research
services provided by a particular broker may be useful only to one or more of
the advisory accounts of the Manager and its affiliates. Investment research
received for the commissions of those other accounts may be useful both to the
Fund and one or more of such other accounts. Investment research services may be
supplied to the Manager by a third party at the instance of a broker through
which trades are placed. It may include information and analyses on particular
companies and industries as well as market or economic trends and portfolio
strategy, receipt of market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research
service also assists the Manager in a non-research capacity (such as bookkeeping
or other administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making process may
be paid in commission dollars.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager. That research provides additional views
and comparisons for consideration, and helps the Manager obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase.
Subject to applicable rules covering the Manager's activities in this
area, sales of shares of the Fund and/or the other investment companies managed
by the Manager or distributed by the Distributor may also be considered as a
factor in the direction of transactions to dealers. That must be done in
conformity with the price, execution and other considerations and practices
discussed above. Those other investment companies may also give similar
consideration relating to the sale of the Fund's shares. 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 maturity
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
small, high turnover does not have an appreciable adverse effect upon the income
of the Fund.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the different classes of shares of the Fund. The Distributor bears
the expenses normally attributable to sales, including advertising and the cost
of printing and mailing prospectuses, other than those furnished to existing
shareholders. The Distributor is not obligated to sell a specific number of
shares. Expenses normally attributable to sales are borne by the Distributor,
except those paid by the Fund under its Distribution and Service Plans described
below.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below. Class N shares were not publicly offered
during the Fund's fiscal years depicted and therefore are not included in any of
the charts located in this section of the Statement of Additional Information.
<PAGE>
-----------------------------------------------------------
Fiscal Concessions on Class B Concessions on Class
Year
Ended Shares Advanced by C Shares Advanced by
7/31: Distributor1 Distributor1
-----------------------------------------------------------
-----------------------------------------------------------
1998 $457,869 $9,700
-----------------------------------------------------------
-----------------------------------------------------------
1999 $808,752 $35,422
-----------------------------------------------------------
-----------------------------------------------------------
2000 $1,182,200 $64,478
-----------------------------------------------------------
1. The Distributor advances concession payments to dealers for sales of
Class B and Class C shares from its own resources at the time of
sale.
----------------------------------------------------------------
Fiscal Class A Class B Class C
Contingent Contingent
Deferred Sales Contingent Deferred Sales
Charges Deferred Sales Charges
Year Retained by Charges Retained Retained by
Ended 7/31 Distributor by Distributor Distributor
----------------------------------------------------------------
----------------------------------------------------------------
2000 $217,971 $730,451 $21,157
----------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class
Each plan has been approved by a vote of the Board of Trustees, including
a majority of the Independent Trustees2, cast in person at a meeting called for
the purpose of voting on that plan.
2 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers
to those Trustees who are not "interested persons" of the Fund (or its
parent corporation) and who do not have any direct or indirect financial
interest in the operation of the distribution plan or any agreement under
the plan.
Under the plans, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time, may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use its profits from the advisory fee it receives
from the Fund. In their sole discretion, the Distributor and the Manager may
increase or decrease the amount of payments they make from their own resources
to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A plan may be terminated at any time by the vote
of a majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A plan that would materially increase payments under the plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each plan states that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund is
committed to the discretion of the Independent Trustees. This does not prevent
the involvement of others in the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plans for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
o Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. The Class A
service plan permits reimbursements to the Distributor at a rate of up to 0.20%
of average annual net assets of Class A shares. While the plan permits the Board
to authorize payments to the Distributor to reimburse itself for services under
the plan, the Board has not yet done so. The Distributor makes payments to plan
recipients quarterly at an annual rate not to exceed 0.20% of the average annual
net assets consisting of Class A shares held in the accounts of the recipients
or their customers.
For the fiscal year ended July 31, 2000 payments under the Class A Plan
totaled $612,817, all of which was paid by the Distributor to recipients. That
included $109,502 paid to an affiliate of the Distributor's parent company. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent years. The Distributor may not
use payments received under the Class A Plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.
o Class B, Class C and Class N Service and Distribution Plan Fees. Under
each plan, service fees and distribution fees are computed on the average of the
net asset value of shares in the respective class, determined as of the close of
each regular business day during the period. Each plan provides provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid. The types of services that
recipients provide are similar to the services provided under the Class A
service plan, described above.
Each Plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly
basis, without payment in advance. Currently, the Board of Trustees has not
authorized the payment of the service fee.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing concession to the recipient on Class C shares outstanding for a
year or more. The Distributor retains the asset based sales charge on Class N
shares. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B, Class C or Class N service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
concessions and service fee in advance at the time of purchase.
The asset-based sales charges on Class B, Class C and Class N shares allow
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund pays the
asset-based sales charges to the Distributor for its services rendered in
distributing Class B, Class C and Class N shares. The payments are made to the
Distributor in recognition that the Distributor:
o pays a sales concession to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales concessions and/or the advance of the
service fee payment to recipients under the plans, or may provide such
financing from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B, Class C and Class N
shares, and
o bears the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue
sky" registration fees and certain other distribution expenses.
The Distributor's actual expenses in selling Class B, Class C and Class N
shares may be more than the payments it receives from the contingent deferred
sales charges collected on redeemed shares and from the Fund under the plans. If
the Class B, Class C or Class N plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales charge
to the Distributor for distributing shares before the plan was terminated.
-------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 7/31/00
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Unreimbursed
Aggregate Expenses as %
Payments Retained by Unreimbursed of Net Assets
Under Plan Distributor Expenses Under Plan of Class
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Plan $1,696,419 $1,696,467 $0 NONE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Plan $447,175 $447,261 $0 NONE
--------------------------------------------------------------------------------
All payments under the Class B, Class C and Class N plans are subject to
the limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "yield," "compounded effective
yield" and "average annual total return." An explanation of how yields and total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1.800.525.7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. If the fund shows total returns in addition to its yields, the
returns must be for the 1-, 5- and 10-year periods ending as of the most recent
calendar quarter prior to the publication of the advertisement (or its
submission for publication).
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparisons with other
investments:
o Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the
performance of each shareholder's account. Your account's performance
will vary from the model performance data if your dividends are
received in cash, or you buy or sell shares during the period, or you
bought your shares at a different time than the shares used in the
model.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The Fund's yield is not fixed or guaranteed and will fluctuate.
o Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future yields or returns.
o Yields. The Fund's current yield is calculated for a seven-day period of
time as follows. First, a base period return is calculated for the seven-day
period by determining the net change in the value of a hypothetical pre-existing
account having one share at the beginning of the seven-day period. The change
includes dividends declared on the original share and dividends declared on any
shares purchased with dividends on that share, but such dividends are adjusted
to exclude any realized or unrealized capital gains or losses affecting the
dividends declared. Next, the base period return is multiplied by 365/7 to
obtain the current yield to the nearest hundredth of one percent.
The compounded effective yield for a seven-day period is calculated by
(1) adding 1 to the base period return (obtained as described above),
(2) raising the sum to a power equal to 365 divided by 7, and
(3) subtracting 1 from the result.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. The calculation of yield under either
procedure described above does not take into consideration any realized or
unrealized gains or losses on the Fund's portfolio securities which may affect
dividends. Therefore, the return on dividends declared during a period may not
be the same on an annualized basis as the yield for that period.
o Total Return Information. There are different types of "total returns"
to measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. The cumulative
total return measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show actual
year-by-year performance. The Fund uses standardized calculations for its total
returns as prescribed by the SEC. The methodology is discussed below.
In calculating total returns for Class B shares, payment of the applicable
contingent deferred sales charge is applied, depending on the period for which
the return is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in
the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year and
none thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period. . For Class N on shares, the 1%
contingent deferred sales charge is deducted for returns for the 1-year and
life-of-class periods, as applicable.
o Average Annual Total Return. The "average annual total return" of each class
is an average annual compounded rate of return for each year in a specified
number of years. It is the rate of return based on the change in value of a
hypothetical initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV" in the
formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
o Cumulative Total Return. The "cumulative total return" calculation measures
the change in value of a hypothetical investment of $1,000 over an entire period
of years. Its calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual basis.
Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
--------------------------------------------------------------------------------
Class of Shares Yield Compounded Average Annual Total Returns (at
Effective
(7 days Yield
ended (7 days ended
7/31/00) 7/31/00) 7/31/00)*
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1-Year 5 Years 10 Years
(or life of
the class,
if less)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares 5.49% 5.64% 5.10% 4.61% 4.30%1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares 4.94% 5.06% 4.52% 4.01% 3.78%2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares 4.93% 5.05% 4.52% 4.01% 3.79%3
--------------------------------------------------------------------------------
1. Inception of Class A shares: 1/3/89
2. Inception of Class B shares: 8/17/93
3. Inception of Class C shares: 12/1/93
* Class N shares were not offered for sale during the Fund's fiscal year ending
7/31/00.
o Other Performance Comparisons. Yield information may be useful to investors in
reviewing the Fund's performance. The Fund may make comparisons between its
yield and that of other investments, by citing various indices such as The Bank
Rate Monitor National Index (provided by Bank Rate Monitor(TM)) which measures
the average rate paid on bank money market accounts, NOW accounts and
certificates of deposits by the 100 largest banks and thrifts in the top ten
metro areas. When comparing the Fund's yield with that of other investments,
investors should understand that certain other investment alternatives such as
certificates of deposit, U.S. government securities, money market instruments or
bank accounts may provide fixed yields and may be insured or guaranteed.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the Fund cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or the Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of investor/shareholder
services by third parties may compare the services of the Oppenheimer funds to
those of other mutual fund families selected by the rating or ranking services.
They may be based on the opinions of the rating or ranking service itself, based
on its research or judgment, or based on surveys of investors, brokers,
shareholders or others.
--------------------------------------------------------------------------------
<PAGE>
A B O U T Y O U R A C C O U N T
--------------------------------------------------------------------------------
How to Buy Shares
Additional information is presented below about the methods that can be used to
buy shares of the Fund. Appendix C contains more information about the special
sales charge arrangements offered by the Fund, and the circumstances in which
sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives federal
funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange 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 to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employee-sponsored qualified retirement accounts.
Asset Builder Plans also enable shareholders of the Fund to use their account in
the Fund to make monthly automatic purchases of shares of up to four other
Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or your can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
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:
Oppenheimer Bond Fund Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California
Oppenheimer California Municipal Fund Municipal Fund
Oppenheimer Main Street Growth & Income
Oppenheimer Capital Appreciation Fund Fund
Oppenheimer Capital Preservation Fund Oppenheimer Main Street Opportunity Fund
Oppenheimer Capital Income Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Champion Income Fund Oppenheimer MidCap Fund
Oppenheimer Convertible Securities Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund Oppenheimer Municipal Bond Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Emerging Technologies Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Emerging Growth Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Europe Fund Oppenheimer
Quest Opportunity Value Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Quest Small Cap Fund
Oppenheimer Global Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Insured Municipal Fund
Oppenheimer Trinity Core Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Trinity Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Trinity Value Fund
Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust
Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund
Oppenheimer Large Cap Growth Fund
Limited-Term New York Municipal Fund
Rochester Fund Municipals
And the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt
Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds described above except the Fund and the money market
funds. Under certain circumstances described in this Statement of Additional
Information, redemption proceeds of certain money market fund shares may be
subject to a contingent deferred sales charge.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B,
Class C or Class N shares and the dividends payable on Class B, Class C or Class
N shares will be reduced by incremental expenses borne solely by that class.
Those expenses include the asset-based sales charges to which Class B, Class C
and Class N shares are subject.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while that suspension remained
in effect. Although Class B shares could then be exchanged for Class A shares on
the basis of relative net asset value of the two classes, without the imposition
of a sales charge or fee, such exchange could constitute a taxable event for the
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Trustees' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian bank expenses, share issuance costs, organization and
start-up costs, interest, taxes and brokerage commissions, and non-recurring
expenses, such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan fees, transfer and shareholder
servicing agent fees and expenses and shareholder meeting expenses (to the
extent that such expenses pertain only to a specific class).
Determination of Net Asset Value Per Share. The net asset value per share of the
Fund is determined as of the close of business 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 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 announcement (which is subject to
change) states that it will close on New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
The Fund's Board of Trustees has adopted the amortized cost method to
value the Fund's portfolio securities. Under the amortized cost method, a
security is valued initially at its cost and its valuation assumes a constant
amortization of any premium or accretion of any discount, regardless of the
impact of fluctuating interest rates on the market value of the security. This
method does not take into consideration any unrealized capital gains or losses
on securities. While this method provides certainty in valuing securities, in
certain periods the value of a security determined by amortized cost may be
higher or lower than the price the Fund would receive if it sold the security.
The Fund's Board of Trustees has established procedures reasonably
designed to stabilize the Fund's net asset value at $1.00 per share. Those
procedures include a review of the Fund's portfolio holdings by the Board of
Trustees, at intervals it deems appropriate, to determine whether the Fund's net
asset value calculated by using available market quotations deviates from $1.00
per share based on amortized cost.
The Board of Trustees will examine the extent of any deviation between the
Fund's net asset value based upon available market quotations and amortized
cost. If the Fund's net asset value were to deviate from $1.00 by more than
0.5%, Rule 2a-7 requires the Board of Trustees to consider what action, if any,
should be taken. If they find that the extent of the deviation may cause a
material dilution or other unfair effects on shareholders, the Board of Trustees
will take whatever steps it considers appropriate to eliminate or reduce the
dilution, including, among others, withholding or reducing dividends, paying
dividends from capital or capital gains, selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average maturity
of the portfolio, or calculating net asset value per share by using available
market quotations.
During periods of declining interest rates, the daily yield on shares of
the Fund may tend to be lower (and net investment income and dividends higher)
than those of a fund holding the identical investments as the Fund but which
used a method of portfolio valuation based on market prices or estimates of
market prices. During periods of rising interest rates, the daily yield of the
Fund would tend to be higher and its aggregate value lower than that of an
identical portfolio using market price valuation.
How to Sell Shares
The information below supplements the terms and conditions for redeeming shares
set forth in the Prospectus.
Checkwriting. When a check is presented to 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 bank. 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.
In choosing to take advantage of the checkwriting privilege, by signing
the account application or by completing a checkwriting card, each individual
who signs:
(1) for individual accounts, represents that they are the registered
owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other entities,
represents that they are an officer, general partner, trustee or other
fiduciary or agent, as applicable, duly authorized to act on behalf of the
registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund's drafts (checks) are payable to pay all checks drawn on the Fund
account of such person(s) and to redeem a sufficient amount of shares from
that account to cover payment of each check;
(4) specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against joint
accounts, or accounts for corporations, partnerships, trusts or other
entities, the signature of any one signatory on a check will be sufficient
to authorize payment of that check and redemption from the account, even
if that account is registered in the names of more than one person or more
than one authorized signature appears on the checkwriting card or the
application, as applicable;
(5) understands that the checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank shall incur any
liability for that amendment or termination of checkwriting privileges or
for redeeming shares to pay checks reasonably believed by them to be
genuine, or for returning or not paying checks that have not been accepted
for any reason.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of Class A shares that were
purchased by exchange of Class A shares of another Oppenheimer fund on which an
initial sales charge was paid or Class A or Class B shares on which a contingent
deferred sales charge was paid.
The reinvestment may be made without sales charge only in Class A shares
of any of the other Oppenheimer funds into which shares of the Fund are
exchangeable as described in "How to Exchange Shares" below. Reinvestment will
be at the net asset value next computed after the Transfer Agent receives the
reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
or Class N shares. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on that
gain. If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested of another of the
Oppenheimer funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed may not include
the amount of the sales charge paid. That would reduce the loss or increase the
gain recognized from the redemption. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of the
redemption proceeds.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, under unusual circumstances, the
Board of Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of liquid
securities from the portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any
90-day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage or other costs in selling the
securities for cash. The Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $200. The Board will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of such shares has fallen below the stated minimum solely as a result of market
fluctuations. If the Board exercises this right, it may also fix the
requirements for any notice to be given to the shareholders in question (not
less than 30 days). The Board may alternatively set requirements for the
shareholder to increase the investment, or set other terms and conditions so
that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, shares are not
subject to the payment of a contingent deferred sales charge of any class at the
time of transfer to the name of another person or entity. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B, Class C
or Class N contingent deferred sales charge will be followed in determining the
order in which shares are transferred.
Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds 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 Federal Funds wire.
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
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution
is premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign the
request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed and submitted to the Transfer Agent
before the distribution may be made. Distributions from retirement plans are
subject to withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be withheld
from any distribution even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the conditions of
applicable tax laws and will not be responsible for any tax penalties assessed
in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. Shareholders should contact their
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The 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 customers prior
to the time the Exchange closes. Normally the Exchange closes at 4:00 P.M.
Additionally, the order must have been transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form. The signature(s) of the registered owner(s) on the redemption
document must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the shareholder for
receipt of the payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable to all
shareholders of record. Payments must also be sent to the address of record for
the account and the address must not have been changed within the prior 30 days.
Required minimum distributions from OppenheimerFunds-sponsored retirement plans
may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges may arrange to have Automatic Withdrawal Plan payments transferred to
the bank account designated on the account application or signature-guaranteed
instructions sent to the Transfer Agent. Shares are normally redeemed pursuant
to an Automatic Withdrawal Plan three business days before the payment
transmittal date you select in the account application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of a payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Class B, Class C and Class N
shareholders should not establish withdrawal plans, because of the potential
imposition of the contingent deferred sales charge on such withdrawals (except
where the Class B or Class C contingent deferred sales charge is waived as
described in Appendix C to this Statement of Additional Information).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Instructions should be
provided on the account application or signature-guaranteed instructions.
Exchanges made under these plans are subject to the restrictions that apply to
exchanges as set forth in "How to Exchange Shares" in the Prospectus and below
in this Statement of Additional Information.
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. Shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the
Transfer Agent nor the Fund shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Transfer Agent will credit all such shares to
the account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments of
the proceeds of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment according to the
choice specified in writing by the Planholder. Receipt of payment on the date
selected cannot be guaranteed.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. 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 Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed from the account will be held in uncertificated form in the
name of the Planholder. The account will continue as a dividend-reinvestment,
uncertificated account unless and until proper instructions are received from
the Planholder, his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer funds
having more than one class of shares may be exchanged only for shares of the
same class of other Oppenheimer funds. Shares of Oppenheimer Money Market Fund,
Inc. are deemed to be "Class A Shares" for this purpose. You can obtain a
current list of funds showing which funds offer which classes by calling the
Distributor at 1.800.525.7048.
o All of the Oppenheimer funds currently 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, Centennial California Tax Exempt Trust, and
Centennial America Fund, L.P., which only offer Class A shares.
o Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares.
o Class B, Class C and Class N shares of Oppenheimer Cash Reserves are
generally available only by exchange from the same class of shares of
other Oppenheimer funds or through OppenheimerFunds-sponsored 401(k) and
individual retirement plans.
o Only certain Oppenheimer funds currently offer Class Y shares. Class Y
shares of Oppenheimer Real Asset Fund may not be exchanged for shares of
any other fund.
o Only certain Oppenheimer funds currently offer Class N shares, which are
only offered to retirement plans as described in the Prospectus. Class N
shares can be exchanged only for Class N shares of other Oppenheimer
funds.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be
acquired by exchange of shares of any class of any other Oppenheimer funds
except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash
Reserves acquired by exchange of Class M shares.
o Class A shares of Senior Floating Rate Fund are not available by exchange
of Class A shares of other Oppenheimer funds. Class A shares of Senior
Floating Rate Fund that are exchanged for shares of the other Oppenheimer
funds may not be exchanged back for Class A shares of Senior Floating Rate
Fund.
o Class X shares of Limited Term New York Municipal Fund can be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may be
made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves
or Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available
by exchange of shares of Oppenheimer Money Market Fund or Class A shares of
Oppenheimer Cash Reserves. If any Class A shares of another Oppenheimer
fund that are exchanged for Class A shares of Oppenheimer Senior Floating
Rate Fund are subject to the Class A contingent deferred sales charge of
the other Oppenheimer fund at the time of exchange, the holding period for
that Class A contingent deferred sales charge will carry over to the Class
A shares of Oppenheimer Senior Floating Rate Fund acquired in the exchange.
The Class A shares of Oppenheimer Senior Floating Rate Fund acquired in
that exchange will be subject to the Class A Early Withdrawal Charge of
Oppenheimer Senior Floating Rate Fund if they are repurchased before the
expiration of the holding period.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares of any
money market fund purchased without a sales charge may be exchanged for shares
of Oppenheimer funds offered with a sales charge upon payment of the sales
charge. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
Shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds managed by
the Manager or its subsidiaries) redeemed within the 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. To qualify for that privilege, the investor or the investor's dealer
must notify the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased. If requested, they
must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by applicable
law. It may be required to provide 60 days notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares of
this Fund acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are redeemed
within 18 months of the end of the calendar month of the initial purchase of the
exchanged Class A shares, the Class A contingent deferred sales charge is
imposed on the redeemed shares. The Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within 6
years of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares. A contingent deferred sales charge of 1.00% will be
imposed if the retirement plan is terminated or Class N shares of all
Oppenheimer funds are terminated as an investment option of the plan and you
redeem your shares within 18 months after the plan's first purchase of Class N
shares of any Oppenheimer fund or with respect to an individual retirement plan,
if you redeem your shares within 18 months of the plan's first purchase of Class
N shares of any Oppenheimer fund.
When Class B, Class C or Class N shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the Prospectus for
the imposition of the Class B, Class C or Class N contingent deferred sales
charge will be followed in determining the order in which the shares are
exchanged. Before exchanging shares, shareholders should take into account how
the exchange may affect any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify which class of shares they wish to
exchange.
|X| Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investor must obtain a prospectus of that fund before
the exchange request may be submitted. If all telephone lines are busy (which
might occur, for example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone and would have
to submit written exchange requests.
|X| Processing Exchange Requests. Shares to be exchanged are redeemed on
the regular business day the Transfer Agent receives an exchange request in
proper form (the "Redemption Date"). Normally, shares of the fund to be acquired
are purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The Fund
reserves the right, in its discretion, to refuse any exchange request that may
disadvantage it (for example, if the receipt of multiple exchange requests from
a dealer might require the disposition of portfolio securities at a time or at a
price that might be disadvantageous to the Fund). When you exchange some or all
of your shares from one fund to another, any special account features such as an
Asset Builder Plan or an Automatic Withdrawal Plan, will be switched to the new
account unless you tell the Transfer Agent not to do so. However, special
redemption and exchange features cannot be switched to an account in Oppenheimer
Senior Floating Rate Fund.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered by a share
certificate that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that the
fund selected is appropriate for his or her investment and should be aware of
the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. The Fund, the Distributor, and the Transfer Agent
are unable to provide investment, tax or legal advice to a shareholder in
connection with an exchange request or any other investment transaction.
Dividends and Taxes
The Fund has no fixed dividend rate and there can be no assurance as to the
payment of any dividends or the realization of any capital gains. The dividends
and distributions paid by a class of shares will vary from time to time
depending on market conditions, the composition of the Fund's portfolio, and
expenses borne by the Fund or borne separately by a class. Dividends are
calculated in the same manner, at the same time, and on the same day for each
class of shares. However, dividends on Class B, Class C and Class N shares are
expected to be lower than dividends on Class A. That is because of the effect of
the asset-based sales charge on Class B, Class C and Class N shares.
Dividends, distributions and proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.
Reinvestment will be made as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends 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. It if does not, the Fund must pay an
excise tax on the amounts not distributed. It is presently anticipated that the
Fund will meet those requirements. However, the Fund's Board of Trustees 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 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. The Fund's dividends will not be eligible for the
dividends-received deduction for corporations.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends and distributions. That qualification enables the Fund
to "pass through" its income and realized capital gains to shareholders without
having to pay tax on them. The Fund qualified as a regulated investment company
in its last fiscal year and intends to qualify in future years, but reserves the
right not to qualify. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund qualifies. The Fund might not meet those
tests in a particular year. If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction for
payments of dividends and distributions made to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in the same class of
any of the other Oppenheimer funds listed above. Reinvestment for Class B, Class
C and Class N will be made at net asset value without sales charge. Reinvestment
for Class A shares will be subject to the initial sales charge of the fund
selected. To elect this option, the shareholder must notify the Transfer Agent
in writing and must have an existing account in the fund selected for
reinvestment. Otherwise, the shareholder first must obtain a prospectus for that
fund and an application from the Distributor to establish an account. The
investment will be made at net asset value in effect at the close of business on
the payable date of the dividend or distribution. Dividends and/or distributions
from shares of certain other Oppenheimer funds may be invested in shares of this
Fund on the same basis.
Additional Information About the Fund
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders of the Fund. It also handles
shareholder servicing and administrative functions. It is paid on a "at-cost"
basis.
The Custodian. Citibank, N.A. is the custodian bank of the Fund's assets. The
custodian bank's responsibilities include safeguarding and controlling the
Fund's portfolio securities and handling the delivery of such securities to and
from the Fund. It will be the practice of the Fund to deal with the custodian
bank in a manner uninfluenced by any banking relationship the custodian bank may
have with the Manager and its affiliates. The Fund's cash balances with the
custodian bank in excess of $100,000 are not protected by federal deposit
insurance. Those uninsured balances at times may be substantial.
Independent Auditors. Deloitte & Touche llp are the independent auditors of the
Fund. They audit the Fund's financial statements and perform other related audit
services. They also ct as auditors for the Manager and certain other funds
advised by the Manager and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
================================================================================
To the Board of Trustees and Shareholders of
Oppenheimer Cash Reserves:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Cash Reserves, including the statement of investments, as of July
31, 2000, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the period January 1, 1995, to July 31,
2000. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 2000, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer Cash Reserves as of July 31, 2000, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for the period January 1,
1995, to July 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Denver, Colorado
August 21, 2000
<PAGE>
STATEMENT OF INVESTMENTS July 31, 2000
<TABLE>
<CAPTION>
Principal Value
Amount See Note 1
==================================================================================
<S> <C> <C>
Direct Bank Obligations--3.5%
----------------------------------------------------------------------------------
Bank of America N.A.:
6.66%, 10/13/00 $ 7,000,000 $ 7,000,000
----------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce:
6.66%, 10/18/00 12,000,000 12,000,000
-----------
Total Direct Bank Obligations 19,000,000
==================================================================================
Letters of Credit--14.4%
----------------------------------------------------------------------------------
Abbey National plc, guaranteeing commercial paper of Abbey National North
America:
6.52%, 10/24/00 7,800,000 7,681,336
----------------------------------------------------------------------------------
ABN Amro Bank NV, guaranteeing commercial paper of LaSalle Bank NA:
6.78%, 8/30/00 15,000,000 15,000,000
----------------------------------------------------------------------------------
Barclays Bank plc, guaranteeing commercial paper of Banco del Istmo SA:
6.60%, 10/10/00 10,000,000 9,871,667
----------------------------------------------------------------------------------
Credit Local de France, guaranteeing commercial paper of Dexia CLF Finance Co.:
6.59%, 9/13/001 10,000,000 9,921,286
----------------------------------------------------------------------------------
Credit Suisse First Boston, guaranteeing commercial paper of Credit Suisse
First Boston, Inc.:
6.60%, 9/15/001 5,000,000 4,958,750
----------------------------------------------------------------------------------
First Union Corp., guaranteeing commercial
paper of First Union National Bank:
6.62%, 5/17/01(2) 10,000,000 10,000,000
----------------------------------------------------------------------------------
Keycorp, guaranteeing commercial paper of Key Bank NA:
6.62%, 5/11/01(2) 10,000,000 9,998,449
----------------------------------------------------------------------------------
Societe Generale, guaranteeing commercial
paper of Societe Generale North America:
6.60%, 9/8/00 10,000,000 9,930,334
-----------
Total Letters of Credit 77,361,822
==================================================================================
Short-Term Notes--81.3%
----------------------------------------------------------------------------------
Aerospace/Defense--2.4%
Honeywell International, Inc.:
6.63%, 11/13/00 13,000,000 12,751,007
----------------------------------------------------------------------------------
Asset-Backed--10.6% AriesOne Metafolio Corp.:
6.58%, 8/8/00(1) 9,000,000 8,988,502
----------------------------------------------------------------------------------
Asset Backed Capital Finance, Inc.:
6.63%, 9/11/00(1) 5,000,000 4,962,246
----------------------------------------------------------------------------------
Breeds Hill Capital Co. LLC, Series A:
6.64%, 9/18/00(1) 8,000,000 7,929,173
----------------------------------------------------------------------------------
Moriarty Ltd.:
6.57%, 10/20/00(1) 10,000,000 9,854,000
6 | OPPENHEIMER CASH RESERVES
<PAGE>
Principal Value
Amount See Note 1
----------------------------------------------------------------------------------
Asset-Backed Continued
Scaldis Capital LLC:
6.62%, 9/14/00(1) $ 8,000,000 $ 7,935,271
----------------------------------------------------------------------------------
Sigma Finance, Inc.:
6.60%, 8/30/00(1) 3,000,000 2,984,050
6.65%, 10/2/00(1) 5,000,000 4,942,736
6.68%, 9/1/00(1) 3,500,000 3,479,867
----------------------------------------------------------------------------------
VVR Funding LLC:
6.63%, 8/4/00(1) 6,000,000 5,996,710
-----------
57,072,555
----------------------------------------------------------------------------------
Automotive--2.2% DaimlerChrysler NA Holdings:
6.61%, 11/20/00 12,000,000 11,755,430
----------------------------------------------------------------------------------
Banks--2.2%
Wells Fargo Co.:
6.52%, 10/23/00 12,000,000 11,819,613
----------------------------------------------------------------------------------
Beverages--1.8%
Coca-Cola Enterprises, Inc.:
6.52%, 10/17/00(1) 10,000,000 9,860,544
----------------------------------------------------------------------------------
Broker/Dealers--10.9% Banc of America Securities LLC:
6.887%, 8/1/00(2) 15,000,000 15,000,000
----------------------------------------------------------------------------------
Bear Stearns Cos., Inc.:
6.679%, 2/14/01(2) 8,000,000 8,000,000
----------------------------------------------------------------------------------
Goldman Sachs Group LP:
6.90%, 12/4/00 4,000,000 4,000,000
----------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.:
6.60%, 7/5/01(2) 13,000,000 12,995,171
----------------------------------------------------------------------------------
Morgan Stanley, Dean Witter & Co.:
6.59%, 9/11/00 3,000,000 2,977,484
6.688%, 6/8/01(2) 3,700,000 3,700,000
----------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc.:
6.50%, 8/3/00 12,000,000 11,995,667
-----------
58,668,322
----------------------------------------------------------------------------------
Commercial Finance--7.0%
CIT Group, Inc.:
6.63%, 10/25/00 13,000,000 12,796,496
----------------------------------------------------------------------------------
Countrywide Home Loans, Series H:
6.70%, 5/21/01(2) 13,000,000 12,998,980
----------------------------------------------------------------------------------
Homeside Lending, Inc.:
6.52%, 8/11/00 12,000,000 11,978,267
-----------
37,773,743
7 | OPPENHEIMER CASH RESERVES
<PAGE>
STATEMENT OF INVESTMENTS Continued
Principal Value
Amount See Note 1
----------------------------------------------------------------------------------
Consumer Services--3.2%
Block Financial Corp.:
6.57%, 8/29/00(1) $ 6,000,000 $ 5,969,340
6.58%, 8/18/00(1) 7,000,000 6,978,249
----------------------------------------------------------------------------------
Prudential Funding Corp.:
6.66%, 8/30/00 4,500,000 4,475,858
-----------
17,423,447
----------------------------------------------------------------------------------
Diversified Financial--12.7%
Associates Corp. of North America:
6.65%, 8/1/00 23,620,000 23,620,000
----------------------------------------------------------------------------------
Ford Motor Credit Co.:
6.52%, 8/9/00 10,000,000 9,985,511
----------------------------------------------------------------------------------
GE Capital International Funding, Inc.:
6.62%, 10/11/00(1) 10,000,000 9,869,439
----------------------------------------------------------------------------------
General Electric Capital Corp.:
6.68%, 8/30/00 3,000,000 2,983,857
----------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance Corp.:
6.66%, 8/17/00 12,000,000 11,964,480
----------------------------------------------------------------------------------
Textron Financial Corp.:
6.55%, 10/4/00 10,000,000 9,883,556
-----------
68,306,843
----------------------------------------------------------------------------------
Electric Utilities--2.2%
Ameren Corp.:
6.53%, 8/24/00 12,000,000 11,949,860
----------------------------------------------------------------------------------
Insurance--12.0%
Aegon Funding Corp.:
6.59%, 9/8/00(1) 5,000,000 4,965,167
6.62%, 12/7/00(1) 5,000,000 4,882,311
----------------------------------------------------------------------------------
AIG Life Insurance Co.:
6.645%, 5/31/01(2,3) 7,000,000 7,000,000
----------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers, Inc., Series A:
6.63%, 9/15/00 3,000,000 2,975,138
6.64%, 9/11/00 5,000,000 4,962,189
----------------------------------------------------------------------------------
Metropolitan Life Insurance Co.:
6.895%, 8/1/00(2) 13,000,000 13,000,000
----------------------------------------------------------------------------------
Pacific Life Insurance Co.:
6.661%, 8/1/00(2,3) 5,000,000 5,000,000
----------------------------------------------------------------------------------
Prudential Life Insurance Co.:
6.78%, 10/2/00(2) 10,000,000 10,000,000
----------------------------------------------------------------------------------
Teachers Insurance & Annuity Assn. of America:
6.62%, 8/1/00(1) 12,000,000 12,000,000
-----------
64,784,805
8 | OPPENHEIMER CASH RESERVES
<PAGE>
Principal Value
Amount See Note 1
----------------------------------------------------------------------------------
Leasing & Factoring--2.4%
American Honda Finance Corp.:
6.613%, 2/16/01(2,4) $13,000,000 $ 12,997,915
----------------------------------------------------------------------------------
Manufacturing--2.4%
Eaton Corp.:
6.50%, 8/3/00(1) 5,000,000 4,998,194
6.70%, 11/8/00(1) 8,000,000 7,852,600
------------
12,850,794
----------------------------------------------------------------------------------
Special Purpose Financial--2.2%
Forrestal Funding Master Trust, Series 1999-A:
6.60%, 8/11/00(4) 5,000,000 4,990,833
----------------------------------------------------------------------------------
KZH-KMS Corp.:
6.54%, 8/16/00(1) 7,150,000 7,130,516
------------
12,121,349
----------------------------------------------------------------------------------
Telecommunications: Technology--5.2%
Alcatel SA:
6.57%, 8/7/00(1) 5,000,000 4,994,525
6.60%, 9/7/00(1) 5,000,000 4,966,083
----------------------------------------------------------------------------------
SBC Communications, Inc.:
6.55%, 8/3/00(1) 5,000,000 4,998,181
----------------------------------------------------------------------------------
Vodafone Air Touch plc-MTC:
6.57%, 8/14/00(1) 13,000,000 12,969,158
------------
27,927,947
----------------------------------------------------------------------------------
Telephone Utilities--1.9%
AT&T Corp.:
6.752%, 7/13/01(1,2) 10,000,000 10,000,000
------------
Total Short-Term Notes 438,064,174
----------------------------------------------------------------------------------
Total Investments, at Value 99.2% 534,425,996
----------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.8 4,499,528
--------------------------
Net Assets 100.0% $538,925,524
==========================
</TABLE>
Footnotes to Statement of Investments
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. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $184,386,898, or 34.21% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
2. Represents the current interest rate for a variable or increasing rate
security.
3. 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 $12,000,000,
or 2.23% 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.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $17,988,748 or 3.34% of the Fund's
net assets as of July 31, 2000.
See accompanying Notes to Financial Statements.
9 | OPPENHEIMER CASH RESERVES
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES July 31, 2000
<TABLE>
<CAPTION>
==================================================================================
<S> <C>
Assets
Investments, at value--see accompanying statement $534,425,996
----------------------------------------------------------------------------------
Cash 350,761
----------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 17,945,341
Interest 1,033,970
Other 244,092
------------
Total assets 554,000,160
==================================================================================
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 14,275,838
Dividends 614,392
Transfer and shareholder servicing agent fees 50,432
Distribution and service plan fees 50,218
Other 83,756
------------
Total liabilities 15,074,636
--================================================================================
Net Assets $538,925,524
============
==================================================================================
Composition of Net Assets
Paid-in capital $ 538,920,814
----------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 4,710
-------------
Net Assets $538,925,524
=============
==================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $317,198,388 and 317,254,344 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 $172,345,401
and 172,340,768 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 $49,381,735 and 49,380,372 shares of beneficial interest
outstanding) $1.00
</TABLE>
See accompanying Notes to Financial Statements.
10 | OPPENHEIMER CASH RESERVES
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended July 31, 2000
<TABLE>
<CAPTION>
==================================================================================
<S> <C>
Investment Income
Interest $36,116,352
==================================================================================
Expenses
Management fees 2,880,791
----------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 612,817
Class B 1,696,419
Class C 447,175
----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 1,639,463
----------------------------------------------------------------------------------
Shareholder reports 180,646
----------------------------------------------------------------------------------
Registration and filing fees 90,981
----------------------------------------------------------------------------------
Custodian fees and expenses 22,861
----------------------------------------------------------------------------------
Trustees' compensation 1,475
----------------------------------------------------------------------------------
Other 342,182
-----------
Total expenses 7,914,810
Less expenses paid indirectly (6,141)
-----------
Net expenses 7,908,669
==================================================================================
Net Investment Income 28,207,683
==================================================================================
Net Realized Gain on Investments 4,319
==================================================================================
Net Increase in Net Assets Resulting from Operations $28,212,002
</TABLE>
See accompanying Notes to Financial Statements.
11 | OPPENHEIMER CASH RESERVES
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended July 31, 2000 1999
==================================================================================
<S> <C> <C>
Operations
Net investment income $ 28,207,683 $ 17,971,444
----------------------------------------------------------------------------------
Net realized gain 4,319 5,386
---------------------------
Net increase in net assets resulting from operations 28,212,002 17,976,830
==================================================================================
Dividends and/or Distributions to Shareholders
Class A (15,670,808) (10,360,549)
Class B (9,902,934) (6,243,315)
Class C (2,633,941) (1,367,580)
==================================================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Class A 52,564,154 54,152,037
Class B (31,737,646) 124,074,884
Class C (226,153) 31,505,887
==================================================================================
Net Assets
Total increase 20,604,674 209,738,194
----------------------------------------------------------------------------------
Beginning of period 518,320,850 308,582,656
---------------------------
End of period $538,925,524 $518,320,850
===========================
</TABLE>
See accompanying Notes to Financial Statements.
12 | OPPENHEIMER CASH RESERVES
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class A 2000 1999
1998 1997 1996(1) 1995
===================================================================================================================
<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 .04
.04 .04 .03 .05
Dividends and/or distributions
to shareholders (.05) (.04)
(.04) (.04) (.03) (.05)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
$1.00 $1.00 $1.00
======================================================================
===================================================================================================================
Total Return(2) 5.10% 4.30%
4.61% 4.41% 2.68% 4.84%
===================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $317,198 $264,632 $210,477
$172,970 $170,031 $148,529
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $312,440 $245,622 $186,795
$179,948 $149,889 $105,349
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 5.00% 4.22%
4.48% 4.33% 4.47% 4.71%
Expenses 1.06% 1.10%
1.28%(4) 1.29%(4) 1.06%(4) 1.36%(4)
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends 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.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
13 | OPPENHEIMER CASH RESERVES
<PAGE>
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class B 2000 1999
1998 1997 1996(1) 1995
===================================================================================================================
<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
.04 .04 .02 .04
Dividends and/or distributions
to shareholders (.04) (.04)
(.04) (.04) (.02) (.04)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
$1.00 $1.00 $1.00
======================================================================
===================================================================================================================
Total Return(2) 4.52% 3.72%
3.98% 3.82% 2.35% 4.26%
===================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $172,345 $204,081 $80,005
$54,009 $85,573 $37,378
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $225,824 $170,068 $73,003
$67,333 $49,226 $35,360
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 4.40% 3.67%
3.93% 3.78% 3.91% 4.15%
Expenses 1.61% 1.65%
1.83%(4) 1.84%(4) 1.61%(4) 1.92%(4)
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends 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.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER CASH RESERVES
<PAGE>
<TABLE>
<CAPTION>
Year Year
Ended Ended
July 31, Dec. 31,
Class C 2000 1999
1998 1997 1996(1) 1995
===================================================================================================================
<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
.04 .04 .02 .04
Dividends and/or distributions
to shareholders (.04) (.04)
(.04) (.04) (.02) (.04)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
$1.00 $1.00 $1.00
======================================================================
===================================================================================================================
Total Return(2) 4.52% 3.73%
3.99% 3.84% 2.35% 4.21%
===================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $49,382 $49,607 $18,101 $
9,125 $11,717 $5,024
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $59,556 $37,244 $15,297
$10,930 $ 6,333 $6,040
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 4.44% 3.67%
3.94% 3.78% 3.91% 4.12%
Expenses 1.61% 1.65%
1.83%(4) 1.85%(4) 1.61%(4) 1.97%(4)
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends 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.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
15 | 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 an open-end management investment company. The
Fund's investment objective is to seek the maximum current income that is
consistent with stability of principal. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
at their offering price. Class B and Class C shares may be subject to a
contingent deferred sales charge (CDSC). All classes of shares have identical
rights to earnings, assets and voting privileges, except that each class has its
own expenses directly attributable to that class and exclusive voting rights
with respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
--------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued on the basis of amortized
cost, which approximates market value.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
--------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
16 | OPPENHEIMER CASH RESERVES
<PAGE>
--------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of 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, 2000 Year Ended July
31, 1999
Shares Amount Shares
Amount
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Sold 1,263,236,304 $ 1,263,236,304 815,693,381 $
815,693,381
Dividends and/or
distributions reinvested 14,256,928 14,256,928 9,563,996
9,563,996
Redeemed (1,224,929,078) (1,224,929,078) (771,105,340)
(771,105,340)
--------------------------------------------------------------
Net increase 52,564,154 $ 52,564,154 54,152,037 $
54,152,037
==============================================================
-----------------------------------------------------------------------------------------
Class B
Sold 677,633,692 $ 677,633,692 621,748,556 $
621,748,556
Dividends and/or
distributions reinvested 8,397,959 8,397,959 5,154,276
5,154,276
Redeemed (717,769,297) (717,769,297) (502,827,948)
(502,827,948)
--------------------------------------------------------------
Net increase (decrease) (31,737,646) $ (31,737,646) 124,074,884 $
124,074,884
==============================================================
-----------------------------------------------------------------------------------------
Class C
Sold 665,255,346 $ 665,255,346 342,809,992 $
342,809,992
Dividends and/or
distributions reinvested 2,260,243 2,260,243 1,147,452
1,147,452
Redeemed (667,741,742) (667,741,742) (312,451,557)
(312,451,557)
--------------------------------------------------------------
Net increase (decrease) (226,153) $ (226,153) 31,505,887 $
31,505,887
==============================================================
</TABLE>
================================================================================
3. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.50% of
the first $250 million of average annual net assets, 0.475% of the next $250
million, 0.45% of the next $250 million, 0.425% of the next $250 million, and
0.40% of net assets in excess of $1 billion. The Fund's management fee for the
year ended July 31, 2000 was an annualized rate of 0.48%, before any waiver by
the Manager if applicable.
17 | OPPENHEIMER CASH RESERVES
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
3. Fees and Other Transactions with Affiliates Continued
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund on an
"at-cost" basis. OFS also acts as the transfer and shareholder servicing agent
for the other Oppenheimer funds.
--------------------------------------------------------------------------------
Distribution and Service Plan Fees. Under its General Distributor's
Agreement with the Manager, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the different classes of shares
of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
Commissions
Commissions Commissions
on Class A Shares on Class B
Shares on Class C Shares
Year Ended Advanced by Distributor(1) Advanced by
Distributor(1) Advanced by Distributor(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C>
<C> <C>
July 31, 2000 --
$1,182,200 $64,478
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
Class A Class
B Class C
Contingent Deferred Contingent
Deferred Contingent Deferred
Sales Charges Sales
Charges Sales Charges
Year Ended Retained by Distributor Retained by
Distributor Retained by Distributor
----------------------------------------------------------------------------------------------------------------
<S> <C>
<C> <C>
July 31, 2000 $217,971
$730,451 $21,157
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
--------------------------------------------------------------------------------
Class A Service Plan Fees. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.20% of average annual net assets of Class A
shares purchased. The Distributor makes payments to plan recipients quarterly at
an annual rate not to exceed 0.20% of the average annual net assets consisting
of Class A shares of the Fund. For the year ended July 31, 2000, payments under
the Class A plan totaled $612,817, prior to Manager waivers if applicable, all
of which were paid by the Distributor to recipients, and included $109,502 paid
to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs
with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years.
18 | OPPENHEIMER CASH RESERVES
<PAGE>
--------------------------------------------------------------------------------
Class B and Class C Distribution and Service Plan Fees. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and asset-based sales charges from the Fund under
the plans. If any plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended July 31, 2000, were
as follows:
<TABLE>
<CAPTION>
Distributor's
Aggregate
Unreimbursed
Total Payments Amount Retained Expenses
Under Plan by Distributor Under Plan
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Class B Plan $1,696,419 $1,696,467 $--
Class C Plan 447,175 447,261 --
</TABLE>
19 | OPPENHEIMER CASH RESERVES
Appendix A
Description of Securities Ratings
Below is a description of the two highest rating categories for Short Term Debt
and Long Term Debt by the "Nationally-Recognized Statistical Rating
Organizations" which the Manager evaluates in purchasing securities on behalf of
the Fund. The ratings descriptions are based on information supplied by the
ratings organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's")
--------------------------------------------------------------------------------
The following rating designations for commercial paper (defined by Moody's as
promissory obligations not having original maturity in excess of nine months),
are judged by Moody's to be investment grade, and indicate the relative
repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be evidenced by
the following characteristics: (a) leading market positions in well-established
industries; (b) high rates of return on funds employed; (c) conservative
capitalization 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:
MIG 1/VMIG 1: Denotes superior credit quality. Excellent protection is afforded
by established cash flows, highly reliable liquidity support or demonstrated
broad-based access to the market for refinancing..
MIG 2/VMIG 2: Denotes strong credit quality. Margins of protection are ample
although not as large as in the preceding group.
Standard & Poor's Rating Services ("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: Obligation is rated in the highest category. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within this category, a
plus (+) sign designation indicates the obligor's capacity to meet its financial
obligation is extremely strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Strong capacity to pay principal and interest. An issue with a very strong
capacity to pay debt service is given a (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
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+").
Fitch, Inc. ("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:
F1: Highest credit quality. Strongest capacity for timely payment of financial
commitments. May have an added "+" to denote any exceptionally strong credit
feature.
F2: Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of higher
ratings.
THOMSON FINANCIAL BANKWATCH ("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 a very high likelihood that principal and
interest will be paid on a timely basis.
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 Investors Service, Inc. ("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. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Judged to be of high quality by all standards. Together with the "Aaa"
group, they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as with "Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than that of "Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the obligation ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates a ranking in the lower end of
that generic rating category.
Standard & Poor's Rating Services ("S&P")
-------------------------------------------------------------------------------
Bonds (including municipal bonds) are rated as follows:
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The highest rating assigned by S&P. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. A strong capacity to meet its financial commitment on the obligation is
very strong.
Fitch, Inc. ("Fitch")
--------------------------------------------------------------------------------
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated "F-1+".
--------------------------------------------------------------------------------
THOMSON FINANCIAL BANKWATCH ("TBW")
TBW issues the following ratings for companies.
Investment Grade. Long-Term Debt Ratings assigned by TBW also weigh heavily
government ownership and support. The quality of both the company's management
and franchise are of even greater importance in the long-term debt rating
decisions.
AAA: Indicates that the ability to repay principal and interest on a timely
basis is extremely high.
AA: Indicates a very strong ability to repay principal and interest on a timely
basis, with limited incremental risk compared to issuers rated in the highest
category.
Global Issuer Ratings. 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: The company 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.
<PAGE>
Appendix B
--------------------------------------------------------------------------------
Industry Classifications
--------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, (2)
non-qualified deferred compensation plans, (3) employee benefit plans3 (4) Group
Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs, SEP-IRAs,
SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
--------------
1. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."3 This waiver provision applies to:
3 However, that commission will not be paid on purchases of shares in
amounts of $1 million or more (including any right of accumulation) by a
Retirement Plan that pays for the purchase with the redemption proceeds of
Class C shares of one or more Oppenheimer funds held by the Plan for more
than one year.
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases by a Retirement Plan (other than an IRA or 403(b)(7) custodial
plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or total plan
assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment adviser
that has made special arrangements with the Distributor for those
purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement
Plan if the administrator of that Plan has made special
arrangements with the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service agreement
with Merrill Lynch, the Plan must have $3 million or more of its assets
invested in (a) mutual funds, other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or managed by
MLAM (the funds described in (a) and (b) are referred to as "Applicable
Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided under a
contract or arrangement between the Retirement Plan and Merrill Lynch. On
the date the plan sponsor signs the record keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets
(excluding assets invested in money market funds) invested in Applicable
Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs that
agreement, the Plan has 500 or more eligible employees (as determined by
the Merrill Lynch plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1, 1999.
<PAGE>
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers.
Class A shares purchased by the following investors are not subject to any Class
A sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's spouse,
a spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are
included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are
identified as such to the Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the time of purchase that
the purchase is for the purchaser's own account (or for the benefit of
such employee's spouse or minor children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients. Those clients may be charged a
transaction fee by their dealer, broker, bank or advisor for the
purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) who
buy shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and
records of the broker, agent or financial intermediary with which the
Distributor has made such special arrangements . Each of these
investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those
persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this
arrangement) and persons who are directors or trustees of the company
or trust which is the beneficial owner of such accounts.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|-|
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or created
under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
Code), in each case if those purchases are made through a broker,
agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November
24, 1995.
|_| A qualified Retirement Plan that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value
Funds at net asset value, with such shares to be held through
DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions.
Class A shares issued or purchased in the following transactions are not subject
to sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor.
|_| Shares purchased through a broker-dealer that has entered into a special
agreement with the Distributor to allow the broker's customers to purchase and
pay for shares of Oppenheimer funds using the proceeds of shares redeemed in the
prior 30 days from a mutual fund (other than a fund managed by the Manager or
any of its subsidiaries) on which an initial sales charge or contingent deferred
sales charge was paid. This waiver also applies to shares purchased by exchange
of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner. This waiver must be requested when the purchase order is
placed for shares of the Fund, and the Distributor may require evidence of
qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate
acts as sponsor.
C. Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions.
The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases:
|_| To make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established.
(2) To return excess contributions.
(3)
<PAGE>
To return contributions made due to a mistake of fact.
(4) Hardship withdrawals, as defined in the plan.4
4 This provision does not apply to IRAs.
(5) Under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code, or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the Internal
Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.
(9) Separation from service.5
5 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of the
Manager) if the plan has made special arrangements with the
Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases: |_| Shares redeemed involuntarily,
as described in "Shareholder Account Rules and
Policies," in the applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
|-|
<PAGE>
Distributions from Retirement Plans or other employee benefit plans for
any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account.
(3) To return contributions made due to a mistake of fact.
(4) To make hardship withdrawals, as defined in the plan.6
6 This provision does not apply to IRAs.
(5) To make distributions required under a Qualified Domestic Relations Order
or, in the case of an IRA, a divorce or separation agreement described
in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.7
7 This provision does not apply to loans from 403(b)(7) custodial plans.
(9) On account of the participant's separation from service.8
8 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary of the
Manager) offered as an investment option in a Retirement Plan if the
plan has made special arrangements with the Distributor.
(11) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled over
directly to an OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
(13) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2, as long
as the aggregate value of the distributions does not exceed 10% of
the account's value, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan
for an account other than a Retirement Plan, if the aggregate
value of the redeemed shares does not exceed 10% of the account's
value, adjusted annually.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in Section
I.A.) of the Fund, the Manager and its affiliates and retirement plans
established by them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value Fund
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York Tax-Exempt
Income Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt
Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former
Quest for Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if that Association purchased shares of any of the Former Quest for
Value Funds or received a proposal to purchase such shares from OCC Distributors
prior to November 24, 1995.
--------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering Price
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
--------------------------------------------------------------------------------
<PAGE>
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders who were shareholders of the AMA Family of Funds on
February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
|_| Shareholders who acquired shares of any Former Quest for Value Fund
by merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed
10% of the initial value of the account value, adjusted annually,
and
|_| liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required
minimum value of such accounts.
|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the merger
of a Former Quest for Value Fund into the fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| withdrawals under an automatic withdrawal plan (but only for Class B
or Class C shares) where the annual withdrawals do not exceed 10% of
the initial value of the account value; adjusted annually, and
|_| liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required
minimum account value.
A shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are:
(1) persons whose purchases of Class A shares of a Fund and other
Former Connecticut Mutual Funds were $500,000 prior to March 18, 1996,
as a result of direct purchases or purchases pursuant to the Fund's
policies on Combined Purchases or Rights of Accumulation, who still
hold those shares in that Fund or other Former Connecticut Mutual
Funds, and
(2) persons whose intended purchases under a Statement of Intention
entered into prior to March 18, 1996, with the former general
distributor of the Former Connecticut Mutual Funds to purchase shares
valued at $500,000 or more over a 13-month period entitled those
persons to purchase shares at net asset value without being subject
to the Class A initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares:
(1) any purchaser, provided the total initial amount invested in the
Fund or any one or more of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made pursuant to the Combined
Purchases, Statement of Intention and Rights of Accumulation features
available at the time of the initial purchase and such investment is
still held in one or more of the Former Connecticut Mutual Funds or a
Fund into which such Fund merged;
(2) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or more of
the Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other activity,
and the spouses and minor dependent children of such persons, pursuant
to a marketing program between CMFS and such group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund
or any one or more of the Former Connecticut Mutual Funds, provided
the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7)
of the Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a)
or 403(b)(7)of the Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other employee benefit
plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase
of shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class
B shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
(1) dealers, brokers or registered investment advisors that had
entered into an agreement with the Distributor or prior
distributor of the Fund's shares to sell shares to defined
contribution employee retirement plans for which the dealer,
broker, or investment advisor provides administrative services.
|-|
<PAGE>
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Oppenheimer Cash Reserves
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Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
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, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
1234
PX0760.001.1100
