<PAGE>
OPPENHEIMER
Intermediate Tax-Exempt Fund
Prospectus dated August 29, 1995, Revised September 11, 1995
Oppenheimer Intermediate Tax-Exempt Fund (the "Fund") is a series of
Oppenheimer Tax-Exempt Fund. The Fund has the investment objective of
seeking a high level of current income exempt from Federal income tax.
The Fund will, under normal market conditions, invest at least 80% of its
total assets in investment-grade Municipal Securities. See "Investment
Objective and Policies."
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the August 29, 1995 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
OppenheimerFunds logo
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
3 Expenses
5 Overview of the Fund
7 Financial Highlights
10 Investment Objective and Policies
17 How the Fund is Managed
18 Performance of the Fund
A B O U T Y O U R A C C O U N T
22 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
32 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
34 How to Sell Shares
By Mail
By Telephone
Checkwriting
36 How to Exchange Shares
37 Shareholder Account Rules and Policies
39 Dividends, Capital Gains and Taxes
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and account transaction charges. The following tables are provided
to help you understand your direct expenses of investing in the Fund and
your share of the Fund's business operating expenses that you will expect
to bear indirectly.
Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages 22 through 32, for an explanation of how and when these charges
apply.
Class A Class B Class C
Shares Shares Shares
-------------------------------------------------------------------------
Maximum Sales Charge 3.50% None None
on Purchases (as a % of
offering price)
-------------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
-------------------------------------------------------------------------
Deferred Sales Charge None(1) 4% in the first 1% if shares are
(as a % of the lower of year, declining redeemed within
the original purchase to 1% in the 12 months of
price or redemption fifth year and purchase(2)
proceeds) eliminated
thereafter(2)
-------------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3)
-------------------------------------------------------------------------
Exchange Fee None None None
1. If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares," below.
2. See "How to Buy Shares - Class B Shares" and "How to Buy Shares - Class
C Shares," below for more information on the contingent deferred sales
charge.
3. There is a $10 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check or by Automated Clearing House
("ACH") transfer through AccountLink, or for which check writing
privileges are used (see "How To Sell Shares").
Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the
Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds the Fund's portfolio securities, audit fees and legal and other
expenses. Those expenses are detailed in the Fund's Financial Statements
in the Statement of Additional Information.
The numbers in the chart below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The "12b-1 Distribution Plan Fees" for
Class A shares are Service Plan Fees (the maximum fee is 0.25% of average
annual net assets of that class), and for Class B and Class C shares are
the Distribution and Service Plan Fee (the maximum service fee is 0.25%
of average annual net assets of that class) and the asset-based sales
charge of 0.75%. The actual expenses for each class of shares may be more
or less, depending on a number of factors, including the actual amount of
the assets represented by each class of shares. These plans are described
in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be
more or less, depending on a number of factors, including the actual
amount of the assets represented by each class of shares. Class B shares
were not publicly offered prior to August 29, 1995. Therefore, "Other
Expenses" shown for Class B shares are estimates based on amounts that
would have been payable if Class B shares had been outstanding for the
fiscal year ended September 30, 1994.
Class A Class B Class C
Shares Shares Shares
--------------------------------------------------------------------------
Management Fees 0.50% 0.50% 0.50%
--------------------------------------------------------------------------
12b-1 Distribution 0.25% 1.00% 1.00%
Plan Fees
--------------------------------------------------------------------------
Other Expenses 0.25% 0.74% 0.74%
--------------------------------------------------------------------------
Total Fund Operating 1.00% 2.24% 2.24%
Expenses
Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the chart above.
If you were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of each
period shown:
1 year 3 years 5 years 10 years(1)
--------------------------------------------------------------------------
Class A Shares $45 $66 $88 $153
--------------------------------------------------------------------------
Class B Shares $63 $90 $130 $197
--------------------------------------------------------------------------
Class C Shares $33 $70 $120 $257
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $45 $66 $88 $153
--------------------------------------------------------------------------
Class B Shares $23 $70 $120 $197
--------------------------------------------------------------------------
Class C Shares $23 $70 $120 $257
1. The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after six years. Because of the asset-based
sales charge and the contingent deferred sales charge imposed on Class B
and Class C shares of the Fund, long-term Class B and Class C shareholders
could bear expenses that would be the economic equivalent of more than the
maximum front-end sales charge permitted under applicable regulatory
requirements. For Class B shareholders, the automatic conversion of Class
B shares to Class A shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares - Class B Shares" for
more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
What Is The Fund's Investment Objective? The Fund's investment
objective is to seek a high level of current income exempt from Federal
income tax.
What Does the Fund Invest In? To seek its objective, the Fund will,
under normal market conditions, invest at least 80% of its assets in
investment-grade Municipal Securities. The Fund may also use hedging
instruments and some derivative investments to try to manage investment
risks. These investments are more fully explained in "Investment
Objective and Policies," starting on page 10.
Who Manages the Fund? The Fund's investment advisor is Oppenheimer
Management Corporation, which (including a subsidiary) manages investment
company portfolios having over $35 billion in assets at June 30, 1995.
The Manager is paid an advisory fee by the Fund, based on its assets. The
Fund's portfolio manager, who is employed by the Manager and who is
primarily responsible for the selection of the Fund's securities, is
Robert E. Patterson. The Fund's Board of Trustees, elected by
shareholders, oversees the investment advisor and the portfolio manager.
Please refer to "How the Fund is Managed," starting on page 17 for more
information about the Manager and its fees.
How Risky is the Fund? All investments carry risks to some degree.
The Fund's investments in municipal bonds are subject to changes in their
value from a number of factors such as changes in general bond market
movements, the change in value of particular bonds because of an event
affecting the issuer, or changes in interest rates. These changes affect
the value of the Fund's investments and its price per share. In the
OppenheimerFunds spectrum, the Fund is generally more conservative than
high yield bond funds, but more aggressive than money market funds. While
the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased for the
portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objectives and your shares
may be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page 10
for a more complete discussion.
How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page 22 for more details.
Will I Pay a Sales Charge to Buy Shares? The Fund has three classes
of shares. All classes have the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge,
starting at 3.50%, and reduced for larger purchases. Class B and Class C
shares are offered without a front-end sales charge, but may be subject
to a contingent deferred sales charge if redeemed within 6 years or 12
months of purchase, respectively. There is also an annual asset-based
sales charge on Class B and Class C shares. Please review "How To Buy
Shares" starting on page 22 for more details, including a discussion about
factors you and your financial advisor should consider in determining
which class may be appropriate for you.
How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer, or by writing checks. Please refer to "How To Sell Shares" on
page 34. The Fund also offers exchange privileges to other
OppenheimerFunds, described in "How to Exchange Shares" on page 36.
How Has the Fund Performed? The Fund measures its performance by
quoting its total return and yield, which measure historical performance.
Those returns and yields can be compared to the returns and yields (over
similar periods) of other funds. Of course, other funds may have
different objectives, investments, and levels of risk. The Fund's
performance can also be compared to a broad market index, which we have
done on page 21. Please remember that past performance does not guarantee
future results.
Financial Highlights
The table on this page presents selected financial information about the
Fund, including per share data, expense ratios and other data based on the
Fund's average net assets. With the exception of the financial
information for the six months ended March 31, 1995 (which is unaudited),
this information has been audited by Deloitte & Touche LLP, the Fund's
independent auditors, whose report on the Fund's financial statements for
the fiscal year ended September 30, 1994, is included in the Statement of
Additional Information. The information in the table below (except for
total return) for the fiscal periods ended September 30, 1987 (from the
commencement of operations on November 11, 1986), 1988, and 1989 was
audited by the Fund's prior independent auditors. The Fund's Class B
shares were not publicly offered during the fiscal year ended September
30, 1994, and thus no information is given below as to Class B shares.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1994 1993 1992 1991 1990(3)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.34 $15.09 $14.40 $13.51 $13.57
-----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .72 .77 .86 .83 .90
Net realized and unrealized
gain (loss) on investments (1.00) .70 .69 .91 (.08)
-------- -------- -------- -------- --------
Total income (loss) from
investment operations (.28) 1.47 1.55 1.74 .82
-----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.67) (.75) (.86) (.85) (.88)
Dividends in excess of net
investment income (.09) -- -- -- --
Distributions from net realized
gain on investments -- (.47) -- -- --
Distributions in excess of net
realized gain on investments (.07) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and
distributions to shareholders (.83) (1.22) (.86) (.85) (.88)
-----------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.23 $15.34 $15.09 $14.40 $13.51
====== ====== ====== ====== ======
TOTAL RETURN, AT NET ASSET VALUE(4) (1.92)% 10.31% 11.10% 13.20% 6.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $83,456 $70,136 $29,724 $23,675 $20,287
-----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $79,076 $48,915 $25,153 $22,071 $20,576
-----------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 5,865 4,571 1,970 1,644 1,502
-----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.05% 5.08% 5.87% 5.93% 6.56%
Expenses, before voluntary
assumption by the Manager 1.00% 1.07% 1.25% 1.35% 1.41%
Expenses, net of voluntary
assumption by the Manager N/A 1.05% 1.16% 1.16% .66%
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 51% 21% 93% 75% 102%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C
---------------------------------- -------------
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1989 1988 1987(2) 1994(1)
==========================================================
========================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.33 $12.56 $14.00 $15.14
--------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .98 1.05 .90 .46
Net realized and unrealized
gain (loss) on investments .24 .77 (1.44) (.83)
-------- -------- -------- --------
Total income (loss) from
investment operations 1.22 1.82 (.54) (.37)
--------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.98) (1.05) (.90) (.46)
Dividends in excess of net
investment income -- -- -- (.06)
Distributions from net realized
gain on investments -- -- -- --
Distributions in excess of net
realized gain on investments -- -- -- (.07)
-------- -------- -------- --------
Total dividends and
distributions to shareholders (.98) (1.05) (.90) (.59)
--------------------------------------------------------------------------------------------------
Net asset value, end of period $13.57 $13.33 $12.56 $14.18
======== ======== ======== ========
==========================================================
========================================
TOTAL RETURN, AT NET ASSET VALUE(4) 9.54% 14.96% (4.11)% (2.54)%
==========================================================
========================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $19,350 $13,480 $10,228 $8,511
--------------------------------------------------------------------------------------------------
Average net assets (in thousands) $17,188 $12,220 $11,152 $4,686
--------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 1,426 1,011 814 600
--------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.09% 8.01% 7.39%(5) 3.77%(5)
Expenses, before voluntary
assumption by the Manager 1.56% 1.75% 1.95%(5) 2.24%(5)
Expenses, net of voluntary
assumption by the Manager .23% N/A .40%(5) N/A
--------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 180% 148% 98% 51%
</TABLE>
(1) For the period from December 1, 1993 (inception of offering) to September
30, 1994.
(2) For the period from November 11, 1986 (commencement of operations) to
September 30, 1987.
(3) On April 7, 1990, Oppenheimer Management Corporation became the investment
advisor to the Fund.
(4) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
(5) Annualized.
(6) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the year ended September 30, 1994 were $68,359,263 and $41,537,773,
respectively.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
-----------------------------------------------------------------------------------------------------------
Class A Class C
------------------------------------------------------------------ ----------------------------
Six Months Period
Six Months Ended Ended Ended
March 31, 1995 Year Ended September 30, Mar. 31, 1995 Sept. 30,
(Unaudited) 1994 1993 1992 1991 1990(2) (Unaudited) 1994(1)
==========================================================
==========================================================
================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value,
beginning of period $ 14.23 $15.34 $15.09 $14.40 $13.51 $13.57 $ 14.18 $15.14
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .39 .72 .77 .86 .83 .90 .36 .46
Net realized and unrealized
gain (loss) on investments .10 (1.00) .70 .69 .91 (.08) .10 (.83)
-------- ------- ------- ------- ------- ------- -------- ------
Total income (loss) from
investment operations .49 (.28) 1.47 1.55 1.74 .82 .46 (.37)
------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.38) (.67) (.75) (.86) (.85) (.88) (.32) (.46)
Dividends in excess of net
investment income -- (.09) -- -- -- -- -- (.06)
Distributions from
net realized
gain on investments -- -- (.47) -- -- -- -- --
Distributions in
excess of net
realized gain on
investments -- (.07) -- -- -- -- -- (.07)
-------- ------- ------- ------- ------- ------- -------- ------
Total dividends and
distributions to
shareholders (.38) (.83) (1.22) (.86) (.85) (.88) (.32) (.59)
==========================================================
==========================================================
================
Net asset value,
end of period $ 14.34 $14.23 $15.34 $15.09 $14.40 $13.51 $ 14.32 $14.18
======== ======= ======= ======= =======
======= ======== ======
==========================================================
==========================================================
================
Total Return, at
Net Asset Value(3) 3.50% (1.92)% 10.31% 11.10% 13.20% 6.14% 3.32% (2.54)%
------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net assets,
end of period
(in thousands) $ 81,512 $83,456 $70,136 $29,724 $23,675 $20,287 $ 7,616 $8,511
------------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $ 78,758 $79,076 $48,915 $25,153 $22,071 $20,576 $ 7,858 $4,686
------------------------------------------------------------------------------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 5,685 5,865 4,571 1,970 1,644 1,502 532 600
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average
net assets:
Net investment income 5.65%(4) 5.05% 5.08% 5.87% 5.93% 6.56% 4.73%(4)
3.77%(4)
Expenses, before
voluntary assumption
by the Manager .94%(4) 1.00% 1.07% 1.25% 1.35% 1.41% 1.86%(4) 2.24%(4)
Expenses, net of
voluntary assumption
by the Manager N/A N/A 1.05% 1.16% 1.16% .66% N/A N/A
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate(5) 32% 51% 21% 93% 75% 102% 32% 51%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to
September 30, 1994.
2. On April 7, 1990, Oppenheimer Management Corporation became the
investment advisor to the Fund.
3. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for
periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity
or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities) for the
six months ended March 31, 1995 were $27,328,472 and $31,507,699,
respectively.
See accompanying Notes to Financial Statements.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to provide a high level
of current income exempt from Federal income tax.
Investment Policies and Strategies. The Fund will seek to attain its
investment objective by investing, under normal market conditions, at
least 80% of its total assets in a portfolio of "investment-grade"
(defined below) Municipal Securities. "Investment-grade" are those
rated - or are determined by the Manager to be of comparable quality to
those rated - within the four highest rating categories of Moody's
Investors Service, Inc., Standard & Poor's Corporation, Fitch Investors
Service, Inc. or another rating organization. Municipal Securities in the
fourth highest rating category (for example, municipal bonds rated "Baa"
and municipal notes rated "MIG 2" by Moody's, and municipal bonds rated
"BBB" and municipal notes rated "SP-2" by Standard & Poor's), although of
investment grade, may be subject to greater market fluctuations and risks
of loss of income and principal than higher-rated Municipal Securities,
and may be considered to have speculative characteristics. Although
unrated securities are not necessarily of lower quality, the market for
them may not be as broad as for rated securities. A reduction in the
rating of a security after it is purchased by the Fund will not require
its disposition. To the extent that the Fund holds securities that have
fallen below investment grade, there is a greater risk that the Fund's
receipt of interest income will be impaired and that its net asset value
will be affected if the issuers of such securities fail to meet their
obligations. See Appendix A to the Statement of Additional Information for
a description of the various rating categories.
Under normal market conditions, no more than 20% of the Fund's total
assets will be invested in taxable investments. However, for temporary
defensive purposes, the Fund may invest up to 100% of its assets in
taxable certificates of deposit and commercial paper and taxable or tax-
exempt money market instruments. The Fund may not invest more than 20%
of its total assets in private activity municipal securities issued to
benefit a private user, the interest on which may be subject to the
Federal alternative minimum tax. The Fund may purchase Municipal
Securities on a "when-issued" basis and may purchase or sell Municipal
Securities on a "delayed delivery" basis. Under normal market conditions,
the Fund will maintain a dollar-weighted average portfolio maturity of
more than three years but not more than ten years. In calculating
maturity, the Fund will consider various factors, including anticipated
payments of principal. The Fund may hold securities with maturities of
more than ten years provided that under normal circumstances it maintains
a dollar-weighted average portfolio maturity as stated above.
Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
Municipal Securities. "Municipal Securities" are municipal bonds,
municipal notes, tax anticipation notes, bond anticipation notes, revenue
anticipation notes, construction loan notes and other short-term loans,
tax-exempt commercial paper and other debt obligations issued by or on
behalf of states, the District of Columbia, any commonwealths, territories
or possessions of the United States, or their respective political
subdivisions, agencies, instrumentalities or authorities, the interest
from which is not subject to Federal individual income tax in the opinion
of bond counsel to the respective issuer at the time of issue. No
independent investigation has been made by the Manager as to the users of
proceeds of bond offerings or the application of such proceeds.
The two principal classifications of Municipal Securities are
"general obligations" (secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest) and
"revenue obligations" (payable only from the revenues derived from a
particular facility or class of facilities, or a specific excise tax or
other revenue source). The Fund may invest in Municipal Securities of
both classifications, subject to particular restrictions described below.
Yields on Municipal Securities vary depending on a variety of
factors, including the general condition of the financial markets and of
the Municipal Securities market in particular, the size of a particular
offering, the maturity of the security and the credit rating of the
issuer. Generally, Municipal Securities of longer maturities produce
higher current yields but are subject to greater price fluctuation due to
changes in interest rates (discussed below), tax laws and other general
market factors than are Municipal Securities with shorter maturities.
Similarly, lower-rated Municipal Securities generally produce a greater
yield than higher-rated Municipal Securities due to the perception of a
greater degree of risk as to the ability of the issuer to meet principal
and interest obligations. "Investment Objective and Policies" in the
Statement of Additional Information contains more information about
Municipal Securities.
Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjusted at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
See "Floating Rate/Variable Rate Obligations" in the Statement of
Additional Information for more details.
Inverse Floaters and Derivative Investments. The Fund may invest
in variable rate bonds known as "inverse floaters." These bonds pay
interest at a rate that varies as the yields generally available on short-
term tax-exempt bonds change. However, the yields on inverse floaters
move in the opposite direction of yields on short-term bonds in response
to market changes. When the yields on short-term tax-exempt bonds go up,
the interest rate on the inverse floater goes down. When the yields on
short-term tax-exempt bonds go down, the interest rate on the inverse
floater goes up. As interest rates rise, inverse floaters produce less
current income. Inverse floaters are a type of "derivative security,"
which is a specially designed investment whose performance is linked to
the performance of another security or investment. Some inverse floaters
have a "cap" whereby if interest rates rise above the "cap," the security
pays additional interest income. If rates do not rise above the "cap,"
the Fund will have paid an additional amount for a feature that proves
worthless. The Fund may also invest in municipal derivative securities
that pay interest that depends on an external pricing mechanism. Examples
are interest rate swaps or caps and municipal bond or swap indices. The
Fund anticipates that it would invest no more than 10% of its total assets
in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due
on the maturity of the investment, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. That can mean that the Fund will realize less income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
Municipal Lease Obligations. The Fund may invest in certificates
of participation, which are tax-exempt obligations that evidence the
holder's right to share in lease, installment loan or other financing
payments by a public entity. Projects financed with certificates of
participation generally are not subject to state constitutional debt
limitations or other statutory requirements that may be applicable to
Municipal Securities. Payments by the public entity on the obligation
underlying the certificates are derived from available revenue sources;
such revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to the
certificates are not guaranteed. While some municipal lease securities
may be deemed to be "illiquid" securities (the purchase of which would be
limited as described below in "Illiquid and Restricted Securities"), from
time to time the Fund may invest more than 5% of its net assets in
municipal lease obligations that the Manager has determined to be liquid
under guidelines set by the Fund's Board of Trustees. See "Municipal
Lease Obligations" in the Statement of Additional Information for more
details.
Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under normal market conditions, the Fund may invest up to 20%
of its assets in taxable investments, including (i) certain "Temporary
Investments" (described in the next paragraph); (ii) hedging instruments
(described in "Hedging" below); (iii) repurchase agreements (explained
below); and (iv) Municipal Securities issued to benefit a private user
("Private Activity Municipal Securities"), the interest from which may be
subject to Federal alternative minimum tax (see "Taxes," below, and
"Private Activity Municipal Securities" in the Statement of Additional
Information).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary
"defensive" position by investing some or all of its assets (there is no
limit on the amount) in short-term money market instruments. These
include the taxable obligations described above, U.S. government
securities, bank obligations, commercial paper, corporate obligations and
other instruments approved by the Fund's Board of Trustees. This strategy
would be implemented to attempt to reduce fluctuations in the value of the
Fund's assets. The Fund may hold temporary investments pending the
investment of proceeds from the sale of Fund shares or portfolio
securities, pending settlement of purchases of Municipal Securities, or
to meet anticipated redemptions. To the extent the Fund assumes a
temporary defensive position, a portion of the Fund's distributions may
be subject to Federal and state income taxes and the Fund may not achieve
its objective.
Interest Rate Risk. The values of Municipal Securities will vary
as a result of changing evaluations by rating services and investors of
the ability of the issuers of such securities to meet their principal and
interest payments. Such values will also change in response to changes
in interest rates: should interest rates rise, the values of outstanding
Municipal Securities will probably decline and (if purchased at principal
amount) would sell at a discount; should interest rates fall, the values
of outstanding Municipal Securities will probably increase and (if
purchased at principal amount) would sell at a premium. Changes in the
value of Municipal Securities held in the Fund's portfolio arising from
these or other factors will not affect interest income derived from those
securities but will affect the Fund's net asset value per share.
Generally, securities of longer maturities are subject to greater
price fluctuations due to changes in interest rates. There are no
restrictions on the maturities of the Municipal Securities in which the
Fund may invest. The Fund will seek to invest in Municipal Securities
that, in the judgment of the Manager, will provide a high level of current
income consistent with the Fund's liquidity requirements and conditions
affecting the Municipal Securities market.
Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund ordinarily does not engage in the
trading of securities for the purpose of realizing short-term gains, but
the Fund may sell securities as the Manager deems advisable to take
advantage of differentials in yield to accomplish the Fund's investment
objective. The "Financial Highlights" above, show the Fund's portfolio
turnover rate during the past fiscal years. While short-term trading
increases portfolio turnover, the Fund incurs little or no brokerage
costs. Portfolio turnover affects the Fund's ability to qualify as a
"regulated investment company" under the Internal Revenue Code for tax
deductions for dividends and capital gains distributions the Fund pays
to shareholders. The Fund qualified in its last fiscal year and intends
to do so in the coming year, although it reserves the right not to
qualify.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
information about these practices, including limitations designed to
reduce some of the risks.
Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and
options on futures and municipal bond indices, or enter into interest rate
swap agreements. These are referred to as "hedging instruments." The
Fund may invest in financial futures contracts and related options on
those contracts only as a hedge against anticipated interest rate changes,
and the Fund does not intend to use hedging instruments for speculative
purposes. The hedging instruments the Fund may use are described below
and in greater detail in "Other Investment Techniques and Strategies" in
the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. The Fund may sell a futures contract or a call option on a
futures contract or purchase a put option on such futures contract if the
Manager anticipates that interest rates will rise, as a hedge against a
decrease in the value of the Fund's portfolio securities. If the Manager
anticipates that interest rates will decline, the Fund may purchase a
futures contract or a call option on a futures contract, or sell a put
option on a futures contract, to protect against an increase in the price
of securities the Fund intends to buy.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Writing
covered call options may also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
- Futures. The Fund may buy and sell financial futures contracts
that relate to (1) interest rates (these are referred to as Interest Rate
Futures); and (2) municipal bond indices (these are referred to as
Municipal Bond Index Futures). These types of Futures are described in
"Hedging With Options and Futures Contracts" in the Statement of
Additional Information. The Fund may concurrently buy and sell Futures
contracts in an attempt to benefit from any outperformance of the Future
purchased relative to the performance of the Future sold. The Fund may
not enter into futures contracts or purchase related options on futures
contracts if immediately after doing so the amount the Fund committed to
initial margin plus the amount paid for unexpired options on futures
contracts exceeds 5% of the Fund's total assets.
- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls).
The Fund may buy calls only on debt securities, municipal bond
indices, Municipal Bond Index Futures and Interest Rate Futures, or to
terminate its obligation on a call the Fund previously wrote. The Fund
may write (that is, sell) covered call options. When the Fund writes a
call, it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from the Fund
at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on an investment
gives the Fund the right to sell the investment at a set price to a seller
of a put on that investment. The Fund can buy only those puts that relate
to (1) debt securities that the Fund owns, (2) Interest Rate Futures held
by it, and (3) Municipal Bond Index Futures held by it. The Fund may not
sell a put other than a put that it previously purchased.
The Fund may buy and sell puts and calls only if certain conditions
are met: (1) after the Fund writes a call, not more than 25% of the
Fund's total assets may be subject to calls; (2) calls the Fund buys or
sells must be listed on a securities or commodities exchange, or quoted
on the Automated Quotation System of the National Association of
Securities Dealers, Inc. (NASDAQ) or in the case of calls on debt
securities, traded in the over-the-counter market; (3) each call the Fund
writes must be "covered" while it is outstanding: that means the Fund
must own the investment on which the call was written or it must own other
securities that are acceptable for the escrow arrangements required for
calls; (4) the Fund may write calls on Futures contracts it owns, but
these calls must be covered by securities or other liquid assets the Fund
owns and segregates to enable it to satisfy its obligations if the call
is exercised; and (5) a call or put option may not be purchased if the
value of all of the Fund's put and call options would exceed 5% of the
Fund's total assets.
- Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest
on a security. For example, they may swap a right to receive floating
rate payments for fixed rate payments. The Fund enters into swaps only
on securities it owns. The Fund may not enter into swaps with respect to
more than 25% of its total assets. Also, the Fund will segregate liquid
assets (such as cash or U.S. Government securities) to cover any amounts
it could owe under swaps that exceed the amounts it is entitled to
receive, and it will adjust that amount daily, as needed. The credit risk
of an interest rate swap depends on the counterparty's ability to perform.
Hedging instruments can be volatile investments and may involve
special risks. If the Manager uses a hedging instrument at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
These risks and the hedging strategies the Fund may use are described in
greater detail in the Statement of Additional Information.
Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. The Fund must receive collateral for such loans.
These loans are limited to not more than 5% of the value of the Fund's
total assets and are subject to other conditions described in the
Statement of Additional Information. The income from such loans, when
distributed by the Fund, will be taxable as ordinary income.
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 publicly sold until it is
registered under the Securities Act of 1933. The Fund will not invest
more than 10% of its net assets in illiquid or restricted securities (that
limit may increase to 15% if certain state laws are changed or the Fund's
shares are no longer sold in those states). Such securities include: (i)
repurchase agreements maturing in more than seven days; (ii) securities
for which market quotations are not readily-available; and (iii) certain
municipal lease obligations that are considered illiquid securities. The
Fund's percentage limitation on these investments does not apply to
certain restricted securities that are eligible for resale to qualified
institutional buyers.
"When-Issued" and "Delayed Delivery" Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis and may purchase
or sell Municipal Securities on a "delayed delivery" basis. When the
Fund engages in these transactions, it will do so for the purpose of
acquiring portfolio securities consistent with the Fund's investment
objective and policies and not for the purpose of investment leverage.
These terms refer to securities that have been created and for which a
market exists, but which are not available for immediate delivery. There
may be a risk of loss to the Fund if the value of the security declines
prior to the settlement date. Under the fundamental policy allowing these
transactions, when the Fund is the buyer, it will maintain (in a
segregated account with its custodian) cash or high-grade Municipal
Securities having a total value equal to the amount of the Fund's purchase
commitments until payment is made. The Fund will make commitments to buy
Municipal Securities on this basis, as a fundamental policy, only with the
intention of actually acquiring the securities, but the Fund may sell the
securities prior to the settlement date if the sale is considered to be
advisable.
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.
There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements of seven days or less. 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 repurchase
transactions that will cause more than 25% of the Fund's total assets to
be subject to repurchase agreements and will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days.
Other Investment Restrictions. The Fund has other investment restrictions
which are fundamental policies. Under these fundamental policies, the Fund
cannot do any of the following: (1) borrow money, except from banks for
temporary purposes in amounts not in excess of 5% of the value of the
Fund's assets; no assets of the Fund may be pledged, mortgaged or
hypothecated other than to secure a borrowing, and then in amounts not
exceeding 10% of the Fund's total assets; borrowings may not be made for
leverage, but only for liquidity purposes to satisfy redemption requests
when liquidation of portfolio securities is considered inconvenient or
disadvantageous; however, the Fund may enter into when-issued and delayed
delivery transactions as described herein; (2) make loans, except that the
Fund may purchase or hold debt obligations, repurchase agreements and
other investments and securities it is permitted to own and may lend its
portfolio securities and other investments it owns; (3) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities), if with respect to 75% of its total
assets, more than 5% of the Fund's total assets would be invested in
securities of that issuer or the Fund would own more than 10% of that
issuer's voting securities; or (4) invest more than 25% of its total
assets in a single industry (although the Fund may invest more than 25%
of its assets in a particular segment of the municipal bond market, but
will not invest more than 25% of its total assets in industrial revenue
bonds in a single industry).
All of the percentage restrictions described above and elsewhere in
the Prospectus apply only at the time the Fund purchases a security and
the Fund need not dispose of a security merely because the size of the
Fund's assets has changed or the security has increased in value relative
to the size of the Fund. There are other fundamental policies discussed
in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of two diversified investment
portfolios or "series" of Oppenheimer Tax-Exempt Fund (the "Trust"), an
open-end, management investment company organized as a Massachusetts
business trust in 1986.
The Trust is governed by a Board of Trustees, which is responsible
for protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Trust" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Trust. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A
Class B and Class C. All classes invest in the same investment portfolio.
Each class has its own dividends and distributions and pays certain
expenses which may be different for the different classes. Each class may
have a different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. Only shares of
a particular class vote together on matters that affect that class alone.
Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
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
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $35 billion as
of June 30, 1995, and with more than 2.6 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
Portfolio Manager. The portfolio manager of the Fund is Robert E.
Patterson, a Senior Vice President of the Manager. He has been the person
principally responsible for the day-to-day management of the Fund's
portfolio since February, 1992. During the past five years, Mr. Patterson
has also served as an officer and portfolio manager for other
OppenheimerFunds.
Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional
assets as the Fund grows: 0.500% of the first $100 million of aggregate
net assets, 0.450% of the next $150 million, 0.425% of the next $250
million, and 0.400% of aggregate net assets over $500 million. The Fund's
management fee for its last fiscal year was 0.500% of average annual net
assets for both its Class A and Class C shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time, it may
use brokers when buying portfolio securities. When deciding which brokers
to use, the Manager is permitted by the investment advisory agreement to
consider whether brokers have sold shares of the Fund or any other funds
for which the Manager serves as investment adviser.
The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
account to the Transfer Agent at the address and toll-free number shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms to
illustrate its performance: "total return" and "yield." These terms are
used to show the performance of each class of shares separately, because
the performance of each class of shares will usually be different, as a
result of the different kinds of expenses each class bears. This
performance information may be useful to help you see how well your
investment has done and to compare it to other funds or a market index,
as we have done below.
It is important to understand that the fund's total returns and
yields represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to measure
and compare the Fund's performance. The Fund's investment performance will
vary, depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
Total Returns. There are different types of "total returns" used 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. 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 the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally they
include the payment of the maximum initial sales charge. Total returns
may also be quoted "at net asset value," without including the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for a one-year period for Class C shares,
they include the effect of the contingent deferred sales charge. Total
returns may also be shown based on the change in net asset value, without
including the contingent deferred sales charge. Class B shares were not
offered during the fiscal year ended September 30, 1994 and thus no total
return information is shown for that class.
Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the
absence of income taxes. It is calculated by dividing that portion of the
yield that is tax-exempt by a factor equal to one minus the applicable tax
rate. The yield of each class will differ because of the different
expenses of each class of shares. The yield data represents a hypothetical
investment return on the portfolio, and does not measure an investment
return based on dividends actually paid to shareholders. To show that
return, a dividend yield may be calculated. Dividend yield is calculated
by dividing the dividends of a class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class C shares do not
reflect the deduction of the contingent deferred sales charge. Class B
shares were not publicly offered prior to August 29, 1995, and thus no
yield information is shown for that class.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
Management's Discussion of Performance. During the past fiscal
year, the Fund's performance was affected by aggressive increases in
short-term interest rates by the Federal Reserve Board, which caused a
decline in the overall price of municipal bonds. The Manager emphasized
essential service issues, diversified by market sector and by state, as
well as on bonds offering significant call protection, which prevents the
issuer of the bond from calling or redeeming it before maturity.
Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held until September 30, 1994; in the case of Class
A shares, from the commencement of operation on November 11, 1986, and in
the case of Class C shares, from the inception of the class on December
1, 1993, with all dividends and capital gains distributions reinvested in
additional shares. The graph reflects the deduction of the 3.50% maximum
initial sales charge on Class A shares and the maximum 1.0% contingent
deferred sales charge on Class C shares.
The Fund's performance is compared to the performance of the Lehman
Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond Index
is an unmanaged index of a broad range of investment grade municipal
bonds, widely regarded as a measure of the performance of the general
municipal bond market. Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction
costs, and none of the data below shows the effect of taxes. Also, the
Fund's performance reflects the effect of fund business and operating
expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the index data does not
take into account portfolio maturity, nor does it reflect any assessment
of the risk of the investments included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Intermediate Tax-Exempt Fund (Class A) and Lehman Bros. Muni
Bond Index
[graph]
Average Annual Total Returns of Class A Shares of the Fund at 9/30/941
1 Year 5 Years Life
----------------------------------------------------------------------
-5.32% 6.87% 6.83%
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Intermediate Tax-Exempt Fund (Class C) and Lehman Bros. Muni
Bond Index
[graph]
Cumulative Total Returns of Class C Shares of the Fund at 9/30/942
Life
------------------------------------------------------------------
-3.46%
1The inception date of the Fund (Class A shares) was 11/11/86. The
average annual total returns and the ending account value for Class A
shares in the graph reflect reinvestment of all dividends and capital
gains distributions and are shown net of the applicable 3.50% maximum
initial sales charge.
2Class C shares of the Fund were first publicly offered on 12/1/93. The
cumulative total returns and the ending account value for Class C shares
in the graph reflect reinvestment of all dividends and capital gains
distributions and are shown net of the applicable 1.0% contingent deferred
sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and may
likely have different share prices.
Class A Shares. When you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, you will not pay any initial sales charge, but
if you sell any of those shares within 18 months after your purchase, you
may pay a contingent deferred sales charge, which will vary depending on
the amount you invested.
Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you have owned your shares. As described below, the Fund
automatically converts Class B shares into Class A shares after six years.
It is described below. Long-term Class B shareholders could pay the
economic equivalent of more than the maximum front-end sales charge
allowed under applicable regulations, because of the effect of the asset-
based sales charge and contingent deferred sales charge. The automatic
conversion of Class B shares to Class A Shares is designed to minimize the
likelihood that this will occur.
Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 12 months of
buying them, you will normally pay a contingent deferred sales charge of
1.0%.
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 better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. 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 most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B or Class C shares). 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.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the annual asset-based sales charge on Class B and Class C expenses
(which, like all expenses, will affect your investment return). For the
sake of comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns and the operating expenses borne
by each class of shares, and which class you invest in. The discussion
below of he factors to consider in purchasing a particular class of shares
assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. The assumptions we have made in assessing the factors to
consider in purchasing a particular class of shares assume that you will
purchase only one class, and not a combination of different classes.
How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest.
For example, the reduced sales charges available for larger purchases of
Class A shares may, over time, offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on shares of Class B or
C for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short term investment
horizon (that is, you plan to hold your shares less than five years), you
should probably consider purchasing Class C shares rather than Class A or
Class B shares, because of the effect of the Class B contingent deferred
sales charge if you redeem in less than 7 years, as well as the effect of
the Class B asset-based sales charge on the investment return for that
class in the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000) because there is no
initial sales charge on Class C shares, and the contingent deferred sales
charge does not apply to amounts you sell after holding them one year.
However, if you plan to invest more than $1000,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge
on Class C shares will have a greater impact on your account over the
longer term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might not be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or more of Class B shares or
purchase orders of $1 million or more of Class C shares, respectively from
a single investor. Of course, these examples are based on approximations
of the effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return stated
above, and therefore should not be relied on as rigid guidelines.
- Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B or Class C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
Are There Differences in Account Features That Matter to You?
Because some account features may not be available for Class B or Class
C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares is better for
you. For example, share certificates are not available for Class B or
Class C shares and if you are considering using your shares as collateral
for a loan, that may be a factor to consider. Also, Checkwriting
privileges are not available for class B or Class C shares. Additionally,
the dividends payable to Class B and Class C shareholders will be reduced
by the additional expenses borne solely by that class, such as the asset-
based sales charge, as described below and in the Statement of Additional
Information.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A,
Class B or Class C shares. If you do not choose, your investment will be
made in Class A shares.
Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares.
Payment by Federal Funds Wire. Shares may be purchased by Federal
Funds wire. The minimum investment is $2,500. You must first call the
Distributor's Wire Department at 1-800-525-7041 to notify the Distributor
of the wire, and to receive further instructions.
Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from days in ACH
transmissions. You must request AccountLink privileges on the application
or dealer settlement instructions used to establish your account. Please
refer to "AccountLink" below for more details.
Asset Builder Plans. You may purchase shares of the Fund (and up to
four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day The New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, where purchases are not subject to an initial
sales charge, the offering price may be net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer. The current sales charge rates
and commissions paid to dealers and brokers are as follows:
Front-End Front-End
Sales Charge Sales Charge Commission
as a as a as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
-----------------------------------------------------------------------
Less than $100,000 3.50% 3.63% 3.00%
-----------------------------------------------------------------------
$100,000 or more but less 3.00% 3.09% 2.50%
than $250,000
-----------------------------------------------------------------------
$250,000 or more but less 2.50% 2.56% 2.00%
than $500,000
-----------------------------------------------------------------------
$500,000 or more but less 2.00% 2.04% 1.50%
than $1 million
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more OppenheimerFunds
aggregating $1 million or more. However, the Distributor pays dealers of
record commissions on such purchases in an amount equal to the sum of 1.0%
of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25%
of share purchases over $5 million. That commission will be paid only on
the amount of those purchases in excess of $1 million that were not
previously subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or for trust or custodial accounts on behalf of your
children who are minors. A fiduciary can cumulate shares purchased for a
trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A
shares of the Fund and Class A and Class B shares of other
OppenheimerFunds to reduce the sale charge rate that applies to current
purchases of Class A shares. You can also count Class A and Class B
shares of other OppenheimerFunds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge
rate for current purchases of Class A shares, provided that you still hold
that investment in one of the OppenheimerFunds. The value of those shares
will be based on the greater of the amount you paid for the shares or
their current value (at offering price). The OppenheimerFunds are listed
in "Reduced Sales Charges" in the Statement of Additional Information, or
a list can be obtained from the Transfer Agent. The reduced sales charge
will apply only to current purchases and must be requested when you buy
your shares.
Letter of Intent. Under a Letter of Intent, if you purchase Class
A and Class B shares of the Fund and Class A and Class B shares of other
OppenheimerFunds during a 13-month period, you can reduce the sales charge
rate that applies to your purchases of Class A shares. The total amount
of your intended purchases of both Class A and Class B shares will
determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional Information.
Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of
this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
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:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
- 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 are
identified 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); and
- dealers, brokers or registered investment advisers 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.
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 Class A sales charges:
- 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 OppenheimerFunds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor
- shares purchased and paid for with the proceeds of shares redeemed
in the prior 12 months 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 your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver.
The Class A contingent deferred sales charge does not apply to
purchases of Class A shares at net asset value described above and is also
waived if shares are redeemed in the following cases: (1) for retirement
distributions or loans to participants or beneficiaries from qualified
retirement plans, deferred compensation plans or other employee benefit
plans ("Retirement Plans"), (2) to return excess contributions made to
Retirement Plans, (3) to make Automatic Withdrawal Plan payments that are
limited to no more than 12% of the original account value annually, (4)
involuntary redemptions of shares by operation of law or under the
procedures set forth in the Fund's Declaration of Trust or adopted by the
Board of Trustees, and (5) Class A shares that would otherwise be subject
to the Class A contingent deferred sales charge are redeemed, but at the
time the purchase order for your shares was placed, the dealer agreed to
accept the dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (and that no further
commission would be payable if the shares were redeemed within 18 months
of purchase).
Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 5 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 5 years, and (3) shares held the longest during the
5-year period.
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:
Contingent Deferred
Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
-----------------------------------------------------------------------
0-1 4.0%
-----------------------------------------------------------------------
1-2 3.0%
-----------------------------------------------------------------------
2-3 2.0%
-----------------------------------------------------------------------
3-4 2.0%
-----------------------------------------------------------------------
4-5 1.0%
-----------------------------------------------------------------------
5 and following None
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which
the purchase was made.
Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions:
- to make distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an Automatic
Withdrawal Plan after the participant reaches age 59-1/2, as long as the
payments are no more than 10% of the account value annually (measured from
the date the Transfer Agent receives the request), or (b) following the
death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary which occurred after the account was opened;
- redemptions from accounts other than Retirement Plans following the
death or disability of the shareholder (the disability must have occurred
after the account was established and you must provide evidence of a
determination of disability by the Social Security Administration),
- to make returns of excess contributions to Retirement Plans, and
- to make distributions from IRAs (including SEP-IRAs and SAR/SEP
accounts) before the participant is age 59-1/2, and distributions from
403(b)(7) custodial plans or pension or profit sharing plans before the
participant is age 59-1/2 but only after the participant has separated
from service, if the distributions are made in substantially equal
periodic payments over the life (or life expectancy) of the participant
or the joint lives (or joint life and last survivor expectancy) of the
participant and the participant's designated beneficiary (and the
distributions must comply with other requirements for such distributions
under the Internal Revenue Code and may not exceed 10% of the account
value annually, measured from the date the Transfer Agent receives the
request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) 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; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Fund pays the asset-based sales charge to the Distributor for its services
rendered in connection with the distribution of Class B shares. Those
payments are at a fixed rate which is not related to the Distributor's
expense. The services rendered by the Distributor include paying and
financing the payment of sales commissions, service fees and other costs
of distributing and selling Class B shares.
If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the service fee and/or the asset-
based sales charge to the Distributor as to shares sold before the Plan
was terminated.
Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of
1.0% will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
redemptions or circumstances described above under "Waivers of Class B
Sales Charge."
Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for distributing Class C shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class C shares. The Distributor also
receives a service fee of 0.25% per year. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close
of each regular business day. The asset-based sales charge allows
investors to buy Class C shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
total up-front commission paid by the Distributor to the dealer at the
time of sale is 1.00% of the purchase price.
The Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class C shares.
Those payments, retained by the Distributor, are at a fixed rate which is
not related to the Distributor's expenses. The services rendered by the
Distributor include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class C shares,
including compensating personnel of the Distributor who support
distribution of Class C shares.
The Distributor retains the asset-based sales charge during the first
year shares are outstanding. The Distributor plans to pay the asset-based
sales charge as an ongoing commission to the dealer on Class C shares that
have been outstanding for a year or more.
If the 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 certain expenses it incurred before the plan was
terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on 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.
Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in
amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
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. Please refer to "How
to Exchange Shares," below, for details.
- 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.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks
may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying a sales charge. This privilege applies to
Class A shares that you purchased subject to an initial sales charge and
to Class A or B shares on which you paid a contingent deferred sales
charge when you redeemed them. It does not apply to Class C shares. You
must be sure to ask the Distributor for this privilege when you send your
payment. A realized gain on the redemption is taxable, and the
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a loss on the redemption, some or all of the loss may
not be tax deductible, depending on the timing and amount reinvested in
the Fund. Please consult the Statement of Additional Information for more
details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, 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, as described above.
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, 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, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The check is not payable to all shareholders listed on the account
statement
- The check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270,
Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
Telephone Redemptions Through AccountLink or by Wire. Shareholders
may have the Transfer Agent send redemption proceeds of $2,500 or more by
Federal Funds wire to a designated commercial bank account. The bank must
be a member of the Federal Reserve wire system. There is a $10 fee for
each Federal Funds wire. To place a wire redemption request, call the
Transfer Agent at 1-800-852-8457. The wire 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. To establish wire redemption privileges on
an account that is already established, please contact the Transfer Agent
for instructions.
Selling Shares by Wire. You may request that redemption proceeds of
$2,500 or more be wired to a previously designated account at a commercial
bank that is a member of the Federal Reserve wire system. The wire will
normally be transmitted on the next bank business day after the redemption
of shares. To place a wire redemption request, call the Transfer Agent
at 1-800-525-7048. There is a $10 fee for each wire.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B or Class C shares, or Class A shares that are subject to a
contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
- 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.
- Don't use your checks if you changed your Fund account number.
The Fund will charge a $10 fee for any check that is not paid because
(1) the owners of the account told the Fund not to pay the check, or (2)
the check was for more than the account balance, or (3) the check did not
have the proper signatures or (4) the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- 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
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A, Class B and/or Class C shares, and a list
can be obtained by calling the Distributor at 1-800-525-7048. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the
same name(s) and address. Shares held under certificates may not be
exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- 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 is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into if
it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a
result, those exchanges may be subject to notice requirements, delays and
other limitations that do not apply to shareholders who exchange their
shares directly by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
Net Asset Value Per Share is determined for each class of shares as
of the close of The New York Stock Exchange on each regular business day
The New York Stock Exchange is open by dividing the value of the Fund's
net assets attributable to a class by the number of shares of that class
that are outstanding. The Trust's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value.
In general, securities values are based on market value. There are
special procedures for valuing illiquid and restricted securities,
obligations for which market values cannot be readily obtained, and call
options and hedging instruments. These procedures are described more
completely 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 and until 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. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
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 can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within 7 days after the Transfer
Agent receives redemption instructions in proper form, except under
unusual circumstances determined by the Securities and Exchange Commission
delaying or suspending such payments. For accounts registered in the name
of a broker-dealer, payment will be forwarded within 3 business days. The
Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase
payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase
shares by 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 may be made if the account value has fallen
below $1,000 for reasons other than the fact that the market value of
shares has dropped, and in some cases, involuntary redemptions may be made
to repay the Distributor for losses from the cancellation of share
purchase orders.
"Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class C shares.
To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same last name and address
on the Fund's records. However, each shareholder may call the Transfer
Agent at 1-800-525-7048 to ask that copies of those materials be sent
personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income each regular business day and
pays those dividends to shareholders monthly on a date selected by the
Board of Trustees. Dividends paid on Class A shares generally are expected
to be higher than for Class B or Class C shares because expenses allocable
to Class B and Class C shares will generally be higher.
During the Fund's fiscal year ended September 30, 1994, the Fund
sought to pay distributions to shareholders at a targeted level per Class
A share each month, to the extent that target was consistent with the
Fund's net investment income and other distributable income sources,
although the amount of distributions could vary from time to time,
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by that Class. The Board of Trustees could change that
targeted level at any time, and there is otherwise no fixed dividend rate.
The Fund was able to pay dividends at the targeted level from net
investment income and other distributable income, without any material
impact on the Manager's portfolio management practices or on the Fund's
net asset value per share. There can be no assurance as to the payment
of any dividends or the realization of any capital gains.
Capital Gains. Although the Fund does not seek capital gains, the Fund may
realize capital gains on the sale of portfolio securities. If it does,
it may make distributions annually in December out of any net short-term
or long-term capital gains. The Fund may also make supplemental
distributions of dividends and capital gains following the end of its
fiscal year. If net capital losses are realized in any year, they are
charged against the principal and not against net investment income, which
is distributed regardless of capital gains or losses. Long-term capital
gains will be separately identified in the tax information the Fund sends
you after the end of the year. Short-term capital gains are treated as
dividends for tax purposes.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. You have four
options:
Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
Reinvest Capital Gains Only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or sent to
your bank account on AccountLink.
Receive All Distributions in Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank on AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. Dividends paid from short-term capital
gains are taxable as ordinary income. Dividends paid from net investment
income earned by the Fund on Municipal Securities will be excludable from
your gross income for federal income tax purposes. A portion of the
dividends paid by the Fund may be an item of tax preference if you are
subject to alternative minimum tax. Distributions are subject to federal
income tax and may be subject to state or local taxes. 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 any taxable distribution you received
in the previous year as well as the amount of your tax-exempt income.
"Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a dividend or a taxable
capital gain.
Taxes on Transactions: Even though the Fund seeks tax-exempt income
for distribution to shareholders, you may have a capital gain or loss when
you sell or exchange your shares. A capital gain or loss is the
difference between the price you paid for the shares and the price you
received when you sold them. Any capital gain is subject to capital gains
tax.
Returns of Capital: In certain cases, distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders. A
non-taxable return of capital may reduce your tax basis in your Fund
shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer Intermediate
Tax-Exempt Fund: "Comparison of Total Return of Oppenheimer Intermediate
Tax-Exempt Fund and the Lehman Brothers Municipal Bond Index - Change in
Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Intermediate Tax-Exempt Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in the Fund. In the case of the Fund's class A shares, that graph will
cover the period from the commencement of the Fund's operations (11/11/86)
through 9/30/94 and in the case of the Fund's Class C shares will cover
the period from the inception of the class (December 1, 1993) through
September 30, 1994. The graph will compare such values with hypothetical
$10,000 investments over the same time periods in the Lehman Brothers
Municipal Bond Index. Set forth below are the relevant data points that
will appear on the linear graph. Additional information with respect to
the foregoing, including a description of the Lehman Brothers Municipal
Bond Index, is set forth in the Prospectus under "How Has the Fund
Performed - Management's Discussion of Performance."
Fiscal Year Oppenheimer Intermediate Lehman Brothers
(Period) Ended Tax-Exempt Fund A Municipal Bond Index
11/11/86 $9,650 $10,000
9/30/87 $9,253 $9,690
9/30/88 $10,638 $10,948
9/30/89 $11,652 $11,898
9/30/90 $12,368 $12,707
9/30/91 $14,000 $14,383
9/30/92 $15,553 $15,886
9/30/93 $17,111 $16,698
9/30/94 $16,831 $16,291
Fiscal Oppenheimer Intermediate Lehman Brothers
Period Ended Tax-Exempt Fund C Municipal Bond Index
12/1/93 $10,000 $10,000
9/30/94 $9,655 $9,824
<PAGE>
Oppenheimer Intermediate Tax-Exempt Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information
and, if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR0860.001.0895 Printed on Recycled Paper
