Registration No. 33-08054
File No. 811-4803
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. __ / /
POST-EFFECTIVE AMENDMENT NO. 12 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 14 / X /
OPPENHEIMER TAX-EXEMPT BOND FUND
- -------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
- -------------------------------------------------------------------------
(Address of Principal Executive Offices)
1-303-671-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
Oppenheimer Management Corporation
Two World Trade Center,
New York, New York 10048-0203
- -------------------------------------------------------------------------
(Names and Addresses of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On February 1, 1995, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On ____________ pursuant to pargraph (a)(1)
/ / 75 days upon filing pursuant to paragraph (a)(2)
/ / On _______, pursuant to paragraph (a)(2)
of Rule 485
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended September 30, 1994 was filed on November 29, 1994.
<PAGE>
OPPENHEIMER TAX-EXEMPT BOND FUND
FORM N-1A
Cross Reference Sheet
Oppenheimer Insured Tax-Exempt Bond Fund
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed - Organization and
History; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History; The Transfer
Agent; Dividends, Capital Gains and Taxes; Investment Objective
and Policies - Portfolio Turnover
7 Shareholder Account Rules and Policies; How to Buy Shares; How
to Exchange Shares; Special Investor Services; Service Plan and
Distribution Plan; How to Sell Shares
8 How to Sell Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment Techniques
and Strategies; Additional Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund; How to Sell Shares; How
to Exchange Shares
19 Your Investment Account; How to Buy Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
_____________
*Not applicable or negative answer.
<PAGE>
OPPENHEIMER TAX-EXEMPT BOND FUND
FORM N-1A
Cross Reference Sheet
Oppenheimer Intermediate Tax-Exempt Bond Fund
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed - Organization and
History; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History; The
Transfer Agent; Dividends, Capital Gains and Taxes;
Investment Objective and Policies - Portfolio Turnover
7 Shareholder Account Rules and Policies; How to Buy Shares;
How to Exchange Shares; Special Investor Services; Service
Plan and Distribution Plan; How to Sell Shares
8 How to Sell Shares
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed - Trustees and Officers of the Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund; How to Sell Shares;
How to Exchange Shares
19 Your Investment Account; How to Buy Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
_____________
*Not applicable or negative answer.<PAGE>
Oppenheimer Insured Tax-Exempt Bond Fund
Prospectus dated February 1, 1995
Oppenheimer Insured Tax-Exempt Bond Fund (the "Fund"), is a series of
Oppenheimer Tax-Exempt Bond Fund (the "Trust"). The Fund has the
investment objective of seeking as high a level of current income exempt
from Federal income tax as is consistent with the assurance of the
scheduled receipt of interest and principal through insurance and with
preservation of capital. See "Investment Objective and Policies." While
payments of principal and interest on the securities in which the Fund
invests are insured (other than securities purchased for temporary or
liquidity purposes), neither the principal value of those securities nor
the net asset value of shares of the Fund is guaranteed, and therefore the
Fund's net asset value per share is subject to fluctuations due to changes
in the value of its portfolio investments. For more details on the
insurance of the Fund's portfolio, see page ____.
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B shares, which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you hold them. Class B shares are also subject to an annual
"asset-based sales charge." Each class of shares bears different
expenses. In deciding which class of shares to buy, you should consider
how much you plan to purchase, how long you plan to keep your shares, and
other factors discussed in "How to Buy Shares" starting on page __.
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 February 1, 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).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and 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
Page
About the Fund
Expenses
Overview of the Fund
Financial Highlights
Objective and Policies
How the Fund is Managed
Performance of the Fund
About Your Account
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, 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 bear indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended September 30, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages ____ through ____, for an explanation of how and when these charges
apply.
Class A Shares Class B Shares
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None
Sales Charge on Reinvested Dividends None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption
proceeds) None(1) 5% in the first year,
declining to 1% in the
sixth year and eliminated
thereafter
Redemption Fee None(1) None(2)
Exchange Fee $5.00(3) $5.00(3)
(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) There is a $15 transaction fee for redemptions paid by Federal
Funds wire, but not for redemptions paid by check or by Automated
Clearing House ("ACH") wire through AccountLink, or for which check
writing privileges are used (see "How To Redeem Shares").
(3) Fee is waived for automated exchanges, as described in "How to
Exchange 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 its portfolio securities, audit fees and legal 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. For Class B shares, the
12b-1 Fees are the Distribution and Service Plan Fees. The service fee
is a maximum of 0.25% of average annual net assets of the class and the
asset-based sales charge is 0.75%. 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 than the numbers in the chart, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares.
Class A Shares Class B Shares
Management Fees .45% .45%
12b-1 Distribution Plan Fees .25% 1.00%
Other Expenses .35% .37%
Total Fund Operating Expenses 1.05% 1.82%
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses chart above. If you were to redeem your shares at the end of
each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
Class A Shares $58 $79 $103 $170
Class B Shares $68 $87 $119 $175
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
Class A Shares $58 $79 $103 $170
Class B Shares $18 $57 $99 $175
*The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. 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. 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. 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 as high a level of current income exempt from Federal
income tax as is consistent with the assurance of the scheduled receipt
of interest and principal through insurance and with preservation of
capital.
- What Does the Fund Invest In? To seek its objective, the Fund
primarily invests in a diversified portfolio of municipal securities. The
Fund invests 65% of its total assets in municipal bonds that are insured.
The Fund may also use some derivative investments to try to manage
investment risks. These investments are more fully explained in
"Investment Objective and Policies," starting on page ___.
- Who Manages the Fund? The Fund's investment advisor is
Oppenheimer Management Corporation, which (including a subsidiary) advises
investment company portfolios having over $28 billion in assets. The
Fund's portfolio manager, who is primarily responsible for the selection
of the Fund's securities, is Robert Patterson. The Manager is paid an
advisory fee by the Fund, based on its assets. 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 ___ for more information about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some
degree. The risk of issuer default is minimized by the Fund's policy of
investing in insured municipal bonds. However, 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 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 by focusing on insured
municipal bonds, 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 ___ for a more complete discussion.
</R.
- 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 ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has two
classes of shares. Class A shares are offered with a front-end sales
charge, starting at 4.75%, and reduced for larger purchases. Class B
shares are offered without a front-end sales charge, but may be subject
to a contingent deferred sales charge (starting at 5% and declining as
shares are held longer) if redeemed within 6 years of purchase. There is
also an annual asset-based sales charge on Class B shares. Please review
"How To Buy Shares" starting on page ___ for more details, including a
discussion about 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. Please refer to "How To Sell Shares" on page ___.
- 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 broad market indices, which we have
done on page ___. 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 and expense ratios and other data based
on the Fund's average net assets. The information for the fiscal years
ended September 30. 1990, 1991, 1992, 1993, and 1994, 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.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1994 1993 1992 1991 1990(3) 1989
==========================================================
=====================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $18.06 $16.92 $16.17 $15.16 $15.27 $14.96
- -----------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .89 .93 .96 .92 .98 1.06
Net realized and
unrealized gain
(loss) on investments (1.84) 1.35 .73 1.01 (.11) .31
------ ----- ----- ----- ----- -----
Total income (loss) from
investment
operations (.95) 2.28 1.69 1.93 .87 1.37
- -----------------------------------------------------------------------------------------------
Dividends and
distributions to
shareholders:
Dividends from net
investment income (.86) (.96) (.91) (.92) (.98) (1.06)
Dividends in excess
of net investment
income (.03) -- -- -- -- --
Distributions from net
realized gain on
investments (.08) (.18) (.03) -- -- --
------ ----- ----- ----- ----- -----
Total dividends and
distributions to
shareholders (.97) (1.14) (.94) (.92) (.98) (1.06)
- -----------------------------------------------------------------------------------------------
Net asset value,
end of period $16.14 $18.06 $16.92 $16.17 $15.16 $15.27
====== ====== ====== ====== ====== ======
==========================================================
=====================================
TOTAL RETURN, AT
NET ASSET VALUE(4) (5.46)% 14.02% 10.74% 13.08% 5.81% 9.37%
==========================================================
=====================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $67,793 $62,158 $33,751 $23,791 $16,863 $13,105
- -----------------------------------------------------------------------------------------------
Average net assets
(in thousands) $66,953 $45,949 $27,811 $19,936 $15,145 $11,200
- -----------------------------------------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 4,201 3,442 1,995 1,471 1,113 858
- -----------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 5.23% 5.40% 5.81% 5.83% 6.43% 6.87%
Expenses, before voluntary
assumption by
the Manager 1.05% 1.18% 1.35% 1.60% 1.62% 2.04%
Expenses, net of voluntary
assumption by the Manager N/A 1.10% .95% .91% .62% .42%
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 99% 7% 47% 67% 62% 142%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------- ------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1988 1987(2) 1994 1993(1)
==========================================================
====================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $13.79 $16.00 $18.07 $17.33
- ------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income 1.07 .92 .77 .30
Net realized and
unrealized gain
(loss) on investments 1.17 (2.21) (1.86) .74
----- ----- ----- -----
Total income (loss) from
investment
operations 2.24 (1.29) (1.09) 1.04
- ------------------------------------------------------------------------------
Dividends and
distributions to
shareholders:
Dividends from net
investment income (1.07) (.92) (.73) (.30)
Dividends in excess
of net
investment
income -- -- (.02) --
Distributions from net
realized gain on
investments -- -- (.08) --
----- ----- ----- -----
Total dividends and
distributions to
shareholders (1.07) (.92) (.83) (.30)
- ------------------------------------------------------------------------------
Net asset value,
end of period $14.96 $13.79 $16.15 $18.07
====== ====== ====== ======
==========================================================
====================
TOTAL RETURN, AT
NET ASSET VALUE(4) 16.67% (8.36)% (6.20)% 6.04%
==========================================================
====================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $8,483 $5,449 $11,571 $5,104
- ------------------------------------------------------------------------------
Average net assets
(in thousands) $6,936 $5,435 $ 9,209 $2,298
- ------------------------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 567 395 717 282
- ------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 7.34% 6.69%(5) 4.43% 3.99%(5)
Expenses, before voluntary
assumption by
the Manager 2.50% 2.98%(5) 1.82% 1.96%(5)
Expenses, net of voluntary
assumption by the Manager .13% .34%(5) N/A N/A
- ------------------------------------------------------------------------------
Portfolio turnover rate(6) 141% 112% 99% 7%
</TABLE>
(1) For the period from May 3, 1993 (inception of offering) to September
30, 1993.
(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
$97,142,573 and $74,122,758, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to provide as high a level
of current income exempt from Federal income tax as is consistent with the
assurance of the scheduled receipt of interest income and principal
through insurance and with preservation of capital.
Investment Policies and Strategies. As a matter of fundamental policy,
the Fund will seek to attain its investment objective by investing at
least 80% of its total assets in a portfolio of Municipal Securities and
at least 65% of its total assets in Municipal Bonds (as each is defined
below), all of which are insured as to scheduled payments of both interest
and principal, except as described below. Although each insurer's quality
standards may vary from time to time, generally such insurers insure only
those Municipal Securities that are rated, at the date of purchase: (1)
in the case of long-term debt, "AAA" through "BBB" by Standard & Poor's
Corporation ("S&P") or "Aaa" through "Baa" by Moody's Investors Service,
Inc. ("Moody's"); (2) in the case of short-term securities, "SP-1+"
through "SP-2" by S&P or "MIG 1" through "MIG 4" by Moody's; or (3) in the
case of tax-exempt commercial paper, "A-1+" through "A-2" by S&P or
"Prime-1" through "Prime-2" by Moody's. An insurer may also insure lower-
rated or unrated Municipal Securities if they meet its insurance
standards.
As a matter of fundamental policy, the Fund may invest, without any
limitation as to rating category, in any securities for which it obtains
insurance coverage. Although the cost of insurance on the Fund's portfolio
will reduce the Fund's yield, one of the objectives of obtaining such
insurance is to achieve a higher yield than would be available if all
securities in the Fund's portfolio were rated "AAA" by S&P without the
benefit of any insurance. If the Fund invests in insured Municipal
Securities that are below investment grade in the opinion of the Manager,
such insurance will make the risks of owning such securities comparable
to those of investment grade Municipal Securities.
Pending investment of its assets in longer term Municipal
Securities, the Fund may invest up to 35% of its total assets in short-
term Municipal Securities without obtaining insurance on them, provided
that such securities carry an "A-1+" or "SP-1+" short-term rating or "AAA"
long-term rating by S&P. Although the Fund intends to invest in insured
Municipal Securities (or temporarily in uninsured short-term Municipal
Securities). As a matter of fundamental policy, the Fund may invest
temporarily up to 20% of its assets in uninsured taxable securities for
liquidity purposes and may invest more than 20% of its total assets in
uninsured taxable securities for temporary defensive purposes, as
described below. In addition, the Fund normally will not invest more than
20% of its total assets in Municipal Securities issued to benefit a
private user ("Private Activity Municipal Securities"), the interest from
which may be subject to Federal alternative minimum tax to which certain
shareholders may be subject (see "Dividends, Capital Gains and Taxes,"
below and "Private Activity Municipal Securities" in the Statement of
Additional Information for a more detailed discussion of the tax treatment
of the Fund's dividends). No independent investigation has been made by
the Manager as to the users of proceeds of bond offerings or the
application of such proceeds.
- 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.
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. Fundamental policies 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).
- 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.
"Municipal Bonds" are Municipal Securities that have a maturity when
issued of one year or more, and "Municipal Notes" are Municipal Securities
that have a maturity when issued of less than one year. 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 issue.
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 investment but have similar credit quality, redemption
provisions and maturities. </R.
- 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 and do not constitute an obligation of the
states or any of its political subdivisions. 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
"Investment Objective and Policies - Municipal Securities - Municipal
Lease Obligations" in the Statement of Additional Information for more
details.
- Investments in Taxable Securities and Temporary Defensive
Investment Strategy. Under certain conditions and subject to certain
restrictions, described above, as a matter of fundamental policy, the Fund
may hold certain taxable investments in any of the following
circumstances: (a) pending investment of the proceeds of sales of shares
of the Fund or sales of portfolio securities; (b) pending settlement of
purchases of portfolio securities; or (c) to maintain liquidity for the
purpose of meeting anticipated redemptions or exchanges.
In times of unstable market or economic conditions, as a matter of
fundamental policy, the Fund may invest more than 20% of its assets in
taxable securities for temporary defensive purposes when, in the opinion
of the Manager, it is advisable to do so because of market conditions.
While dividends paid by the Fund from income derived from interest
attributable to Municipal Securities will be exempt from Federal
individual income taxes, any net interest income derived from taxable
securities and distributed by the Fund will be taxable as ordinary income
when distributed. To the extent that the Fund distributes taxable income,
it will not be meeting its investment objective.
The types of taxable securities in which the Fund may invest are
limited as a matter of fundamental policy, to the following short-term
fixed-income securities (maturing in one year or less from the time of
purchase): (i) obligations issued by, or guaranteed as to principal and
interest by, the U.S. Government, or by its agencies or instrumentalities
if such obligations are backed by the full faith and credit of the United
States; (ii) commercial paper rated "A-1" or better by S&P and issued by
companies whose long-term unsecured debt is rated "AAA" by S&P; (iii)
certificates of deposit of any bank whose long-term debt obligations have
been rated "AAA" by S&P (or, in the case of the principal bank in a bank
holding company, the long-term unsecured debt obligations of the bank
holding company); and (iv) repurchase agreements (described below in
"Other Investment Techniques and Strategies") with respect to any of the
foregoing types of securities; provided, however, that such commercial
paper, certificates of deposit and repurchase agreements may not exceed
25% of the total assets of the Fund.
- 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.
Insurance on the Municipal Securities of the Fund does not insure against
fluctuations in the net asset value of the Fund's shares, and the net
asset value will be affected by increases or decreases in prevailing
interest rates.
As a matter of fundamental policy, 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, conditions affecting the Municipal
Securities market and the cost of the insurance obtainable on such bonds.
- Insurance. To the extent that Municipal Securities in the Fund's
portfolio are insured, they will at all times be fully insured as to the
scheduled payment of all installments of interest and principal except,
as noted above, for investments made for temporary liquidity and defensive
purposes and pending investment in longer term Municipal Securities. This
insurance minimizes the risks to the Fund and its shareholders from
defaults in the portfolio securities owned by it. Each Municipal Security
in the Fund's portfolio will be covered by either a mutual fund "Portfolio
Insurance Policy" issued by Financial Guaranty Insurance Company
("Financial Guaranty"), a "Secondary Market Insurance Policy" or a "New
Issue Insurance Policy" obtained by the issuer or the underwriter of the
security at the time of its original issuance. If a Municipal Security
is already covered by a New Issue Insurance Policy or Secondary Market
Insurance Policy, then such security is not required to be additionally
insured under a Portfolio Insurance Policy issued by Financial Guaranty.
Such New Issue Insurance Policy or Secondary Market Insurance Policy may
have been issued by Financial Guaranty or by other insurers.
Based upon the current composition of the Fund's portfolio, the
Manager estimates that the premiums for a Portfolio Insurance Policy will
range from 0.2% to 0.4% per annum of average daily net assets. Premiums
are paid from the Fund's assets, and will reduce the current yield on its
portfolio by the amount thereof. When the Fund purchases a Secondary
Market Insurance Policy (see below), the single premium is added to the
cost basis of the Municipal Security and is not considered an item of
expense for the Fund.
Any of the policies discussed above insure the scheduled payment of
all principal and interest on the Municipal Securities as they fall due.
The insurance does not guarantee the market value of the Municipal
Securities or the value of the shares of the Fund and, except as described
below, has no effect on the net asset value or redemption price of the
shares of the Fund. The insurance of principal refers to the face or par
value of the security, and is not affected by the price paid therefor by
the Fund or the market value thereof. Payment of a claim under an
insurance policy depends on the claims-paying ability of the insurer and
no representation is made by the Fund as to the ability of any insurer to
meet its commitments.
The New Issue Insurance Policies, if any, on the Fund's securities
have been obtained by the respective issuers or underwriters of those
securities, and all premiums with respect to such securities have been
paid in advance by such issuers or underwriters. Such policies are non-
cancelable and will continue in force so long as the securities are
outstanding and the respective insurers remain in business. Since New
Issue Insurance remains in effect as long as the securities insured
thereby are outstanding, the insurance may have an effect on the resale
value of securities in the Fund's portfolio. Therefore, New Issue
Insurance may be considered to represent an element of market value in
regard to securities thus insured, but the exact effect, if any, of this
insurance on such market value cannot be estimated. The Fund will acquire
Municipal Securities subject to New Issue Insurance Policies only if the
claims-paying ability of the insurer thereof is rated "AAA" by S&P at the
date of purchase.
The Portfolio Insurance Policy obtained by the Fund from Financial
Guaranty will be effective only so long as the Fund is in existence,
Financial Guaranty is in business, and the Municipal Securities described
in the policy continue to be held by the Fund. In the event of a sale of
any Municipal Security by the Fund or payment thereof prior to maturity
because such Municipal Security is called or redeemed, the Portfolio
Insurance Policy terminates as to such security.
The Portfolio Insurance Policy obtained by the Fund is non-
cancelable except for failure to pay the premium. Nonpayment of premiums
on the Portfolio Insurance Policy obtained by the Fund will, under certain
circumstances, result in the cancellation of the Portfolio Insurance
Policy and also will permit Financial Guaranty to take action against the
Fund to recover premium payments due it. The premium rate for each
security covered by the Portfolio Insurance Policy is fixed for the life
of the Fund at the time of purchase. The insurance premiums are payable
monthly by the Fund and are adjusted for purchases, sales and payments
prior to maturity of covered securities during the month. Financial
Guaranty cannot cancel coverage already in force with respect to Municipal
Securities owned by the Fund and covered by the Portfolio Insurance Policy
except for non-payment of premiums. If any insurance for a Municipal
Security is canceled, the Manager will determine as promptly thereafter
as possible whether that security should be sold by the Fund.
In determining whether to insure any Municipal Security, Financial
Guaranty applies its own standards, which are not necessarily the same as
the criteria used in regard to the selection of securities by the Manager.
That decision is made prior to the Fund's purchase of such securities.
Contracts to purchase securities are not covered by the Portfolio
Insurance Policy although securities underlying such contracts are covered
by such insurance upon physical delivery of the securities to the Fund or
the Fund's Custodian.
- Secondary Market Insurance. The Fund may at any time purchase
from Financial Guaranty a Secondary Market Insurance Policy on any
Municipal Security purchased by the Fund that is covered by a Portfolio
Insurance Policy. The right of the Fund to obtain a Secondary Market
Insurance Policy with respect to a security is in addition to the
Portfolio Insurance Policy. However, the coverage and obligation to pay
monthly premiums under a Portfolio Insurance Policy with respect to a
security would cease with the purchase by the Fund of a Secondary Market
Insurance Policy on such security.
By purchasing a Secondary Market Insurance Policy, the Fund would,
upon payment of a single pre-determined premium, obtain insurance against
non-payment of scheduled principal and interest for the remaining term of
the security, regardless of whether the Fund then owned the security.
Such insurance coverage will be noncancellable and will continue in force
so long as the security so insured is outstanding. The purpose of
acquiring such a policy would be to enable the Fund to sell the Municipal
Security to a third party as an "AAA" rated insured security at a market
price higher than what otherwise might be obtainable if the security were
sold without the insurance coverage. Such rating is not automatic,
however, and must specifically be requested from S&P for each security.
Such policy likely would be purchased if, in the opinion of the Manager,
the market value or net proceeds of a sale of the security so insured
would exceed the current value of the security (without insurance) plus
the cost of the policy. Any difference between a security's market value
as an "AAA" rated security and its market value without such rating,
including the single premium cost thereof, would inure to the Fund in
determining the net capital gain or loss realized by the Fund upon the
sale of the portfolio security. The Fund may purchase insurance under a
Secondary Market Insurance Policy in lieu of a Portfolio Insurance Policy
at any time, regardless of the effect on market value of the underlying
Municipal Security, if the Manager believes such insurance would best
serve the Fund's interests in meeting its objectives and policies. The
Secondary Market Insurance Policy allows the Fund to purchase a Secondary
Market Insurance Policy on a security which is currently in default as to
payments by the issuer and to sell such security on an insured basis
rather than be obligated to hold the defaulted security in its portfolio
in order to continue in force the applicable Portfolio Insurance Policy.
- Financial Guaranty Insurance Company. Financial Guaranty is a New
York stock insurance company, with principal offices at 115 Broadway, New
York, New York, 10006. "Investment Objective and Policies" in the
Statement of Additional Information contains more information on Financial
Guaranty.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund generally 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. 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. The "Financial Highlights," above,
shows the Fund's portfolio turnover rate during the past fiscal years.
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.
- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers, and other
financial institutions. These loans are limited to not more than 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 sold publicly until it is registered under
the Securities Act of 1933. The Fund will not invest more than 10% of its
net assets in illiquid or restricted securities (that limit may increase
to 15% if certain state laws are changed or the Fund's shares are no
longer sold in those states). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers.
- "When-Issued" and Delayed Delivery Transactions. As a matter of
fundamental policy, the Fund may purchase Municipal Securities on a "when-
issued" basis and may purchase or sell Municipal Securities on a "delayed
delivery" basis. These terms refer to securities that have been created
and for which a market exists, but which are not available for immediate
delivery. 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. 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 these securities, but the Fund may sell the securities prior to
the settlement date if the sale is considered to be advisable. There may
be a risk of loss to the Fund if the value of the security declines prior
to the settlement date.
- 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 its net 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 the 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) purchase
certificates of deposit or taxable commercial paper that will cause more
than 25% of the Fund's total assets to be so invested; (3) make loans,
except that the Fund may purchase or hold debt obligations in accordance
with its other investment restrictions that are fundamental policies (and
may enter into repurchase transactions; it may also lend its portfolio
securities in amounts not exceeding 5% of the total assets of the Fund if
such loans are collateralized by cash or U.S. Government Securities in
amounts equal at all times to at least 100% of the value of the securities
loaned, including accrued interest); (4) 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 then own more than 10% of that issuer's
voting securities; or (5) 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 development bonds in a
single industry). </R.
All of the percentage restrictions described above and elsewhere in
this 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 Bond 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
under Massachusetts law for protecting the interests of shareholders. 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 two classes of shares, Class A and
Class B. 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 $28 billion as
of September 30, 1994, and with more than 1.8 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, a 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: 0.450% of the first $100
million of aggregate net assets, 0.400% of the next $150 million, 0.375%
of the next $250 million, and 0.350% of net assets in excess of $500
million. The Fund's management fee for its last fiscal year was 0.450%
of average annual net assets for both its Class A and Class B shares,
which may be higher than the rate paid by some other mutual funds.
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. </R.
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 Fund's 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
accounts to the Transfer Agent at the address and toll-free numbers 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 market indices,
as we have done below.
It is important to understand that the Fund's yields and total returns
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. From time to time, the Manager may voluntarily
assume a portion of the Fund's expenses (which may include the management
fee), thereby lowering the overall expense ratio per share and increasing
the yield and total return of that class during the time such expenses
were assumed. 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, they reflect the
payment of the maximum initial sales charge. Total returns may also be
quoted "at net asset value," without considering the effect of the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for Class B shares, they reflect the effect
of the contingent deferred sales charge. They may also be shown based on
the change in net asset value, without considering the effect of the
contingent deferred sales charge.
- 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 B shares do not
reflect the deduction of the contingent deferred sales charge.
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 securities. The Manager
emphasized high quality essential service issues, diversified by market
sector and by state, as well as 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 operations on November 11, 1986, and
in the case of Class B shares, from the inception of the class on May 3,
1993, with all dividends and capital gains distributions reinvested in
additional shares. The graph reflects the deduction of the 4.75% maximum
initial sales charge on Class A shares and the maximum 5.0% contingent
deferred sales charge on Class B 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 the same portfolio quality standards, nor does it
reflect any assessment of the risk of the investments included in the
index.
Oppenheimer Insured Tax-Exempt Bond Fund
Comparison of Change in Value
of $10,000 Hypothetical Investment to the
Lehman Brothers Municipal Bond Index
(Graph)
Past performance is not predictive of future performance.
Oppenheimer Insured Tax-Exempt Bond Fund
Average Annual Total Returns at 9/30/94
1-Year 5-Year Life
Class A:* -9.93% 6.36% 6.07%
Class B:** -10.64% N/A -3.03%
_________________________________________
* The inception date of the Fund (Class A shares) was 11/11/86.
**Class B shares of the Fund were first publicly
offered on 5/3/93.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If 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, and you sell any of those shares within 18
months after your purchase, you may pay a contingent deferred sales
charge, which dollar value 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 6 years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you own your shares.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, deciding which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. Because 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 to consider 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 offer Class A and/or Class B 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, based on the
sales charge rates that apply to each class, and considering the effect
of the asset-based sales charge on Class B expenses (which will affect
your investment return), and, for the sake of comparison, we have assumed
that there is a 10% rate of appreciation in your 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 of
shares you invest in. The factors discussed below are not intended to be
investment advice or recommendations, because each investor's financial
considerations are different.
- How Long Do You Expect to Hold Your Investment? The Fund is
designed for long-term 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.
The effect of the sales charge over time, using our assumptions, will
generally depend on the amount invested. Because of the effect of class-
based expenses, your choice will also depend on how much you invest.
- How Much Do You Plan to Invest? If you plan to invest a
substantial amount over the long term, the reduced sales charges available
for larger purchases of Class A shares may 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 expenses on Class B, for which no initial sales
charge is paid. Additionally, dividends payable to Class B shareholders
will be reduced by the additional expenses borne solely by Class B, such
as the asset-based sales charge described below.
In general, if you plan to invest less than $100,000, Class B shares
may be more advantageous than Class A shares, using the assumptions in our
hypothetical example. However, if you plan to invest more than $100,000
(not only in the Fund, but possibly in other OppenheimerFunds as well),
then Class A shares generally will be more advantageous than Class B,
because of the effect of the reduction of initial sales charges on larger
purchases of Class A shares (described in "Reduced Sales Charges for Class
A Share Purchases," below). That is also the case because the annual
asset-based sales charge on Class B shares will have a greater impact on
larger investments than the initial sales charge on Class A shares because
of the reductions of initial sales charge available for larger purchases.
And for 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 $1 million or more of Class B shares
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 assumptions stated above. Therefore, these examples
should not be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter To You?
Because some features (such as Checkwriting) may not be available to Class
B shareholders, or other features (such as Automatic Withdrawal Plans) may
not be advisable (because of the effect of the contingent deferred sales
charge) for Class B shareholders, you should carefully review how you plan
to use your investment account before deciding which class of shares to
buy. Additionally, dividends payable to Class B shareholders will be
reduced by the additional expenses borne by that class that are not borne
by Class A, such as the Class B asset-based sales charge described below
and in the Statement of Additional Information.
Also, because not all of the OppenheimerFunds currently offer Class
B shares, and because exchanges are permitted only to the same class of
shares in another of the OppenheimerFunds, you should consider how
important the exchange privilege is likely to be for you.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling or
servicing one class of shares than another class. It is important that
investors understand that the purpose of the Class B contingent deferred
sales charge is the same as the purpose of the front-end sales charge on
Class A shares: to compensate the Distributor for commissions it pays to
dealers and financial institutions for sales of shares.
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 or
Class B 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 Sales Charge Commission as
As a Percentage of: Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
_______________________________________________________________________
__________
Less than $50,000 4.75% 4.98% 4.00%
$50,000 or more but
less than $100,000 4.50% 4.71% 4.00%
$100,000 or more but
less than $250,000 3.50% 3.63% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.25%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.80%
_______________________________________________________________________
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. You and your spouse can cumulate Class A
shares you purchase for your own accounts, or jointly, or on behalf of
your children who are minors, under trust or custodial accounts. 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 cumulate current purchases of Class A shares
of the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your 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, you may purchase Class
A shares of the Fund and other OppenheimerFunds during a 13-month period
at the reduced sales charge rate that applies to the aggregate amount of
the intended purchases, including 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. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) 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; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) 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; (5)
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); (6) 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.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates act as sponsor, or (c) 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. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge is also waived if shares
are redeemed in the following cases: (1) Automatic Withdrawal Plan
payments that are limited to no more than 12% of the original account
value annually, (2) 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 (3) if, at any time, an order is
placed for Class A shares that would otherwise be subject to Class A
contingent deferred sales charge, the dealer agrees to accept the dealer's
portion of the commission payable on the sale in installments of 1/18th
of the commission per month (with no further commission payable if the
shares are 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 by up to .25% of its
average annual net assets. 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 6 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 6 years, and (3) shares held the longest during the
6-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:
Years Since Beginning Contingent Deferred Sales Charge
of Month in which On Redemptions in That Year
Purchase Order Was Made (As % of Amount Subject to Charge)
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for a
redemption following the death or disability of the shareholder (you must
provide evidence of a determination of disability by the Social Security
Administration).
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 and Class
B 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 and costs 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 service for accounts that hold Class B shares.
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.
The asset-based sales charge and service fees increase Class B expenses
by up to 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
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
Because the Distributor's actual expenses in selling Class B shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class B shares, those expenses may be
carried over and paid in future years. 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. At September 30, 1994, the end
of the Plan year, the Distributor had incurred unreimbursed expenses under
the Plan of $500,228 (equal to 4.32% of the Fund's net assets represented
by Class B shares on that date), which have been carried over into the
present Plan year.
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 Fund shares,
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 sell, and
Class B shares on which you paid a contingent deferred sales charge when
you redeemed them. 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 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
- A redemption is not payable to all shareholders listed on the
account statement
- A redemption 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 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 Shareholders 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. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
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 $15 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 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. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchange between already established accounts on PhoneLink
described below. 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 shares and either Class B 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.
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 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. 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 neither it nor the Fund will be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent
during periods of unusual market activity, you may not be able to complete
a telephone transaction and should consider placing your order by mail.
- 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 and Class B 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. 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 of small accounts may be made by the Fund
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 B 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 surname 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 and
Class B shares from net investment income on each regular business day and
pays those dividends to shareholders monthly on a date selected by the
Board of Trustees. Daily dividends will not be declared or paid on newly
purchased shares until Federal Funds (funds credited to a member bank's
account at the Federal Reserve Bank) are available from the purchase
payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Shares
purchased through dealers or brokers normally are paid for by the fifth
business day following the placement of the purchase order. Shares
redeemed through the regular redemption procedure will be paid dividends
through and including the day on which the redemption request is received
by the Transfer Agent in proper form. Dividends will be paid with respect
to shares repurchased by a dealer or broker for four business days
following the trade date (i.e., to and including the day prior to
settlement of the repurchase). If a shareholder redeems all shares in an
account, all dividends accrued on shares held in that account will be paid
together with the redemption proceeds. However, the amount of dividends
and distributions may vary from time to time, depending upon market
conditions, the composition of the Fund's portfolio, and expenses borne
by that class. It is expected that distributions paid with respect to
Class A shares will generally be higher than for Class B shares because
expenses allocable to Class B 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 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. The Board of
Trustees could change that targeted level at any time, and there is
otherwise no fixed dividend rate. 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 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 calendar year. Short-term capital gains are
treated as taxable 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 Long-Term 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.
APPENDIX TO PROSPECTUS OF
OPPENHEIMER INSURED TAX-EXEMPT BOND FUND
Graphic material included in Prospectus of Oppenheimer Insured Tax-
Exempt Bond Fund: "Comparison of Total Return of Oppenheimer Insured Tax-
Exempt Bond 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
Insured Tax-Exempt Bond 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 B shares will cover
the period from the inception of the class (May 3, 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 Insured Lehman Brothers
(Period) Ended Tax-Exempt Bond Fund A Municipal Bond Index
11/11/86 $ 9,525 $ 10,000
9/30/87 $ 8,729 $ 9,690
9/30/88 $ 10,184 $ 10,948
9/30/89 $ 11,138 $ 11,898
9/30/90 $ 11,785 $ 12,707
9/30/91 $ 13,326 $ 14,383
9/30/92 $ 14,757 $ 15,886
9/30/93 $ 16,826 $ 17,910
9/30/94 $ 15,912 $ 17,473
Fiscal Year Oppenheimer Insured Lehman Brothers
(Period) Ended Tax-Exempt Bond Fund B Municipal Bond Index
5/3/93 $ 10,000 $ 10,000
9/30/93 $ 10,578 $ 10,511
9/30/94 $ 9,576 $ 10,255
Oppenheimer Insured Tax-Exempt Bond Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
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 O P P E N H E I M E R
Transfer Agent Insured Tax-Exempt
Oppenheimer Shareholder Services Bond Fund
P.O. Box 5270
Denver, Colorado 80217 Prospectus
1-800-525-7048 Effective
February 1, 1995
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 80202OppenheimerFunds
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.
PR866.0195.N Printed on recycled paper
<PAGE>
Oppenheimer Insured Tax-Exempt Bond Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
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 O P P E N H E I M E R
Transfer Agent Insured Tax-Exempt
Oppenheimer Shareholder Services Bond Fund
P.O. Box 5270
Denver, Colorado 80217 Prospectus
1-800-525-7048 Effective
February 1, 1995
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 80202OppenheimerFunds
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.
PR865.0195.N Printed on recycled paper
<PAGE>
Oppenheimer Intermediate Tax-Exempt Bond Fund
Prospectus dated February 1, 1995
Oppenheimer Intermediate Tax-Exempt Bond Fund (the "Fund"), is a series
of Oppenheimer Tax-Exempt Bond Fund. The Fund has the investment
objective of seeking a high level of current income exempt from Federal
income tax through the purchase of investment grade securities. See
"Investment Objective and Policies."
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class C shares,which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you hold them. A contingent deferred sales charge is imposed
on most Class C shares redeemed within 12 months of purchase. Class C
shares are also subject to an annual "asset-based sales charge." Each
class of shares bears different expenses. In deciding which class of
shares to buy, you should consider how much you plan to purchase, how long
you plan to keep your shares, and other factors discussed in "How to Buy
Shares" starting on page ___.
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 January 27, 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).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
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
Page
ABOUT THE FUND
Expenses
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, 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. The calculations are based on the Fund's
expenses during its fiscal year ended September 30, 1994.
-- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages _____ through _____, for an explanation of how and when these
charges apply.
Class A Shares Class C Shares
Maximum Sales Charge on Purchases
(as a % of offering price) 3.50% None
Sales Charge on Reinvested
Dividends None None
Deferred Sales Charge
(as a % of the lower of the
original purchase price or
redemption proceeds) None(1) 1.0%(2)
Exchange Fee $5.00(3) $5.00(3)
___________________
(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," below.
(2) If you redeem Class C shares within 12 months of buying them, you may
have to pay a 1.0% contingent deferred sales charge. See "How to Buy
Shares," below.
(3) Fee is waived for automated exchanges, as described in "How to
Exchange 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 (the "Manager"), and 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. The following numbers 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 the Service Plan Fees (which are a maximum of 0.25% of
average annual net assets of that class), and for Class C shares are the
Distribution and Service Plan Fees (maximum of 0.25% for the service fee)
and the asset-based sales charge of 0.75%. 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 C shares were not publicly sold before December
1, 1993. Therefore, the Annual Fund Operating Expenses shown for Class
C shares are based on expenses for the period from December 1, 1993
through September 30, 1994.
Class A Shares Class C Shares
Management Fees .50% .50%
12b-1 Distribution Plan Fees .25%* 1.00%**
Other Expenses .25% .74%
Total Fund Operating ----- -------
Expenses 1.00% 2.24%
_______________________________
*Service Plan fees only
**Includes Service Plan Fee and asset-based sales charge
-- 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 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 C Shares $23 $70 $120 $257
_________________
(1) Because of the asset-based sales charge imposed on Class C shares
of the Fund, long-term shareholders of Class C shares could bear
expenses that would be the economic equivalent of an amount greater
than the maximum front-end sales charges permitted under applicable
regulatory requirements.
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. 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 through the purchase of investment grade securities.
-- What Does the Fund Invest In? To seek its objective, the Fund
primarily invests 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 ___.
-- Who Manages the Fund? The Fund's investment advisor is
Oppenheimer Management Corporation, which (including a subsidiary) advises
investment company portfolios having over $28 billion in assets. The
Fund's portfolio manager, who is primarily responsible for the selection
of the Fund's securities, is Robert Patterson. The Manager is paid an
advisory fee by the Fund, based on its assets. 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 ___ 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 ___
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 ___ for more details.
-- Will I Pay a Sales Charge to Buy Shares? The Fund has two classes
of shares. Class A shares are offered with a front-end sales charge,
starting at 3.50%, and reduced for larger purchases. Class C shares are
offered without a front-end sales charge, but may be subject to a 1.0%
contingent deferred sales charge if redeemed within 12 months of purchase.
There is also an annual asset-based sales charge on Class C shares.
Please review "How To Buy Shares" starting on page ___ for more details,
including a discussion about 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. Please refer to "How To Sell Shares" on page ___.
-- 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 broad market indices, which we have
done on page ___. 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 based on the Fund's average net assets.
The 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.
<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.
<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 through the purchase of
investment grade securities.
Investment Policies and Strategies. As a matter of fundamental policy, the
Fund will seek to attain its investment objective by investing at least
80% of its total assets in a portfolio of "investment grade" (defined
below) Municipal Securities and at least 65% of its total assets in a
portfolio of investment grade municipal bonds under normal market
conditions. "Investment grade" securities include: (1) in the case of
long-term debt, those securities rated "AAA" through "BBB" by Standard &
Poor's Corporation ("S&P") or "Aaa" through "Baa" by Moody's Investor
Services, Inc. ("Moody's"); (2) in the case of short-term securities, "SP-
1+" through "SP-2" by S&P or "MIG1" through "MIG4" by Moody's; or (3) in
the case of tax-exempt commercial paper, "A-1+" through "A-2" by S&P or
"Prime-1" through "Prime-2" by Moody's. As a fundamental policy, the Fund
may also invest in unrated securities but only if judged by the Manager
to be of comparable quality to Municipal Securities rated as investment
grade.
Municipal bonds are Municipal Securities that have a maturity of more
than one year when issued. 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 S&P, 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 rating categories
of S&P and Moody's.
As a fundamental policy, the Fund may invest temporarily up to 20% of
its total assets in taxable securities for liquidity purposes, as
described below. Under another fundamental policy, the Fund may invest
more than 20% of its assets in taxable securities for temporary defensive
purposes, as described below. In addition, the Fund will normally not
invest more than 20% of its total assets in municipal securities issued
to benefit a private user ("Private Activity Municipal Securities"), the
interest from which may be subject to Federal alternative minimum tax to
which certain shareholders may be subject (see "Dividends, Capital Gains
and Taxes," below and "Private Activity Municipal Securities" in the
Statement of Additional Information for a more detailed discussion of the
tax treatment of the Fund's dividends). Under normal circumstances, the
Fund will maintain a dollar-weighted average portfolio maturity of more
than three 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 investment objectives, 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.
The Fund's Board of Trustees may change non-fundamental policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies 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).
-- 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.
"Municipal Bonds" are Municipal Securities that have a maturity when
issued of one year or more, and "Municipal Notes" are Municipal Securities
that have a maturity when issued of less than one year.
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 issue.
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 realized 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
investment 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 "Investment Objective and
Policies -Municipal Securities - Municipal Lease Securities" in the
Statement of Additional Information for more details.
-- Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under certain conditions and subject to certain restrictions,
described above, the Fund may hold certain taxable investments in any of
the following circumstances: (a) pending investment of the proceeds of
sales of shares of the Fund or sales of portfolio securities; (b) pending
settlement of purchases of portfolio securities; or (c) to maintain
liquidity for the purpose of meeting anticipated redemptions or exchanges.
In times of unstable market or economic conditions, as a fundamental
policy the Fund may invest more than 20% of its assets in taxable
securities for temporary defensive purposes when, in the opinion of the
Manager, it is advisable to do so because of market conditions. While
dividends paid by the Fund from income derived from interest attributable
to Municipal Securities will be exempt from Federal individual income
taxes, any net interest income derived from taxable securities and
distributed by the Fund will be taxable as ordinary income when
distributed. To the extent that the Fund distributes taxable income, it
will not be meeting its investment objective.
The types of taxable securities in which the Fund may invest are limited
as a matter of fundamental policy to the following short-term fixed-income
securities (maturing in one year or less from the time of purchase): (i)
obligations issued by, or guaranteed as to principal and interest by, the
U.S. Government or by its agencies or instrumentalities if such
obligations are backed by the full faith and credit of the United States;
(ii) commercial paper rated "A-1" or better by S&P and issued by companies
whose long-term unsecured debt is rated "AAA" by S&P; (iii) certificates
of deposit of any bank (or, in the case of the principal bank in a bank
holding company, the long-term unsecured debt obligations of the bank
holding company) whose long-term debt obligations have been rated "AAA"
by S&P; and (iv) repurchase agreements with respect to any of the
foregoing types of securities; provided, however, that such commercial
paper, certificates of deposit and repurchase agreements may not exceed
25% of the total assets of the Fund.
-- 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.
As a matter of fundamental policy, 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." As a
fundamental policy, 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. One fundamental policy of the Fund permits the Fund to sell
a futures contract or a call option on a futures contract if the Manager
anticipated that interest rates will rise, as a hedge against a decrease
in the value of the Fund's portfolio securities. Under that fundamental
policy, 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. As a fundamental policy, 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. Under other
fundamental policies, 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. Under another fundamental policy, the Fund may not purchase or
sell futures contracts or related options on futures contracts if, on
doing so, more than one third of its assets would be needed.
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. 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. As a fundamental
policy, 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) purchase certificates of
deposit or taxable commercial paper that will cause more than 25% of the
Fund's total assets to be so invested; (3) make loans, except that the
Fund may purchase or hold debt obligations in accordance with its other
investment restrictions that are fundamental policies (and may enter into
repurchase transactions and may lend its portfolio securities in amounts
not exceeding 5% of the total assets of the Fund if such loans are
collateralized by cash or U.S. Government Securities in amounts equal at
all times to at least 100% of the value of the securities loaned,
including accrued interest); (4) 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 (5) 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 Bond 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 two classes of shares, Class A and
Class C. 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 $28 billion as
of September 30, 1994, and with more than 1.8 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, a 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, which may be higher than
the rate paid by some other mutual funds.
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. As the Fund purchases most
of its portfolio securities directly from the sellers and not through
brokers, it 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 market indices,
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, they reflect the
payment of the maximum initial sales charge. Total returns may also be
quoted "at net asset value," without considering the effect of 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 reflect the effect of the contingent deferred sales charge. They may
also be shown based on the change in net asset value, without considering
the effect of the contingent deferred sales charge.
-- 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.
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 of 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 4.75% 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.
Oppenheimer Intermediate Tax-Exempt Bond Fund
Comparison of Change in Value
of $10,000 Hypothetical Investment to the
Lehman Brothers Municipal Bond Index
[Graph]
Past performance is not predictive of future performance.
Oppenheimer Intermediate Tax-Exempt Bond Fund
Average Annual Total Returns at 9/30/94
1-Year 5-Year Life
Class A:* -5.32% 6.87% 6.83%
Class C:** N/A N/A -3.46%
_________________________________________
* The inception date of the Fund (Class A shares) was 11/11/86.
** Reflects Cumulative Total Return from the date that Class C shares
were first publicly offered (12/1/93) and is not annualized.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two 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 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 advisors.
-- How Much Do You Plan to Invest? If you plan to invest a
substantial amount over the long term, the reduced sales charges available
for larger purchases of Class A shares may be more beneficial to you than
purchasing Class C shares, because of the higher annual expenses Class C
shares will likely bear. For purchases over $1 million, the contingent
deferred sales charge on Class A shares may be more beneficial. The
Distributor will not accept any order for $1 million or more for Class C
shares on behalf of a single investor for that reason.
-- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, investors who prefer
not to pay an initial sales charge and who plan to hold their shares for
more than one year might consider Class C shares. Investors who plan to
redeem shares within a year might consider whether the front-end sales
charge on Class A shares would result in higher net expenses after
redemption.
-- Are There Differences in Account Features That Matter to You?
Because some account features may not be available for 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. Additionally, the dividends payable to Class C shareholders will be
reduced by the additional expenses borne solely by that class, such as the
asset-based sales charge to which Class C shares are subject, as described
below and in the Statement of Additional Information.
-- How Does It Affect Payments to My Broker? A salesperson or any
other person who is entitled to receive compensation for selling Fund
shares may receive different compensation for selling one class than for
selling another class. It is important that investors understand that the
purpose of the contingent deferred sales charge and asset-based sales
charge for Class C shares is the same as the purpose of the front-end
sales charge on sales of Class A shares.
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 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.
-- Group Programs. Reduced sales charges on Class A shares are
available to participants in a group sales program if the administrator
of the program has entered into an agreement with the Distributor
providing, among other things, that all participants' purchases are made
by a single group order and payment for each investment period and that
requisite data about such participants and purchases be provided to the
Transfer Agent in acceptable computer format. The sales charge for such
purchases will be at the rate in the table above that applies to combined
current purchases (minimum $25 per participant per period) of Class A
shares of the Fund, Oppenheimer Insured Tax-Exempt Bond Fund and
Oppenheimer Limited-Term Government Fund by all participants in such
program based upon the current value (at offering price) of shares of such
fund held by all participants in such program at the time of purchase.
No certificates will be issued for shares held by program participants and
dividends and distributions must be reinvested in accounts held by such
participants. Automatic Withdrawal and Exchange Plans (described below)
may not be used for such accounts. The Fund and the Distributor reserve
the right to amend, suspend or cease offering such programs at any time
without prior notice.
-- 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 Sales Charge Commission as
As a Percentage of: Percentage of Offering
Amount of Purchase Offering Price Amount Invested Price
Less than $100,000 3.50% 3.63% 3.00%
$100,000 or more but
less than $250,000 3.00% 3.09% 2.50%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.50%
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. You and your spouse can cumulate Class A
shares you purchase for your own accounts, or jointly, or on behalf of
your children who are minors, under trust or custodial accounts. 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 cumulate current purchases of Class A shares of
the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your 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, you may purchase Class
A shares of the Fund and other OppenheimerFunds during a 13-month period
at the reduced sales charge rate that applies to the aggregate amount of
the intended purchases, including 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. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) 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; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) 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; (5)
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 (6) 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.
Additionally, no sales charge is imposed on shares that are (a) issued
in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than the Oppenheimer Cash Reserves)
or unit investment trusts for which reinvestment arrangements have been
made with the Distributor. There is a further discussion of this policy
in "Reduced Sales Charges" in the Statement of Additional Information.
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) Automatic Withdrawal
Plan payments that are limited to no more than 12% of the original account
value annually, (2) 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 (3) if, at the time an order is
placed for Class A shares that would otherwise be subject to the Class A
contingent deferred sales charge, the dealer agrees to accept the dealer's
portion of the commission payable on the sale in installments of 1/18th
of the commission per month (with no further commission payable if the
shares are 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 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 redemptions
following the: (1) death or (2) disability of the shareholder (you must
provide evidence of a determination of disability by the Social Security
Administration). The contingent deferred sales charge is also waived on
Class C 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 above. Further details
about this policy are contained in "Reduced Sales Charges" in the
Statement of Additional Information.
-- 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 its services and costs in 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 up to 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
Distributor retains the asset-based sales charge during the first year
shares are outstanding to recoup the sales commissions it pays, the
advances of service fee payments it makes, and its financing costs. 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.
Because the Distributor's actual expenses in selling Class C shares may
be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class C shares, those expenses may be
carried over and paid in future years. At September 30, 1994, the end of
the Plan year, the Distributor had not incurred unreimbursed expenses
under the Plan of $78,979 (equal to 13.16% of the Fund's net assets
represented by Class C shares on that date), which have been carried over
into the present Plan year. 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 Fund shares,
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
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge or on which you paid a contingent deferred
sales charge when you redeemed them. 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 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. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
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 $15 fee for each wire.
Check Writing. 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
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. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchanges between already established accounts on PhoneLink
described below. 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 shares and either Class B 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 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. 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 surname 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 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. The Board may also cause the Fund to declare dividends after
the close of the Fund's fiscal year (which ends September 30th). Also,
dividends paid on Class A shares generally are expected to be higher than
for Class C shares because expenses allocable to Class C shares will
generally be higher. Daily dividends will not be declared or paid on
newly-purchased shares until Federal Funds (funds credited to a member
bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Shares
purchased through dealers or brokers normally are paid for by the fifth
business day following the placement of the purchase order. Shares
redeemed through the regular redemption procedure will be paid dividends
through and including the day on which the redemption request is received
by the Transfer Agent in proper form. Dividends will be paid with respect
to shares repurchased by a dealer or broker for four business days
following the trade date (i.e., to and including the day prior to
settlement of the repurchase). If a shareholder redeems all shares in an
account, all dividends accrued on shares held in that account will be paid
together with the redemption proceeds. The Fund does not have a fixed
dividend rate and there can be no assurance as to the payment of any
dividends or the realization of any capital gains.
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 BOND FUND
Graphic material included in Prospectus of Oppenheimer Intermediate Tax-
Exempt Bond Fund: "Comparison of Total Return of Oppenheimer Intermediate
Tax-Exempt Bond 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 Bond 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 Bond 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 Bond Fund C Municipal Bond Index
12/1/93 $10,000 $10,000
9/30/94 $ 9,655 $ 9,824
<PAGE>
Oppenheimer Intermediate Tax-Exempt Bond Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
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 O P P E N H E I M E R
Oppenheimer Shareholder Services Intermediate
P.O. Box 5270 Tax-Exempt
Denver, Colorado 80217 Bond Fund
1-800-525-7048
Prospectus and New
Custodian of Portfolio Securities Account Application
Citibank, N.A. Effective February 1, 1995
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 representation must not be
relied upon as having been authorized by the Corporation, 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 offer in
such state.
PR860.0195.N Printed on recycled paper
OppenheimerFunds
<PAGE>
Oppenheimer Intermediate Tax-Exempt Bond Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
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 O P P E N H E I M E R
Oppenheimer Shareholder Services Intermediate
P.O. Box 5270 Tax-Exempt
Denver, Colorado 80217 Bond Fund
1-800-525-7048
Prospectus
Custodian of Portfolio Securities Effective February 1, 1995
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 representation must not be
relied upon as having been authorized by the Corporation, 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 offer in
such state.
PR860.0195.N Printed on recycled paper OppenheimerFunds
<PAGE>
Oppenheimer Insured Tax-Exempt Bond Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated February 1, 1995
Oppenheimer Insured Tax-Exempt Bond Fund (the "Fund"), is a series of
Oppenheimer Tax-Exempt Bond Fund (the "Trust"). This Statement of
Additional Information is not a Prospectus. This document contains
additional information about the Fund and supplements information in the
Prospectus dated February 1, 1995. It should be read together with the
Prospectus, which may be obtained by writing to the Fund's Transfer Agent,
Oppenheimer Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217
or by calling the Transfer Agent at the toll-free number shown above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objectives and Policies 2
Investment Policies and Strategies. 2
Other Investment Techniques and Strategies 7
Other Investment Restrictions 8
How the Fund is Managed 9
Organization and History 9
Trustees and Officers of the Trust 9
The Manager and Its Affiliates 13
Brokerage Policies of the Fund 14
Performance of the Fund 16
Distribution and Service Plans 19
About Your Account 22
How To Buy Shares 22
How To Sell Shares 27
How To Exchange Shares 30
Dividends, Capital Gains and Taxes 32
Additional Information About the Fund 34
Financial Information About the Fund 35
Independent Auditors' Report 35
Financial Statements 36
Appendix A (Description of Ratings) A-1
Appendix B (Tax-Equivalent Yield Chart) B-1
Appendix C (Industry Classifications) C-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objectives and policies
of the Fund are described in the Prospectus. Supplemental information
about those policies is set forth below. Certain capitalized terms used
in this Statement of Additional Information have the same meaning as those
terms have in the Prospectus.
Municipal Securities. There are variations in the security of Municipal
Securities, both within a particular classification and between
classifications, depending on numerous factors. The yields of Municipal
Securities depend on, among other things, general conditions of the
Municipal Securities market, size of a particular offering, the maturity
of the obligation and rating of the issue. The market value of Municipal
Securities will vary as a result of changing evaluations of the ability
of their issuers to meet interest and principal payments, as well as
changes in the interest rates payable on new issues of Municipal
Securities.
- Municipal Bonds. The principal classifications of long-term
municipal bonds are "general obligation" and "revenue" or "industrial
development" bonds.
- General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The
proceeds of these obligations are used to fund a wide range of public
projects, including construction or improvement of schools, highways and
roads, and water and sewer systems. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and
taxing power for the payment of principal and interest. The taxes that
can be levied for the payment of debt service may be limited or unlimited
as to the rate or amount of special assessments.
- Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or
the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
- Industrial Development Bonds. Industrial development bonds,
which are considered municipal bonds if the interest paid is exempt from
federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports, and pollution control. These bonds
are also used to finance public facilities such as airports, mass transit
systems, ports, and parking. The payment of the principal and interest
on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.
- Municipal Notes. Municipal Securities having a maturity when issued
of less than one year are generally known as municipal notes. Municipal
notes generally are used to provide for short-term working capital needs
and include:
- Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use or business taxes, and are payable from these specific future
taxes.
- Revenue Anticipation Notes. Revenue anticipation notes are
issued in expectation of receipt of other types of revenue, such as
Federal revenues available under the Federal revenue sharing programs.
- Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
- Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration.
- Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is
issued by state and local governments or their agencies to finance
seasonal working capital needs or as short-term financing in anticipation
of longer-term financing.
- Floating Rate/Variable Rate Obligations. Floating rate and variable
rate demand notes are tax-exempt obligations which may have a stated
maturity in excess of one year, but may include features that permit the
holder to recover the principal amount of the underlying security at
specified intervals not exceeding one year and upon no more than 30 days'
notice. The issuer of such notes normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding
principal amount of the note plus accrued interest upon a specified number
of days notice to the holder. The interest rate on a floating rate demand
note is based on a stated prevailing market rate, such as a bank's prime
rate, the 90-day U.S. Treasury Bill rate, or some other standard, and is
adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand note is also based on a stated prevailing market
rate but is adjusted automatically at specified intervals of no more than
one year. Generally, the changes in the interest rate on such securities
reduce the fluctuation in their market value. As interest rates decrease
or increase, the potential for capital appreciation or depreciation is
less than that for fixed-rate obligations of the same maturity. The
Trust's investment adviser, Oppenheimer Management Corporation (the
"Manager"), may determine that an unrated floating rate or variable rate
demand obligation meets the Fund's quality standards by reason of being
backed by a letter of credit or guarantee issued by a bank that meets the
Fund's quality standards.
- Inverse Floaters and Other Derivative Investments. Some inverse
floaters have a feature known as an interest rate "cap" as part of the
terms of the investment. Investing in inverse floaters that have interest
rate caps might be part of a portfolio strategy to try to maintain a high
current yield for the Fund when the Fund has invested in inverse floaters
that expose the Fund to the risk of short-term interest rate fluctuation.
Embedded caps hedge a portion of the Fund's exposure to rising interest
rates. When interest rates exceed the pre-determined rate, the cap
generates additional cash flows that offset the decline in interest rates
on the inverse floater, and the hedge is successful. However, the Fund
bears the risk that if interest rates do not rise above the pre-determined
rate, the cap (which is purchased for additional cost) will not provide
additional cash flows and will expire worthless.
- Municipal Lease Obligations. From time to time the Fund may invest
more than 5% of its net assets in municipal lease obligations, generally
through the acquisition of certificates of participation, that the Manager
has determined to be liquid under guidelines set by the Board of Trustees.
Those guidelines require the Manager to evaluate: (1) the frequency of
trades and price quotations for such securities; (2) the number of dealers
or other potential buyers willing to purchase or sell such securities; (3)
the availability of market-makers; and (4) the nature of the trades for
such securities. The Manager will also evaluate the likelihood of a
continuing market for such securities throughout the time they are held
by the Fund and the credit quality of the instrument. Municipal leases
may take the form of a lease or an installment purchase contract issued
by a state or local government authority to obtain funds to acquire a wide
variety of equipment and facilities. Although lease obligations do not
constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to budget for, appropriate and make
the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on
a yearly basis. 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 and do not constitute an obligation of issuing municipality
or any of its political subdivisions.
In addition to the risk of "non-appropriation," municipal lease
securities do not yet have a highly developed market to provide the degree
of liquidity of conventional municipal bonds. Municipal leases, like
other municipal debt obligations, are subject to the risk of non-payment.
The ability of issuers of municipal leases to make timely lease payments
may be adversely affected in general economic downturns and as relative
governmental cost burdens are reallocated among federal, state and local
governmental units. Such non-payment would result in a reduction of
income to the Fund, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the
net asset value of the Fund.
- Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally did not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on obligations
issued by or on behalf of a state or local government, the proceeds of
which are used to finance the operations of such governments (e.g.,
general obligation bonds) continues to be tax-exempt. However, the Tax
Reform Act further limited the use of tax-exempt bonds for non-
governmental (private) purposes. More stringent restrictions were placed
on the use of proceeds of such bonds. Interest on certain private
activity bonds (other than those specified as "qualified" tax-exempt
private activity bonds, e.g., exempt facility bonds including certain
industrial development bonds, qualified mortgage bonds, qualified Section
501(c)(3) bonds, qualified student loan bonds, etc.) is taxable under the
revised rules.
Interest on certain private activity bonds issued after August 7, 1986,
which continues to be tax-exempt will be treated as a tax preference item
subject to the alternative minimum tax (discussed below) to which certain
taxpayers are subject. Further, a private activity bond which would
otherwise be a qualified tax-exempt private activity bond will not, under
Internal Revenue Code Section 147(a), be a qualified bond for any period
during which it is held by a person who is a "substantial user" of the
facilities or by a "related person" of such a substantial user. This
"substantial user" provision is applicable primarily to exempt facility
bonds, including industrial development bonds. The Fund may not be an
appropriate investment for entities which are "substantial users" (or
persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, limitations as to the amount of private
activity bonds which each state may issue were revised downward by the Tax
Reform Act, which will reduce the supply of such bonds. The value of the
Fund's portfolio could be affected if there is a reduction in the
availability of such bonds. That value may also be affected by a 1988
U.S. Supreme Court decision upholding the constitutionality of the
imposition of a Federal tax on the interest earned on Municipal Securities
issued in bearer form.
A Municipal Security is treated as a taxable private activity bond
under a test for: (a) a trade or business use and security interest, or
(b) a private loan restriction. Under the trade or business use and
security interest test, an obligation is a private activity bond if: (i)
more than 10% of bond proceeds are used for private business purposes and
(ii) 10% or more of the payment of principal or interest on the issue is
directly or indirectly derived from such private use or is secured by the
privately used property or the payments related to the use of the
property. For certain types of uses, a 5% threshold is substituted for
this 10% threshold. (The term "private business use" means any direct or
indirect use in a trade or business carried on by an individual or entity
other than a governmental unit.) Under the private loan restriction, the
amount of bond proceeds which may be used to make private loans is limited
to the lesser of 5% or $5.0 million of the proceeds. Thus, certain issues
of Municipal Securities could lose their tax-exempt status retroactively
if the issuer fails to meet certain requirements as to the expenditure of
the proceeds of that issue or use of the bond-financed facility. The Fund
makes no independent investigation of the users of such bonds or their use
of proceeds. Should the Fund hold a bond that loses its tax-exempt status
retroactively, there might be an adjustment to the tax-exempt income
previously paid to shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference
items in arriving at alternative minimum taxable income. The Tax Reform
Act, which makes tax-exempt interest from certain private activity bonds
a tax preference item for purposes of the alternative minimum tax on
individuals and corporations specifically states that any exempt-interest
dividend paid by a regulated investment company will be treated as
interest on a specific private activity bond to the extent of its
proportionate share of the interest on such bonds received by the
regulated investment company. The Treasury is authorized to issue
regulations implementing the provision. The Fund may hold Municipal
Securities the interest on which (and thus a proportionate share of the
exempt-interest dividends paid by the Fund) will be subject to the Federal
alternative minimum tax on individuals and corporations. The Fund
anticipates that under normal circumstances it will not purchase any such
securities in an amount greater than 20% of the Fund's total assets.
- Ratings of Municipal Securities. Moody's and S&P's ratings (see
Appendix A) represent their respective opinions of the quality of the
Municipal Securities they undertake to rate. However, such ratings are
general and subjective and are not absolute standards of quality.
Consequently, Municipal Securities with the same maturity, coupon and
rating may have different yields, while Municipal Securities of the same
maturity and coupon with different ratings may have the same yield.
Investment in lower-quality securities may produce a higher yield than
securities rated in the higher rating categories described in the
Prospectus (or judged by the Manager to be of comparable quality).
However, the added risk of lower quality securities might not be
consistent with a policy of preservation of capital.
- Financial Guaranty Insurance Company. The portfolio insurance policy
obtained by the Fund was issued by Financial Guaranty Insurance Company
("Financial Guaranty"). Financial Guaranty is a subsidiary of FGIC
Corporation (the "Corporation"), a Delaware holding company. Financial
Guaranty, domiciled in the State of New York, commenced its business of
providing insurance and financial guaranties for a variety of investment
instruments in January, 1984. The Corporation is a wholly-owned
subsidiary of General Electric Capital Corporation. Neither the
Corporation nor General Electric Capital Corporation are obligated to pay
the debts of or the claims against Financial Guaranty.
Financial Guaranty, in addition to providing insurance for the payment
of interest on and principal of municipal bonds and notes held in unit
investment trust and mutual fund portfolios, provides insurance for new
issues and secondary market issues of municipal bonds and notes and for
portions of new issues and secondary market issues of municipal bonds and
notes. Financial Guaranty also provides credit enhancements for asset-
backed securities, and mortgage-backed securities.
Financial Guaranty is currently authorized to write insurance in 50
states and the District of Columbia, files reports with state insurance
regulatory agencies and is subject to audit and review by such
authorities. Financial Guaranty is also subject to regulation by the
State of New York Insurance Department. Such regulation, however, is no
guarantee that Financial Guaranty will be able to perform on its
commitments or contracts of insurance in the event a claim should be made
thereunder at some time in the future.
The policy of insurance obtained by the Fund from Financial Guaranty
and the agreement and negotiations in respect thereof represent the only
relationship between Financial Guaranty and the Fund. Otherwise, neither
Financial Guaranty nor its parent, FGIC Corporation, or any affiliate
thereof has any significant relationship, direct or indirect, with the
Fund.
Under the provisions of the Portfolio Insurance Policy, Financial
Guaranty unconditionally and irrevocably agrees to pay to State Street
Bank and Trust Company, N.A. or its successor, as its agent (the "Fiscal
Agent") that portion of the principal of and interest on the securities
which shall become due for payment but shall be unpaid by reason of
nonpayment by the issuer. Financial Guaranty will make such payments to
the Fiscal Agent on the date such principal or interest becomes due for
payment or on the business day next following the day on which Financial
Guaranty shall have received notice of nonpayment, whichever is later.
The Fiscal Agent will disburse to the Fund the face amount of principal
and interest which is then due for payment but is unpaid by reason of
nonpayment by the issuer but only upon receipt by the Fiscal Agent of (i)
evidence of the Fund's right to receive payment of the principal or
interest due for payment and (ii) evidence, including any appropriate
instruments of assignment, that all of the rights to payment of such
principal or interest due for payment thereupon shall vest in Financial
Guaranty. (The proceeds attributable to interest payments will be tax-
exempt.) Upon such a payment by the Fiscal Agent, Financial Guaranty will
be fully subrogated to all of the Fund's rights under the defaulted
obligation which includes the right of Financial Guaranty to obtain
payment from the issuer to the extent of amounts paid by Financial
Guaranty to the Fund.
- Additional Information About Municipal Securities. From time to
time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Securities. Similar proposals may be introduced in the future. If such
a proposal were enacted, the availability of Municipal Securities for
investment by the Fund and the value of the portfolio of the Fund would
be affected. At such time, the Board of Trustees of the Trust would re-
evaluate the investment objectives and policies of the Fund and possibly
submit to shareholders proposals for changes in the structure of the Fund.
Other Investment Techniques and Strategies.
- When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may invest in Municipal Securities on a "when-issued"
or "delayed delivery" basis. Payment for and delivery of the securities
generally settles within 45 days of the date the offer is accepted. The
purchase price and yield are fixed at the time the buyer enters into the
commitment. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund from
this investment. However, the Fund intends to be as fully invested as
possible and will not invest in when-issued securities if its income or
net asset value will be materially adversely affected. At the time the
Fund makes the commitment to purchase a Municipal Security on a when-
issued basis, it will record the transaction on its books and reflect the
value of the security in determining its net asset value. It will also
segregate cash or other high quality liquid Municipal Securities equal in
value to the commitment for the when-issued securities. While when-issued
securities may be sold prior to settlement date, the Fund intends to
acquire the securities upon settlement unless a prior sale appears
desirable for investment reasons. There is a risk that the yield
available in the market when delivery occurs may be higher than the yield
on the security acquired.
- Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Trust's Board
of Trustees from time to time. The resale price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective
for the period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery pursuant
to the resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective cannot be changed by the Fund without the
vote of a "majority" of the Fund's outstanding voting securities. Under
the Investment Company Act, such a "majority" vote of the Fund is defined
as the vote of the holders of the lesser of: (i) 67% or more of the shares
present or represented by proxy at such meeting, if the holders of more
than 50% of the outstanding shares are present, or (ii) more than 50% of
the outstanding shares of the Fund.
Under these additional restrictions, the Fund cannot: (1) purchase or
sell real estate, commodities or commodity contracts; except to the extent
that Municipal Securities the Fund may invest in are considered to be
interests in real estate; (2) invest in interests in oil, gas, or other
mineral exploration or development programs; (3) purchase securities on
margin; (4) make short sales of securities; (5) underwrite securities
except to the extent the Fund may be deemed to be an underwriter in
connection with the sale of securities held in its portfolio; (6) invest
in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation or other acquisition; (7)
purchase or sell puts, calls or combinations thereof, or purchase or sell
interest rate futures contracts or related options; (8) make investments
for the purpose of exercising control of management; (9) purchase
securities of any issuer if, to the knowledge of the Fund, its officers
and trustees and officers and directors of the Manager or who individually
own more than .5% of the securities of such issuer together own
beneficially more than 5% of such issuer's outstanding securities; (10)
purchase or retain securities if as a result the Fund would have more than
5% of its total assets invested in securities of private issuers having
a record of less than three years' continuous operation (such period may
include the operation of predecessor companies or enterprises) or in
industrial development bonds if the private entity on whose credit the
security is based, directly or indirectly, is less than three years old
(including predecessors), unless the security is rated by a nationally-
recognized rating service; (11) invest more than 25% of its assets in a
single industry (as described in the Prospectus, the Fund may, from time
to time, invest more than 25% of its assets in a particular segment of the
Municipal Securities market, however, the Fund will not invest more than
25% of its assets in industrial revenue bonds in a single industry); or
(12) invest in common stock or any warrants related thereto.
For purposes of the Fund's policy not to concentrate described under
investment restriction number six in the Prospectus, the Fund has adopted
the industry classifications set forth in Appendix C to this Statement of
Additional Information.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers of the Trust. The Trust's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. All of the Trustees are also trustees, directors
or managing general partners of Oppenheimer Total Return Fund, Inc.,
Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer
Integrity Funds, Oppenheimer Cash Reserves, Oppenheimer Limited-Term
Government Fund, The New York Tax-Exempt Income Fund, Inc., Oppenheimer
Champion High Yield Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Strategic Funds Trust, Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer Strategic
Short-Term Income Fund and Oppenheimer Variable Account Funds; as well as
the following "Centennial Funds": Daily Cash Accumulation Fund, Inc.,
Centennial America Fund, L.P., Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax
Exempt Trust and Centennial California Tax Exempt Trust, (all of the
foregoing funds are collectively referred to as the "Denver-based
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver-based OppenheimerFunds.
As of December 30, 1994, the Trustees and officers of the Fund as a
group owned of record or beneficially less than 1% of each class of shares
of the Fund or the Trust. The foregoing statement does not reflect
ownership of shares held of record by an employee benefit plan for
employees of the Manager (for which plan two of the officers listed above,
Messrs. Fossel and Donohue, are trustees), other than the shares
beneficially owned under the Plan by the officers of the Fund listed
above.
Robert G. Avis, Trustee; Age 63. *
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age 80.
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 64.
19411 Merion Circle, Huntington Beach, California 92468
Vice President of McDonnell Douglas Space Systems Co.; formerly associated
with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee; Age 52.*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Raymond J. Kalinowski, Trustee; Age 65.
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice Chairman
and a director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age 73.
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age 73.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age 79.
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a director of
Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee; Age 61.*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a Director of the Manager; President and Director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
Andrew J. Donohue, Vice President; Age 44.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; formerly a Partner in
Kraft & McManimon (a law firm), prior to which he was an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser) and a director and
an officer of the First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer; Age 58.
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert E. Patterson, Vice President and Portfolio Manager; Age 51.
Two World Trade Center, New York, N.Y. 10048-0203
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Caryn Halbrecht, Vice President and Portfolio Manager; Age 38.
Two World Trade Center, New York, N.Y. 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly a Vice President of Fixed-Income portfolio management at Bankers
Trust.
Robert G. Zack, Assistant Secretary; Age 46.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert J. Bishop, Assistant Treasurer; Age 36.
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller of the Manager,
prior to which he was an Accountant for Resolution Trust Corporation and
previously an Accountant and Commissions Supervisor for Stuart James
Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age 29.
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting, an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Messrs. Fossel and Swain, who are both
officers and Trustees) receive no salary or fee from the Fund. The
Trustees of the Fund (excluding Messrs. Fossel and Swain) received the
total amounts shown below from all 22 of the Denver-based OppenheimerFunds
(including the Fund) listed in the first paragraph of this section, for
services in the positions shown:
Total Compensation
From All
Denver-based
Name Position OppenheimerFunds 1
Robert G. Avis Trustee $53,000.00
William A. Baker Study and
Audit Committee $73,257.01
Chairman and Trustee
Charles Conrad, Jr. Study and Audit Committee $68,293.67
Member and Trustee
Raymond J. Kalinowski Trustee $53,000.00
C. Howard Kast Trustee $53,000.00
Robert M. Kirchner Study and Audit Committee $68,293.67
Member and Trustee
Ned M. Steel Trustee $53,000.00
______________
1 For the 1994 calendar year.
- Major Shareholders. As of December 30, 1994, no person owned
of record or was known by the Trust to own beneficially 5% or more of the
shares of the Trust as a whole or either class of the Fund's outstanding
shares.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Trust, and two of whom (Mr. Fossel and Mr. Swain)
serve as Trustees of the Trust.
- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Trust on behalf of the Fund requires
the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective corporate administration for the Fund, including the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy
materials and registration statements for continuous public sale of shares
of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Fund. Expenses with respect to the Trust's two series,
including the Fund, are allocated in proportion to the net assets of the
respective funds except where allocations of direct expenses could be
made. Certain expenses are further allocated to certain classes of shares
of a series as explained in the Prospectus and under "How to Buy Shares"
below. The advisory agreement lists examples of expenses paid by the
Fund, the major categories of which relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses, transfer
agent and custodian expenses, share issuance costs, certain printing and
registration expenses and non-recurring expenses, including litigation
costs.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has voluntarily undertaken that the total expenses of the Fund in any
fiscal year (including the management fee, but excluding taxes, interest,
brokerage commissions, distribution assistance payments and extraordinary
expenses such as litigation costs) shall not exceed the most stringent
expense limitation imposed under state law applicable to the Fund.
Pursuant to the undertaking, the Manager's fee will be reduced at the end
of a month so that there will not be any accrued but unpaid liability
under this undertaking. Currently, the most stringent state expense
limitation is imposed by California, and limits expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2.0% of the next $70 million, and 1.5% of the average annual net assets
in excess of $100 million. Any assumption of the Fund's expenses under
this limitation lowers the Fund's overall expense ratio and increases its
total return during the time such expenses are limited. The Manager
reserves the right to terminate or amend the undertaking at any time.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with its other investment activities.
If the Manager shall no longer act as investment adviser to the Fund, the
right of the Fund to use the name "Oppenheimer" as part of its corporate
name may be withdrawn.
The Manager became the Fund's investment adviser on April 7, 1990.
During the Fund's fiscal year ended September 30, 1994, the management
fees were $342,465. During the fiscal year ended September 30, 1993, the
management fees payable by the Fund were $210,570, of which $36,479 was
assumed by the Manager. During the fiscal year ended September 30, 1992,
the management fees payable by the Fund were $124,996, of which $13,415
was paid to the Manager due to its assumption of $111,581 of the Fund's
expenses.
From April 7, 1990 until January 31, 1992, Clayton Brown
Investment Management, Inc. ("CBIM"), an affiliate of Clayton Brown &
Associates, Inc., which was the Fund's general distributor until
January 31, 1992, was the sub-advisor for the Fund, pursuant to
Subadvisory Agreement with the Manager. The Manager paid subadvisory fees
to CBIM at the annual rate of .15% of the average daily net assets of the
Fund. Because of the expense assumption undertaking by the Manager at
that time, the Manager did not receive any management fee from the Fund
with which to pay CBIM its Subadvisory fee, and thus absorbed that
expense.
- The Distributor. Oppenheimer Funds Distributor, Inc. (the
"Distributor"), formerly named "Oppenheimer Fund Management, Inc.," became
the Fund's Distributor on January 31, 1992. Prior to that date, Clayton
Brown & Associates, Inc. ("Clayton Brown") was the Fund's general
distributor. Under the General Distributor's Agreement between the Fund
and the Distributor, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class A and
Class B shares but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (other than those paid under the
12b-1 Plans), including advertising and the cost of printing and mailing
prospectus (other than those furnished to existing shareholders) are borne
by the Distributor.
From October 1, 1991 through January 31, 1992, OFDI, which served
as sub-distributor during those periods, received no reallowance of
commissions from Clayton Brown. During the period February 1, 1992
through September 30, 1992, and during the fiscal years ended September
30, 1993 and 1994, the aggregate sales charges in the Fund's Class A
shares was $49,301, $582,215 and $376,541, respectively of which the
Distributor and an affiliated broker-dealer retained in the aggregate
$8,531, $151,408 and $92,979, in those respective years. During the
Fund's fiscal years ended September 30, 1993 and 1994, the contingent
deferred sales charges collected on the Fund's Class B shares totalled
$19,475, all of which the Distributor retained. For additional
information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Distribution and Service
Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions of the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors, implement
the policy of the Fund to obtain, at reasonable expense, the "best
execution" (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Manager need not seek competitive
commission bidding, but is expected to minimize the commissions paid to
the extent consistent with the interests and policies of the Fund as
established by the Board of Trustees. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter and purchases from dealers include a spread between the bid
and the asked price.
Under the advisory agreement, the Manager is authorized to select
brokers other than affiliates that provide brokerage and/or research
services for the Fund and/or the other accounts over which the Manager or
its affiliates have investment discretion. The commissions paid to such
brokers may be higher than another qualified broker would have charged if
a good faith determination is made by the Manager that the commission is
fair and reasonable in relation to the services provided. Subject to the
foregoing considerations, the Manager may also consider sales of shares
of the Fund and other investment companies managed by the Manager and its
affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon recommendations from the Manger's
portfolio managers. In certain instances, portfolio managers may directly
place traders and allocate brokerage, also subject to the provisions of
the advisory agreement and the procedures and rules described above.
Regardless, brokerage is allocated under the supervision of the Manager's
executive officers. As most purchases made by the Fund are principal
transactions at net prices, the Fund incurs little or no brokerage costs.
The Fund usually deals directly with the selling or purchasing principal
or market makers without incurring charges for the services of a broker
on its behalf unless it is determined that better price or execution can
be obtained by utilizing the services of a broker. Purchases of
securities from underwriters include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers include a spread
between the bid and asked price. The Fund seeks to obtain prompt
execution of orders at the most favorable net pace. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager or it affiliates are combined.
Transactions effected pursuant to such combined orders are averaged as to
price and allocated in accordance with the purchase or sale orders
actually placed for each account. Option commissions may be relatively
higher than those which would apply to direct purchases and sales of
portfolio securities.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolios or being considered for purchase. The Board,
including the "Independent Trustees" (those Trustees who are not
"interested persons" as defined in the Investment Company Act, and who
have no direct or indirect financial interest in the operation of the
advisory agreement or the Distribution Plans described below) annually
reviews information furnished by the Manager as to the commissions paid
to brokers furnishing such services so that the Board may ascertain
whether the amount of such commissions was reasonably related to the value
or the benefit of such services.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "tax-equivalent yield," "dividend yield," "average annual total
return," "total return" and "total return at net asset value" of an
investment in each class of Fund shares may be advertised. An explanation
of how standardized yield, tax-equivalent yield, dividend yield, average
annual total return and total return are calculated for each class and the
components of those calculations is set forth below. Class B shares were
first publicly offered on May 3, 1993.
- Standardized Yields.
- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class
outstanding during the 30-day period that were entitled
to receive dividends.
d = the maximum offering price per share of that class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This
standardized yield is not based on actual distributions paid by the Fund
to shareholders in the 30-day period, but is a hypothetical yield based
on the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended September 30, 1994, the standardized yields for
the Fund's Class A and Class B shares were 5.00% and 4.47%, respectively.
- Tax-Equivalent Yield. The Fund's "tax-equivalent yield" adjusts
the Fund's current yield, as calculated above, by a stated combined
Federal and state tax rate. The tax equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's
current yield (as calculated above) by one minus a stated income tax rate
and adding the result to the portion (if any) of the Fund's current yield
that is not tax-exempt. The tax-equivalent yield may be used to compare
the tax effects of income derived from the Fund with income from taxable
investments at the tax rates stated. Appendix B includes a tax equivalent
yield table, based on various effective tax brackets for individual
taxpayers. Such tax brackets are determined by a taxpayer's Federal
taxable income (the net amount subject to Federal income tax after
deductions and exemptions). The tax-equivalent yield tables assume that
the investor is taxed at the highest bracket, regardless of whether a
switch to non-taxable investments would cause a lower bracket to apply.
For taxpayers with income above certain levels, otherwise allowable
itemized deductions are limited. The Fund's tax-equivalent yield for its
Class A and Class B shares for the 30-day period ended September 30, 1994
were 8.28% and 7.40%, respectively, for an individual in the 36% Federal
income tax bracket.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A or Class B share dividends derived
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum front-
end sales charge. For Class B shares, the maximum offering price is the
net asset value per share, without considering the effect of contingent
deferred sales charges.
From time to time, similar calculations may also be made using the
Class A net asset value (instead of its respective maximum offering price)
at the end of the period. The dividend yields on Class A shares for the
30-day period ended September 30, 1994 were 5.16% and 5.41% when
calculated at maximum offering price and net asset value, respectively.
The dividend yield on Class B shares for the 30-day period ended September
30, 1994 was 4.64% when calculated at net asset value.
- Total Return Information.
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "average annual total return" on an investment in Class A shares
of the Fund for the one and five year periods ended September 30, 1994 was
(9.95)% and 6.35%, respectively and for the period from inception of the
Fund on November 11, 1986 through September 30, 1994 was 6.06%. The
"average annual total return" on an investment in Class B shares of the
Fund for the one year ended September 30, 1994 was (10.67)%. For the
period from inception of Class B shares on May 3, 1993 through September
30, 1994, the average annual total return was (3.05)%.
- Cumulative Total Return. The "cumulative total return" calculation
measures the change in the value of a hypothetical investment of $1,000
over an entire period of years. Its calculation uses some of the same
factors as average annual total return, but it does not average the rate
of return on an annual basis. Cumulative total return is determined as
follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, the payment of the
contingent deferred sales charge of 5.0% in the first year, 4.0% in the
second year, 3.0% in the third and fourth years, 2.0% in the fifth year,
1.0% in the sixth year and none thereafter is applied, as described in the
Prospectus. Total returns also assume that all dividends and capital
gains distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is redeemed
at the end of the period. The "total return" on an investment in Class
A shares of the Fund (using the method described above) for the period
from November 11, 1986 (inception of the Fund) through September 30, 1994,
was 59.07%. The cumulative total return on Class B shares for the period
from May 3, 1993 (inception of the class) through September 30, 1994 was
(4.26)%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A or Class B shares.
Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The "total return at net asset value"
on the Fund's Class A shares for the one-year period ended September 30,
1994 was (5.46)%. The total return at net asset value for the Fund's
Class B shares for the year ended September 30, 1994 was (6.20)%.
- Other Performance Comparisons. From time to time, the Fund may
publish the ranking of the performance of its Class A or Class B shares
by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund is ranked against (i) all other funds, other
than money market funds, and (ii) all other general municipal bond funds.
The Lipper performance analysis includes the reinvestment of capital gain
distributions and income dividends but does not take sales charge or taxes
into consideration. From time to time the Fund may include in its
advertisement and sales literature performance information about the Fund
cited in other newspapers and periodicals such as The New York Times,
which may include performance quotations from other sources, including
Lipper and Morningstar.
From time to time the Fund may publish the ranking of its performance
by Morningstar, Inc., an independent mutual fund monitoring service that
ranks mutual funds, including the Fund, monthly in broad investment
categories (equity, taxable bond, municipal bond and hybrid) based on
risk-adjusted investment return. Investment return measures a fund's
three, five and ten-year average annual total returns (when available) in
excess of 90-day U.S. Treasury bill returns after considering sales
charges and expenses. Risk reflects fund performance below 90-day U.S.
Treasury bill monthly returns. Risk and return are combined to produce
star rankings reflecting performance relative to the average fund in a
fund's category. Five stars is the "highest" ranking (top 10%), four
stars is "above average" (next 22.5%), three stars is "average" (next
35%), two stars is "below average" (next 22.5%) and one star is "lowest"
(bottom 10%). Morningstar ranks the Fund in relation to other municipal
bond funds. Rankings are subject to change.
Investors may also wish to compare the Fund's Class A or Class B
return to the returns on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary interest-
paying checking and savings accounts, and other forms of fixed or variable
time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed and will
fluctuate daily, while bank depository obligations may be insured by the
FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government. In order
to compare the Fund's dividends to the rate of the return on taxable
investments, Federal income taxes on such investments should be
considered.
When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period will not be a
predication or representation by the Fund of future returns. The returns
of the Class A and Class B shares of the Fund are affected by portfolio
quality, the type of investments the Fund holds and its operating expenses
allocated to a particular class.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class B shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Trust, including a majority of
the Independent Trustees, cast in person at a meeting called for the
purpose of voting on that Plan, and (ii) the holders of a "majority" (as
defined in the Investment Company Act) of the shares of each class. For
the Distribution and Service Plan for Class B shares, that vote was cast
by the Manager as the sole initial holder of Class B shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically
approved at least annually by the Trust's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any payment. The report for the Class B Plan shall also
include the distribution costs for that quarter, and such costs for
previous fiscal periods that have been carried forward, as explained in
the Prospectus and below. Those reports, including the allocations on
which they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Trust who are not "interested persons" of the
Trust is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in such selection and
nomination if the final decision on selection or nomination is approved
by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers, did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fees at the maximum rate and set no requirement for a minimum amount of
the assets.
For the fiscal year ended September 30, 1994, payments under the
Class A Plan totalled $162,106, all of which was paid by the Distributor
to Recipients, including $5,920 paid to MML Investor Services, Inc., an
affiliate of the Distributor. Any unreimbursed expenses incurred by the
Distributor with respect to Class A shares for any fiscal year may not be
recovered in subsequent years. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest expense,
carrying charge, or other financial costs, or allocation of overhead by
the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of .25% of the average daily net asset
value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B shares are redeemed
during the first year that the shares are outstanding, the Recipient will
be obligated to repay a pro rata portion of the advance payment for those
shares to the Distributor. Payments made under the Class B Plan during the
fiscal year ended September 30, 1994 totalled $92,013, all paid by the
Distributor to Recipients, including $125 paid to a dealer affiliated with
the Distributor. During the Fund's fiscal year ended September 30, 1994,
$89,853 was retained as reimbursement for Class B distribution-related
expenses and sales commissions under the 12b-1 Plan. For the fiscal year
ended September 30, 1994, the carry-forward expenses of unreimbursed
distribution and servicing costs of $500,228.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B
Plan are subject to the limitations imposed by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees. The Distributor anticipates
that it will take a number of years for it to recoup (from the Fund's
payments to the Distributor under the Class B Plan and recoveries of the
contingent deferred sales charge) the sales commissions paid to authorized
brokers or dealers.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of Class B shares to Class A shares after six years
is subject to the continuing availability of a private letter ruling from
the Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of B shares does not constitute a taxable
event for the holder under Federal income tax law. If such a revenue
ruling or opinion is no longer available, the automatic conversion feature
may be suspended, in which event no further conversions of Class B shares
would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined of the
close of The New York Stock Exchange (the "NYSE") on each day that the
Exchange is open by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class
outstanding. The NYSE normally closes at 4:00 P.M., New York time, but
may close earlier on some days (for example, in case of weather
emergencies or on days before a holiday). The NYSE's most recent annual
announcement (which is subject to change) states that it will close on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other
days. Dealers in debt securities may conduct trading on certain days on
which the NYSE is closed (i.e. weekends or holidays, such as Good Friday).
Because the Fund's net asset value and offering prices will not be
calculated on those days, if securities of the same type held by the Fund
are traded on those days, the Fund's net asset values of Class A and Class
B shares of the Fund may be significantly affected on such days, when
shareholders will not have the ability to purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term
debt securities, and short-term debt securities having a maturity in
excess of 60 days are valued at the mean between the bid and asked prices
determined by a portfolio pricing service approved by the Board or
obtained from active market makers on the basis of reasonable inquiry;
(ii) short-term debt securities having a remaining maturity of 60 days or
less are valued at cost, adjusted for amortization of premiums and
accretion of discounts; and (iii) securities (including restricted
securities) not having readily-available market quotations are valued at
fair value under the Board's procedures.
In the case of Municipal Securities, when last sale information is
not generally available, such pricing procedures may include "matrix"
comparisons to the prices for comparable instruments on the basis of
quality, yield, maturity, and other special factors involved (such as the
tax-exempt status of the interest paid by Municipal Securities). With the
approval of the Trust's Board of Trustees, the Manager may employ a
pricing service, bank or broker/dealer experienced in such matters to
price any of the types of securities described above. The Board has
authorized the Manager to employ a pricing service to price many of the
Fund's securities. The Trustees will monitor the accuracy of such pricing
services by comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
With respect to valuation of securities which are in default in
payment of principal or interest or, as determined by the Manager, in
significant risk of such default (the "Defaulted Securities") and which
are covered by insurance obtained by the Fund, the value of the insurance
guaranteeing interest and principal payments will be an element of the net
asset value per share for the Fund. The value of the insurance will be
equal to the difference between (i) the market value of the Defaulted
Securities assuming the exercise of the right to obtain a Secondary Market
Insurance Policy (less the insurance premium attributable to the purchase
of such policy) and (ii) the market value of such Defaulted Securities not
covered by a Secondary Market Insurance Policy. In addition, the ability
of Financial Guaranty to meet its commitments under the Fund's insurance
policy, including the commitments to issue Secondary Market Insurance
Policies, will be considered. If an occurrence were to take place after
the value of a security in a portfolio was so established but before the
net asset value per share is determined which was likely to materially
change the net asset value, then such security would be valued under
procedures adopted by the Trustees to make such fair value determination.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for such purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If the Federal Funds
are received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund three days after the transfers are initiated. The Distributor and
the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter. This enables the investor to obtain the reduced sales charge rate
(as set forth in the Prospectus) applicable to purchases of shares in that
amount (the "intended purchase amount"). Each purchase under the Letter
will be made at the public offering price applicable to a single lump-sum
purchase of shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of the Letter) do not include
any shares sold without a front-end sales charge or without being subject
to a Class A contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend, or discontinue offering checkwriting privileges at any time
without prior notice.
Selling Shares by Wire. The wire of redemptions proceeds may be
delayed if the Fund's custodian bank is not open for business on a day
when the Fund would normally authorize the wire to be made, which is
usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next
bank business day on which the Fund is open for business. No dividends
will be paid on the proceeds of redeemed shares awaiting transfer by wire.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than
$1,000 or such lesser amount as the Board may fix. The Board of Trustees
will not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital
gain that was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares
of the Fund or another of the OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of the New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customer prior to the time the Exchange closes (normally 4:00
P.M., but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Payment ordinarily will be made within seven days
after the Distributor's receipt of the required redemption documents, with
signature(s) guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange to
have Automatic Withdrawal Plan payments transferred to the bank account
designated on the OppenheimerFunds New Account Application or signature-
guaranteed instructions. The Fund cannot guarantee receipt of a payment
on the date requested and reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. Because
of the sales charge assessed on Class A share purchases, shareholders
should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B shareholders
should not establish withdrawal plans that would require the redemption
of shares purchased subject to a contingent deferred sales charge and held
less than 6 years, because of the imposition of the Class B contingent
deferred sales charge on such withdrawals (except where the Class B
contingent deferred sales charge is waived as described in the Prospectus
under "Class B Contingent Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
automatically on a monthly, quarterly, semi-annual or annual basis under
an Automatic Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How
to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All OppenheimerFunds offer
Class A shares (except for Oppenheimer Strategic Diversified Income Fund),
but only the following other OppenheimerFunds currently offer Class B
shares:
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Equity Income Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Growth Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class
B contingent deferred sales charge is imposed on Class B shares acquired
by exchange if they are redeemed within 6 years of the initial purchase
of the exchanged Class B shares.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans and Automatic Withdrawal Plans will be
switched to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations), shareholders
might not be able to request exchanges by telephone and would have to
submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Fund
intends to qualify under the Internal Revenue Code during each fiscal year
to pay "exempt-interest dividends" to its shareholders. Exempt-interest
dividends which are derived from net investment income earned by the Fund
on Municipal Securities will be excludable from gross income of
shareholders for Federal income tax purposes. Net investment income
includes the allocation of amounts of income from the Municipal Securities
in the Fund's portfolio which are free from Federal income taxes. This
allocation will be made by the use of one designated percentage applied
uniformly to all income dividends made during the Fund's tax year. Such
designation will normally be made following the end of each fiscal year
as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of
the Fund's income that was tax-exempt for a given period. A portion of
the exempt-interest dividends paid by the Fund may be an item of tax
preference for shareholders subject to the alternative minimum tax. All
of the Fund's dividends (excluding capital gains distributions) paid
during 1994 were exempt from Federal personal income taxes. The amount
of any dividends attributable to tax preference items for purposes of the
alternative minimum tax will be identified when tax information is
distributed by the Fund. Corporate shareholders and "substantial users"
of facilities financed by Private Activity Municipal Securities should see
"Private Activity Municipal Securities."
A shareholder receiving a dividend from income earned by the Fund
from one or more of: (1) certain taxable temporary investments (such as
certificates of deposit, repurchase agreements, commercial paper and
obligations of the U.S. government, its agencies and instrumentalities);
(2) income from securities loans; or (3) an excess of net short-term
capital gain over net long-term capital loss from the Fund, treats the
dividend as a receipt of either ordinary income or long-term capital gain
in the computation of gross income, regardless of whether the dividend is
reinvested. The Fund's dividends will not be eligible for the dividends-
received deduction for corporations. Shareholders receiving Social
Security benefits should be aware that exempt-interest dividends are a
factor in determining whether such benefits are subject to Federal income
tax. Losses realized by shareholders on the redemption of Fund shares
within six months of purchase (which period may be shortened by
regulation) will be disallowed for Federal income tax purposes to the
extent of exempt-interest dividends received on such shares.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc. as promptly as possible after the return of such checks
to the Transfer Agent to enable the investor to earn a return on otherwise
idle funds.
Long-term capital gains distributions, if any, are taxable as long-
term capital gains whether received in cash or reinvested and regardless
of how long Fund shares have been held. Dividends paid by the Fund
derived from net short-term capital gains are taxable to shareholders as
ordinary income, whether received in cash or reinvested. For information
on "backup withholding" on taxable dividends, see "How To Sell Shares."
Interest on loans used to purchase shares of the Fund may not be deducted
for Federal income tax purposes. Under rules used by the Internal Revenue
Service to determine when borrowed funds are deemed used for the purpose
of purchasing or carrying particular assets, the purchase of Fund shares
may be considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of shares.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation, will receive no tax deduction for
payments of dividends and distributions made to shareholders and would be
unable to pay "exempt-interest" dividends as discussed above.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. The Manager might determine in a particular year that it
might be in the best interest of shareholders for the Fund not to make
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital
gains available for distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or distributions in shares of the same class
of any of the other OppenheimerFunds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. Class B shareholders
should be aware that as of the date of this Statement of Additional
Information, not all of the OppenheimerFunds offer Class B shares. To
elect this option, a shareholder must notify the Transfer Agent in writing
and either must have an existing account in the fund selected for
investment or must obtain a prospectus for that fund and an application
from the Distributor to establish an account. The investment will be made
at the net asset value per share in effect at the close of business on
the payable date of the dividend or distribution. Dividends and
distributions from other Eligible Funds may be invested in shares of this
Fund on the same basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities and handling the delivery of portfolio
securities to and from the Fund. The Manager has represented to the Fund
that its banking relationships with the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Manager's and the Fund's financial statements and perform other related
audit services. They also act as auditors for certain other funds advised
by the Manager and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Insured Tax-Exempt
Bond Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Insured Tax-Exempt
Bond Fund as of September 30, 1994, the related statement of operations
for the year then ended, the statements of changes in net assets for the
years ended September 30, 1994 and 1993 and the financial highlights for
the period October 1, 1989 to September 30, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights (except for total return) for the period November 11, 1986
(commencement of operations) to September 30, 1989 were audited by other
auditors, whose report dated November 2, 1989 expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at September 30, 1994 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the financial
position of Oppenheimer Insured Tax-Exempt Bond Fund at September 30,
1994, the results of its operations, the changes in its net assets, and
the financial highlights for the respective stated periods, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1994
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1994
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
===========
MUNICIPAL BONDS AND NOTES--97.9%
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
ALABAMA--1.4% Pelham, Alabama General Obligation Warrants,
AMBAC Insured, 7.10%, 8/1/15 Aaa/AAA/AAA $1,000,000 $1,112,331
- -------------------------------------------------------------------------------------------------------------------------------
ALASKA--4.9% Alaska Energy Authority Power Revenue Bonds,
Bradley Lake Hydroelectric Project, Series 2,
MBIA Insured, 7.25%, 7/1/21 Aaa/AAA 500,000 532,496
------------------------------------------------------------------------------------------------------
North Slope Boro, Alaska General Obligation
Revenue Refunding Bonds, Series G, FSA Insured,
8.35%, 6/30/98 Aaa/AAA/A- 3,000,000 3,337,251
------------
3,869,747
- -------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA--5.5% California Public Capital Improvements
Financing Authority Revenue Bonds, Pooled
Project, Series B, BIG Insured, 8.10%, 3/1/18 Aaa/AAA 240,000 261,624
------------------------------------------------------------------------------------------------------
Loma Linda, California Revenue Bonds,
City Hall & Public Improvement Projects,
AMBAC Insured, 5.40%, 1/1/16 Aaa/AAA/AAA 2,000,000 1,746,162
------------------------------------------------------------------------------------------------------
Los Angeles County, California Metropolitan
Transportation Authority Sales Tax Revenue
Refunding Bonds, Series A, MBIA Insured,
5.625%, 7/1/18 Aaa/AAA/A+ 1,500,000 1,341,198
------------------------------------------------------------------------------------------------------
Sacramento, California Municipal Electric
Utility District Revenue Refunding Bonds,
Series G, MBIA Insured, 6.50%, 9/1/13 Aaa/AAA/A- 1,000,000 1,022,974
-----------
4,371,958
- -------------------------------------------------------------------------------------------------------------------------------
COLORADO--2.1% Colorado Health Facilities Authority
Revenue Bonds:
PSL Health System Project,
Series A, FSA Insured, 7.25%, 2/15/16 Aaa/AAA 500,000 539,242
Rose Medical Center, Prerefunded,
MBIA Insured, 7%, 8/15/21 Aaa/AAA 500,000 553,548
------------------------------------------------------------------------------------------------------
Poudre Valley, Colorado Hospital District
Revenue Bonds, Prerefunded, AMBAC Insured,
6.625%, 12/1/11 Aaa/AAA/AAA 500,000 540,468
-----------
1,633,258
- -------------------------------------------------------------------------------------------------------------------------------
DELAWARE--2.8% Delaware Transportation System Authority
Revenue Refunding Bonds, 7.75%, 7/1/04 Aaa/AAA 2,000,000 2,210,050
- -------------------------------------------------------------------------------------------------------------------------------
FLORIDA--1.2% Orange County, Florida Tourist Development
Tax Revenue Refunding Bonds, Series A,
MBIA Insured, 5.90%, 10/1/10 Aaa/AAA/A 1,000,000 974,767
- -------------------------------------------------------------------------------------------------------------------------------
GEORGIA--1.2% Fulton De Kalb, Georgia Hospital Authority
Revenue Certificates, Prerefunded, Series A,
AMBAC Insured, 7.25%, 1/1/20 Aaa/AAA/AAA 900,000 994,873
</TABLE>
4 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 5
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS--7.6% Chicago, Illinois Midway Airport Revenue
Bonds, Series A, MBIA Insured, 6.25%, 1/1/14 Aaa/AAA $ 500,000 $ 482,071
------------------------------------------------------------------------------------------------------
Cook County, Illinois Community College District
No. 508 Certificates of Participation:
FGIC Insured, 8.75%, 1/1/05 Aaa/AAA/AAA 500,000 612,288
Lease Certificates, Series C,
MBIA Insured, 7.70%, 12/1/07 Aaa/AAA 2,500,000 2,863,110
------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Revenue Bonds,
Memorial Medical Center Project, MBIA Insured,
6.75%, 10/1/11 Aaa/AAA 2,000,000 2,069,036
-----------
6,026,505
- -------------------------------------------------------------------------------------------------------------------------------
INDIANA--5.8% Fort Wayne, Indiana Hospital Authority Revenue
Bonds, Parkview Memorial Hospital Project,
Series A, FGIC Insured, 7.50%, 11/15/11 Aaa/AAA/AAA 250,000 270,579
------------------------------------------------------------------------------------------------------
Hamilton Southeastern, Indiana Consolidated
School Building Corp. Revenue Refunding Bonds,
Fst. Mtg., AMBAC Insured, 7%, 7/1/11 Aaa/AAA/AAA 500,000 535,303
------------------------------------------------------------------------------------------------------
Indiana Health Facilities Financing Authority
Hospital Revenue Bonds, Community
Hospital of Indiana, MBIA Insured, 7%, 7/1/21 Aaa/AAA 500,000 528,717
------------------------------------------------------------------------------------------------------
Indiana State Office Building Revenue
Bonds, Commission Capital Complex,
Series B, MBIA Insured, 7.40%, 7/1/15 Aaa/AAA 2,500,000 2,757,040
------------------------------------------------------------------------------------------------------
Whitko, Indiana Middle School Building Corp.
Revenue Bonds, Fst. Mtg., AMBAC Insured,
6.75%, 7/15/12 Aaa/AAA/AAA 500,000 513,624
-----------
4,605,263
- -------------------------------------------------------------------------------------------------------------------------------
KANSAS--1.3% Burlington, Kansas Pollution Control Revenue
Refunding Bonds, Kansas Gas and Electric Co.
Project, MBIA Insured, 7%, 6/1/31 Aaa/AAA 1,000,000 1,055,228
- -------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS--6.8% Massachusetts State General Obligation Bonds,
FGIC Insured, 7.875%, 6/1/97 Aaa/AAA/AAA 1,500,000 1,615,891
------------------------------------------------------------------------------------------------------
Massachusetts State Health & Educational
Facilities Revenue Bonds, Lahey Clinic Medical
Center, Series B, MBIA Insured, 5.625%, 7/1/15 Aaa/AAA 2,000,000 1,802,900
------------------------------------------------------------------------------------------------------
Massachusetts State Housing Finance
Revenue Bonds, Series A, AMBAC Insured,
6.60%, 7/1/14 Aaa/AAA/AAA 2,000,000 1,990,998
-----------
5,409,789
- -------------------------------------------------------------------------------------------------------------------------------
MICHIGAN--3.5% Detroit, Michigan Sewage Disposal System Revenue
Refunding Bonds, FGIC Insured, 7.72%, 7/1/23(1) Aaa/AAA/AAA 2,000,000 1,529,110
------------------------------------------------------------------------------------------------------
Lansing, Michigan Sewer Disposal Revenue
Refunding Bonds, FGIC Insured, 5.85%, 5/1/14 Aaa/AAA/AAA 1,000,000 946,479
------------------------------------------------------------------------------------------------------
Michigan Municipal Board Authority Revenue
Bonds, Local Government, Group 19, AMBAC
Insured, 7.50%, 11/1/09 Aaa/AAA/AAA 250,000 272,448
-----------
2,748,037
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEBRASKA--0.7% Nebraska Investment Finance Authority Hospital
Revenue Bonds, Nebraska Methodist Health System,
MBIA Insured, 7%, 3/1/06 Aaa/AAA $ 500,000 $ 532,776
- -------------------------------------------------------------------------------------------------------------------------------
NEVADA--4.1% Clark County, Nevada School District General
Obligation Bonds, Series B, MBIA Insured, 6.75%,
3/1/08 Aaa/AAA 2,000,000 2,080,590
------------------------------------------------------------------------------------------------------
Humboldt County, Nevada Pollution Control
Revenue Bonds, Idaho Power Co. Project,
AMBAC Insured, 8.30%, 12/20/14 Aaa/AAA/AAA 1,000,000 1,159,136
-----------
3,239,726
- -------------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE--0.6% New Hampshire Turnpike System Revenue
Refunding Bonds, Series A, FGIC Insured,
6.75%, 11/1/11 Aaa/AAA/AAA 500,000 523,153
- -------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY--4.0% Bergen County, New Jersey Utilities Authority
Water Pollution Control Revenue Bonds, Series A,
FGIC Insured, 6.50%, 12/15/12 Aaa/AAA/AAA 500,000 509,664
------------------------------------------------------------------------------------------------------
East Orange, New Jersey General Obligation Bonds,
FSA Insured, 8.40%, 8/1/06 Aaa/AAA 1,000,000 1,216,439
------------------------------------------------------------------------------------------------------
Union City, New Jersey General Obligation Bonds,
FSA Insured, 6.375%, 11/1/10 Aaa/AAA 1,435,000 1,471,293
-----------
3,197,396
- -------------------------------------------------------------------------------------------------------------------------------
NEW YORK--16.3% New York City Municipal Water Finance Authority
Revenue Refunding Bonds, Water and Sewer
System Project:
Series B, AMBAC Insured, 5.375%, 6/15/19 Aaa/AAA/AAA 1,805,000 1,559,581
Series B, MBIA Insured, 5.375%, 6/15/19 Aaa/AAA/A 1,000,000 861,840
Series F, AMBAC Insured, 5.50%, 6/15/11 Aaa/AAA/AAA 4,000,000 3,699,052
------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance
Agency Revenue Bonds, Mental Health Services
Facilities Improvement Project:
Prerefunded, Series A, MBIA Insured, 7.75%,
8/15/10 Aaa/AAA 235,000 267,402
Prerefunded, Series B, CGIC Insured, 7.875%,
8/15/15 Baa1/AAA/AAA 500,000 560,836
Unrefunded Balance, MBIA Insured, 7.75%, 8/15/10 Aaa/AAA 370,000 408,317
------------------------------------------------------------------------------------------------------
New York State Urban Development Corp. Revenue
Refunding Bonds, Correctional Facilities Capital
Project, Series A, FSA Insured, 5.25%, 1/1/14 Aaa/AAA/A 4,115,000 3,570,433
------------------------------------------------------------------------------------------------------
Suffolk County, New York Industrial Development
Authority Revenue Bonds, Southwest Sewer
System, FGIC Insured, 6%, 2/1/07 Aaa/AAA/AAA 2,000,000 2,018,908
-----------
12,946,369
- -------------------------------------------------------------------------------------------------------------------------------
OHIO--1.8% Ohio Municipal Electric Generation Agency
Revenue Bonds, Joint Venture No. 5, AMBAC
Insured, 5.625%, 2/15/16 Aaa/AAA/AAA 1,000,000 909,746
------------------------------------------------------------------------------------------------------
Streetsboro, Ohio City School District General
Obligation Bonds, AMBAC Insured, 7.125%, 12/1/10 Aaa/AAA/AAA 500,000 546,489
-----------
1,456,235
</TABLE>
6 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 7
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OKLAHOMA--3.0% Grove, Oklahoma Municipal Services Authority
Utility and Sales Tax Revenue Bonds, Series 1991,
CGIC Insured, 7%, 2/1/16 Aaa/AAA $1,115,000 $1,157,569
------------------------------------------------------------------------------------------------------
Norman, Oklahoma Regional Hospital Authority
Revenue Bonds, MBIA Insured, 6.90%, 9/1/21 Aaa/AAA 500,000 516,755
------------------------------------------------------------------------------------------------------
Oklahoma Baptist University Authority Revenue
Bonds, FGIC Insured, 7.10%, 8/1/09 Aaa/AAA/AAA 150,000 159,075
------------------------------------------------------------------------------------------------------
Tulsa, Oklahoma Airports Improvement Trust
Consolidated General Revenue Bonds, MBIA
Insured, 7.50%, 6/1/08 Aaa/AAA 500,000 537,216
-----------
2,370,615
- -------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA--8.9% Allegheny County, Pennsylvania Hospital
Development Authority Revenue Bonds,
Presbyterian University Hospital, Prerefunded,
Series A, MBIA Insured, 7.60%, 3/1/08 Aaa/AAA 1,400,000 1,492,442
------------------------------------------------------------------------------------------------------
Berks County, Pennsylvania General
Obligation Bonds, FGIC Insured, 6.30%, 11/10/20 Aaa/AAA 2,000,000 2,060,100
------------------------------------------------------------------------------------------------------
Butler County, Pennsylvania Hospital Authority
Revenue Bonds, North Hills Passavant Hospital,
Series A, CGIC Insured, 7%, 6/1/22 Aaa/AAA 200,000 212,511
------------------------------------------------------------------------------------------------------
Pennsylvania State Higher Education
Assistance Agency Student Loan Residual
Interest Revenue Bonds, Series 1992B,
AMBAC Insured, 8.77%, 3/1/22(1) Aaa/AAA/AAA 1,250,000 1,075,997
------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Regional
Port Authority Lease Revenue Bonds,
MBIA Insured, 8.87%, 9/1/20(1) Aaa/AAA 1,900,000 1,735,538
------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania School
District General Obligation Bonds,
Series A, MBIA Insured, 5.75%, 7/1/07 Aaa/AAA 500,000 489,787
-----------
7,066,375
- -------------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA--1.1% Florence County, South Carolina School District
No. 003 Certificates of Participation, Series B,
CGIC Insured, 7%, 1/1/11 Aaa/AAA 310,000 321,890
------------------------------------------------------------------------------------------------------
Sumter County, South Carolina School District
No. 017, Certificates of Participation, Series A,
CGIC Insured, 7.125%, 1/1/11 Aaa/AAA 500,000 530,758
-----------
852,648
- -------------------------------------------------------------------------------------------------------------------------------
TEXAS--6.8% Austin, Texas Combined Utility Systems Revenue
Refunding Bonds, Series A, MBIA Insured, 0%,
11/15/09 Aaa/AAA 3,615,000 1,408,490
------------------------------------------------------------------------------------------------------
Dallas/Fort Worth, Texas Regional Airport Revenue
Bonds, FGIC Insured, 6.50%, 11/1/11 Aaa/AAA/AAA 1,600,000 1,620,928
------------------------------------------------------------------------------------------------------
Houston, Texas Certificates of Participation,
Water Conveyance System Project, Series J, AMBAC
Insured, 6.125%, 12/15/08 Aaa/AAA/AAA 2,345,000 2,366,923
-----------
5,396,341
</TABLE>
<PAGE>
STATEMENTS OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VIRGINIA--1.8% Norfolk, Virginia Water Revenue Bonds,
AMBAC Insured, 5.25%, 11/1/13 Aaa/AAA/AAA $1,000,000 $ 869,283
------------------------------------------------------------------------------------------------------
Roanoke, Virginia Industrial Development
Authority Hospital Revenue Bonds, Roanoke
Memorial Hospital Project-Carilion Health,
Prerefunded, MBIA Insured, 7.25%, 7/1/10 Aaa/AAA 500,000 556,202
-----------
1,425,485
- -------------------------------------------------------------------------------------------------------------------------------
WASHINGTON--1.0% Washington State Public Power Supply
System Revenue Refunding Bonds, Series A,
FGIC Insured, 0%, 7/1/09 Aaa/AAA/AAA 2,000,000 770,642
- -------------------------------------------------------------------------------------------------------------------------------
WISCONSIN--1.3% Wisconsin State Health & Educational
Facilities Authority Revenue Bonds:
Novus Health Group, Series B,
MBIA Insured, 6.75%, 12/15/20 Aaa/AAA 500,000 504,704
SSM Healthcare Projects, Prerefunded,
Series B, MBIA Insured, 7%, 6/1/20 Aaa/AAA 500,000 549,574
-----------
1,054,278
- -------------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--2.4% Puerto Rico Commonwealth Linked Revenue
Bonds, MBIA/FSA Insured, 5.831%, 7/1/20 Aaa/AAA/AAA 2,000,000 1,890,478
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $80,017,715) 97.9%
77,734,323
- -------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.1 1,629,144
--------- -----------
NET ASSETS 100.0% $79,363,467
========= ===========
</TABLE>
(1) Represents the current interest rate for a
variable rate bond. Variable rate bonds known as
"inverse floaters" pay interest at a rate that varies
inversely with short-term interest rates. As interest
rates rise, inverse floaters produce less current
income. Their price may be more volatile than the
price of a comparable fixed-rate security. See
accompanying Notes to Financial Statements.
8 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
<TABLE>
==========================================================
==========================================================
=====
<S> <C> <C>
ASSETS Investments, at value (cost $80,017,715)--see accompanying statement $77,734,323
-------------------------------------------------------------------------------------------
Cash 16,208
-------------------------------------------------------------------------------------------
Receivables:
Interest 1,218,784
Shares of beneficial interest sold 898,539
-------------------------------------------------------------------------------------------
Other 6,071
------------
Total assets 79,873,925
==========================================================
==========================================================
=====
LIABILITIES Payables and other liabilities:
Dividends 234,852
Shares of beneficial interest redeemed 164,218
Distribution and service plan fees--Note 4 48,163
Other 63,225
------------
Total liabilities 510,458
==========================================================
==========================================================
=====
NET ASSETS $79,363,467
============
==========================================================
==========================================================
=====
COMPOSITION OF Paid-in capital $82,436,070
NET ASSETS -------------------------------------------------------------------------------------------
Undistributed net investment income 20,250
-------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (809,461)
-------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (2,283,392)
------------
Net assets $79,363,467
============
==========================================================
==========================================================
=====
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $67,792,867 and 4,201,168 shares of beneficial interest outstanding) $16.14
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $16.94
-------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $11,570,600 and 716,638 shares of beneficial interest
outstanding) $16.15
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
<TABLE>
==========================================================
==========================================================
=====
<S> <C>
INVESTMENT INCOME Interest $ 4,780,017
==========================================================
==========================================================
=====
EXPENSES Management fees--Note 4 342,465
-------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 162,106
Class B--Note 4 92,013
-------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 81,961
Class B 13,464
-------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 85,934
-------------------------------------------------------------------------------------------
Shareholder reports 55,261
-------------------------------------------------------------------------------------------
Legal and auditing fees 12,000
-------------------------------------------------------------------------------------------
Custodian fees and expenses 5,321
-------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,877
-------------------------------------------------------------------------------------------
Other 21,271
-----------
Total expenses 873,673
==========================================================
==========================================================
=====
NET INVESTMENT INCOME 3,906,344
==========================================================
==========================================================
=====
REALIZED AND UNREALIZED Net realized loss on investments (811,863)
LOSS ON INVESTMENTS -------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (7,639,229)
-----------
Net realized and unrealized loss on investments (8,451,092)
==========================================================
==========================================================
=====
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(4,544,748)
===========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1994 1993
==========================================================
==========================================================
===============
<S> <C> <C> <C>
OPERATIONS Net investment income $ 3,906,344 $ 2,520,182
-----------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (811,863) 242,996
-----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (7,639,229) 3,653,486
------------ ------------
Net increase (decrease) in net assets resulting from operations (4,544,748) 6,416,664
==========================================================
==========================================================
===============
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.8620 and $.96 per share, respectively) (3,348,993)
(2,518,298)
SHAREHOLDERS Class B ($.7310 and $.30 per share, respectively) (388,291) (38,890)
-----------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0282 per share) (109,723) --
Class B ($.0240 per share) (12,722) --
-----------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.0763 and $.18 per share, respectively) (279,752) (387,637)
Class B ($.0763 per share) (27,180) --
==========================================================
==========================================================
===============
BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 13,295,652 25,043,911
-----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 7,516,981 4,995,749
==========================================================
==========================================================
===============
NET ASSETS Total increase 12,101,224 33,511,499
-----------------------------------------------------------------------------------------------------------
Beginning of year 67,262,243 33,750,744
------------ ------------
End of year (including undistributed net investment
income of $20,250 and $64,446, respectively) $79,363,467 $67,262,243
============
============
See accompanying Notes to Financial Statements.
</TABLE>
11 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1994 1993 1992 1991 1990(3) 1989
==========================================================
=====================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $18.06 $16.92 $16.17 $15.16 $15.27 $14.96
- -----------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .89 .93 .96 .92 .98 1.06
Net realized and
unrealized gain
(loss) on investments (1.84) 1.35 .73 1.01 (.11) .31
------ ----- ----- ----- ----- -----
Total income (loss) from
investment
operations (.95) 2.28 1.69 1.93 .87 1.37
- -----------------------------------------------------------------------------------------------
Dividends and
distributions to
shareholders:
Dividends from net
investment income (.86) (.96) (.91) (.92) (.98) (1.06)
Dividends in excess
of net investment
income (.03) -- -- -- -- --
Distributions from net
realized gain on
investments (.08) (.18) (.03) -- -- --
------ ----- ----- ----- ----- -----
Total dividends and
distributions to
shareholders (.97) (1.14) (.94) (.92) (.98) (1.06)
- -----------------------------------------------------------------------------------------------
Net asset value,
end of period $16.14 $18.06 $16.92 $16.17 $15.16 $15.27
====== ====== ====== ====== ====== ======
==========================================================
=====================================
TOTAL RETURN, AT
NET ASSET VALUE(4) (5.46)% 14.02% 10.74% 13.08% 5.81% 9.37%
==========================================================
=====================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $67,793 $62,158 $33,751 $23,791 $16,863 $13,105
- -----------------------------------------------------------------------------------------------
Average net assets
(in thousands) $66,953 $45,949 $27,811 $19,936 $15,145 $11,200
- -----------------------------------------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 4,201 3,442 1,995 1,471 1,113 858
- -----------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 5.23% 5.40% 5.81% 5.83% 6.43% 6.87%
Expenses, before voluntary
assumption by
the Manager 1.05% 1.18% 1.35% 1.60% 1.62% 2.04%
Expenses, net of voluntary
assumption by the Manager N/A 1.10% .95% .91% .62% .42%
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 99% 7% 47% 67% 62% 142%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------- ------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1988 1987(2) 1994 1993(1)
==========================================================
====================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $13.79 $16.00 $18.07 $17.33
- ------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income 1.07 .92 .77 .30
Net realized and
unrealized gain
(loss) on investments 1.17 (2.21) (1.86) .74
----- ----- ----- -----
Total income (loss) from
investment
operations 2.24 (1.29) (1.09) 1.04
- ------------------------------------------------------------------------------
Dividends and
distributions to
shareholders:
Dividends from net
investment income (1.07) (.92) (.73) (.30)
Dividends in excess
of net
investment
income -- -- (.02) --
Distributions from net
realized gain on
investments -- -- (.08) --
----- ----- ----- -----
Total dividends and
distributions to
shareholders (1.07) (.92) (.83) (.30)
- ------------------------------------------------------------------------------
Net asset value,
end of period $14.96 $13.79 $16.15 $18.07
====== ====== ====== ======
==========================================================
====================
TOTAL RETURN, AT
NET ASSET VALUE(4) 16.67% (8.36)% (6.20)% 6.04%
==========================================================
====================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $8,483 $5,449 $11,571 $5,104
- ------------------------------------------------------------------------------
Average net assets
(in thousands) $6,936 $5,435 $ 9,209 $2,298
- ------------------------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 567 395 717 282
- ------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 7.34% 6.69%(5) 4.43% 3.99%(5)
Expenses, before voluntary
assumption by
the Manager 2.50% 2.98%(5) 1.82% 1.96%(5)
Expenses, net of voluntary
assumption by the Manager .13% .34%(5) N/A N/A
- ------------------------------------------------------------------------------
Portfolio turnover rate(6) 141% 112% 99% 7%
</TABLE>
(1) For the period from May 3, 1993 (inception of offering) to September
30, 1993.
(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 $97,142,573 and $74,122,758,
respectively.
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Insured Tax-Exempt Bond Fund (the Fund) is a separate series
of Oppenheimer Tax-Exempt Bond Fund, a diversified, open-end management
investment company registered under the Investment Company Act of 1940,
as amended. The Fund's investment advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers both Class A and Class B
shares. Class A shares are sold with a front-end sales charge. Class B
shares may be subject to a contingent deferred sales charge. Both classes
of shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution and/or service plan,
expenses directly attributable to a particular class and exlusive voting
rights with respect to matters affecting a single class. Class B shares
will automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Long-term debt securities are valued by
a portfolio pricing service approved by the Board of Trustees. Long-term
debt securities which cannot be valued by the approved portfolio pricing
service are valued by averaging the mean between the bid and asked prices
obtained from two active market makers in such securities. Short-term debt
securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Securities for which market quotes
are not readily available are valued under procedures established by the
Board of Trustees to determine fair value in good faith.
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
FEDERAL INCOME TAXES. The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A and Class B shares from net investment income each
day the New York Stock Exchange is open for business and pay such
dividends monthly. Distributions from net realized gains on investments,
if any, will be declared at least once each year.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October
1, 1993, the Fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the Fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, subsequent to September 30, 1993, amounts have been
reclassified to reflect a decrease in paid-in capital of $2,641, a
decrease in undistributed net investment income of $55,349, and a decrease
in undistributed capital loss on investments of $57,990. During the year
ended September 30, 1994, in accordance with Statement of Position 93-2,
paid-in capital was increased by $2,432, undistributed net investment
income was decreased by $35,462 and undistributed capital loss was
decreased by $33,030.
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold
trade date). Original issue discount on securities purchased is amortized
over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified
cost basis, which is the same basis used for federal income tax purposes.
For bonds acquired after April 30, 1993, accrued market discount is
recognized at maturity or disposition as taxable ordinary income. Taxable
ordinary income is realized to the extent of the lesser of gain or accrued
market discount.
2. SHARES OF
BENEFICAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 YEAR ENDED SEPTEMBER 30,
1993(1)
----------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,358,474 $23,400,749 1,716,581 $29,729,902
Dividends and
distributions
reinvested 164,884 2,823,809 122,875 2,119,692
Redeemed (763,948) (12,928,906) (392,790) (6,805,683)
--------- ----------- --------- -----------
Net increase 759,410 $13,295,652 1,446,666 $25,043,911
========= =========== =========
===========
----------------------------------------------------------------------------------------------
Class B:
Sold 503,586 $ 8,682,918 281,944 $ 4,987,254
Dividends and
distributions
reinvested 15,806 267,832 1,056 18,887
Redeemed (85,174) (1,433,769) (580) (10,392)
--------- ----------- --------- -----------
Net increase 434,218 $ 7,516,981 282,420 $ 4,995,749
========= =========== =========
===========
</TABLE>
(1) For the year ended September 30, 1993 for Class A shares and for the
period from May 3, 1993
(inception of offering) to September 30, 1993 for Class B shares.
3. UNREALIZED GAINS AND At September 30, 1994, net unrealized
depreciation on LOSSES investments of $2,283,392 was composed of gross
appreciation of $987,289, and gross depreciation of $3,270,681.
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund, which provides for an annual fee of .45%
on the first $100 million of net assets, .40% on the next $150 million,
.375% on the next $250 million and .35% on net assets
in excess of $500 million. The Manager has agreed to assume Fund expenses
(with specified exceptions) in excess of the most stringent applicable
regulatory limit on Fund expenses.
The Manager acts as the accounting agent for the Fund at an annual fee of
$12,000, plus out-of-pocket costs and expenses reasonably incurred.
For the year ended September 30, 1994, commissions (sales charges paid by
investors) on sales of Class A shares totaled $376,541, of which $92,979
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended September 30, 1994, OFDI received
contingent deferred sales charges of $19,475 upon redemption of Class B
shares, as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies.
OSS's total costs of providing such services are allocated ratably to
these companies.
Under separate approved plans, each class may expend up to .25% of its net
assets annually to reimburse OFDI for costs incurred in connection with
the personal service and maintenance of accounts that hold shares of the
Fund, including amounts paid to brokers, dealers, banks and other
financial institutions. In addition, Class B shares are subject
to an asset-based sales charge of .75% of net assets annually, to
reimburse OFDI for sales commissions paid from its own resources at the
time of sale and associated financing costs.
In the event of termination or discontinuance of the Class B plan, the
Board of Trustees may allow the Fund to continue payment of the
asset-based sales charge to OFDI for distribution
expenses incurred on Class B shares sold prior to termination or
discontinuance of the plan.
During the year ended September 30, 1994, OFDI paid $5,920 and $125,
respectively, to an affiliated broker/dealer as reimbursement for Class
A and Class B personal service and maintenance expenses and retained
$89,853 as reimbursement for Class B sales commissions and
service fee advances, as well as financing costs.
Appendix A
DESCRIPTION OF RATINGS
Municipal Bond Ratings.
Moody's Investor Services, Inc. The four highest ratings of Moody's
for Municipal Securities are "Aaa," "Aa," "A" and "Baa." Moody's basis
of such ratings is as follows. Municipal Securities rated "Aaa" are
judged to be of the "best quality." The rating "Aa" is assigned to bonds
which are of "high quality by all standards," but as to which margins of
protection or other elements make long-term risks appear somewhat larger
than "Aaa" rated Municipal Securities. The "Aaa" and "Aa" rated bonds
comprise what are generally known as "high grade bonds." Municipal
Securities which are rated "A" by Moody's possess many favorable
investment attributes and are considered "upper medium grade obligations."
Factors giving security to principal and interest of bonds rated "A" are
considered adequate, but elements may be present which suggest a
susceptibility to impairment at some time in the future. Municipal
Securities rated "Baa" are considered "medium grade" obligations. They
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Those bonds in the "Aa," "A" and "Baa" groups which
Moody's believes possess the strongest attributes are designated "Aa1,"
"A1" and "Baa1."
In addition to the alphabetical rating system described above,
Municipal Securities rated by Moody's which have a demand feature that
provides the holder with the ability periodically to tender (put) the
portion of the debt covered by the demand feature, may also have a short-
term rating assigned to such demand feature. The short-term rating uses
the symbol VMIG to distinguish characteristics which include payment upon
periodic demand rather than fund or scheduled maturity dates and potential
reliance upon external liquidity, as well as other factors. The highest
investment quality is designated by the VMIG 1 rating and the lowest by
VMIG 4.
Standard & Poor's Corporation. The four highest ratings of S&P for
Municipal Securities are AAA (Prime), AA (High Grade), A (Good Grade), and
BBB (Medium Grade). Standard & Poor's basis of such ratings is as
follows. Municipal Securities rated AAA are "obligations of the highest
quality." The rating AA is accorded issues with investment
characteristics "only slightly less marked than those of the prime quality
issues." The rating A describes "the third strongest capacity for payment
of debt service." Principal and interest payments on bonds in this
category are regarded as safe. It differs from the two higher ratings
because, with respect to general obligation bonds, there is some weakness,
either in the local economic base, in debt burden, in the balance between
revenues and expenditures, or in quality of management. Under certain
adverse circumstances, any one such weakness might impair the ability of
the issuer to meet debt obligations at some future date. With respect to
revenue bonds rated A, debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management
performance appears adequate.
The BBB rating is the lowest "investment grade" security rating. The
difference between A and BBB ratings is that the latter shows more than
one fundamental weakness, or one very substantial fundamental weakness,
whereas the former shows only one deficiency among the factors considered.
With respect to revenue bonds, debt coverage is only fair. Stability of
the pledged revenues could show variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger. The ratings AA,
A, and BBB may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
Municipal Note Ratings.
Moody's. Moody's ratings for state and Municipal Notes and other
short-term loans are designated "Moody's Investment Grade" ("MIG"). Notes
bearing the designation "MIG 1" are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for financing.
Notes bearing the designation "MIG 2" are of high quality, with ample
margins of protection, although not so large as notes rated "MIG 1." Such
short-term notes which have demand features may also carry a rating using
the symbol "VMIG" as described above, with the designation "MIG 1/VMIG 1"
denoting best quality, with superior liquidity support in addition to
those characteristics attributable to the designation "MIG 1."
Standard & Poor's. Standard & Poor's ratings for Municipal Notes due
in three years or less are "SP1" and "SP2." "SP1" describes issues with
a very strong or strong capacity to pay principal and interest and
compares with bonds rated "A" by Standard & Poor's; if modified by a plus
sign, it compares with bonds rated "AA" or "AAA" by Standard & Poor's.
"SP2" describes issues with a satisfactory capacity to pay principal and
interest, and compares with bonds rated "BBB" by Standard & Poor's.
In addition to the alphabetical rating system described above,
Municipal Bonds rated by Moody's which have a demand feature that provides
the holder with the ability periodically to tender (put) the portion of
the debt covered by the demand feature, may also have a short-term rating
assigned to such demand feature. The short-term rating uses the symbol
"VMIG" to distinguish characteristics which include payment upon periodic
demand rather than fund or scheduled maturity dates and potential reliance
upon external liquidity, as well as other factors. The highest investment
quality is designated by the "VMIG 1" rating and the lowest by "VMIG 4."
<PAGE>
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield tables below compare tax-free income with taxable
income under Federal income tax rates effective January 1, 1995. Federal
taxable income refers to the net amount subject to Federal income tax
after deductions and exemptions. The tables assume that an investor's
highest tax bracket applies to the change in taxable income resulting from
a switch between taxable and non-taxable investments, that the investor
is not subject to the Alternative Minimum Tax, and that state income tax
payments are fully deductible for Federal income tax purposes. The income
tax brackets are subject to indexing in future years to reflect changes
in the Consumer Price Index. The brackets do not reflect the phaseout of
itemized deductions and personal exemptions at higher income levels,
resulting in higher effective tax rates and tax equivalent yields.
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Insured
Tax Tax-Exempt Bond Fund Yield of
Joint Return Bracket 3.5% 4.0% 4.5% 5.0%
Is Equivalent to a Taxable Yield of:
Over Not Over
- ----- --------
<S> <C> <C> <C> <C> <C> <C>
$0 $ 39,000 15.00% 4.12% 4.71% 5.29% 5.88%
$ 39,000 $ 94,250 28.00% 4.86% 5.56% 6.25% 6.94%
$ 94,250 $143,600 31.00% 5.07% 5.80% 6.52% 7.25%
$143,600 $256,500 36.00% 5.47% 6.25% 7.03% 7.81%
$256,500 and above 39.60% 5.79% 6.62% 7.45% 8.28%
</TABLE>
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Insured
Tax Tax-Exempt Bond Fund Yield of
Joint Return Bracket 5.5% 6.0% 6.5%
Is Equivalent to a Taxable Yield of:
Over Not Over
- ----- --------
<S> <C> <C> <C> <C> <C>
$0 $ 39,000 15.00% 6.47% 7.06% 7.65%
$ 39,000 $ 94,250 28.00% 7.64% 8.33% 9.03%
$ 94,250 $143,600 31.00% 7.97% 8.70% 9.42%
$143,600 $260,500 36.00% 8.59% 9.38% 10.16%
$260,500 and above 39.60% 9.11% 9.93% 10.76%
</TABLE>
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Insured
Tax Tax-Exempt Bond Fund Yield of
Single Return Bracket 3.5% 4.0% 4.5% 5.0%
Is Equivalent to a Taxable Yield of:
Over Not Over
- ----- --------
<S> <C> <C> <C> <C> <C> <C>
$0 $ 23,350 15.00% 4.12% 4.71% 5.29% 5.88%
$ 23,350 $ 56,550 28.00% 4.86% 5.56% 6.25% 6.94%
$ 56,550 $117,950 31.00% 5.07% 5.80% 6.52% 7.25%
$117,950 $256,500 36.00% 5.47% 6.25% 7.03% 7.81%
$256,500 and over 39.60% 5.79% 6.62% 7.45% 8.28%
</TABLE>
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Intermediate
Tax Tax-Exempt Bond Fund Yield of
Single Return Bracket 5.5% 6.0% 6.5%
Is Equivalent to a Taxable Yield of:
Over Not Over
- ----- --------
<S> <C> <C> <C> <C> <C>
$0 $ 23,350 15.00% 6.47% 7.06% 7.65%
$ 23,350 $ 56,550 28.00% 7.64% 8.33% 9.03%
$ 56,550 $117,950 31.00% 7.97% 8.70% 9.42%
$117,950 $256,500 36.00% 8.59% 9.38% 10.16%
$255,500 and over 39.60% 9.11% 9.93% 10.76%
</TABLE>
Appendix C
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Investment Adviser
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 and Shareholder Servicing 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
<PAGE>
Oppenheimer Intermediate Tax-Exempt Bond Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated February 1, 1995
Oppenheimer Intermediate Tax-Exempt Bond Fund (the "Fund"), is a series
of Oppenheimer Tax-Exempt Bond Fund (the "Trust"). This Statement of
Additional Information is not a Prospectus. This document contains
additional information about the Fund and supplements information in the
Prospectus dated January 27, 1995. It should be read together with the
Fund's Prospectus, which may be obtained by writing to the Fund's Transfer
Agent, Oppenheimer Shareholder Services , at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Transfer Agent at the toll-free number
shown above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies. 2
Other Investment Techniques and Strategies 6
Other Investment Restrictions 13
How the Fund is Managed 14
Organization and History 14
Trustees and Officers of the Trust 15
The Manager and Its Affiliates 18
Brokerage Policies of the Fund 20
Performance of the Fund 22
Distribution and Service Plans 25
About Your Account 27
How To Buy Shares 27
How To Sell Shares 33
How To Exchange Shares 36
Dividends, Capital Gains and Taxes 38
Additional Information About the Fund 40
Financial Information About the Fund 41
Independent Auditors' Report 41
Financial Statements 42
Appendix A (Ratings of Investments). A-1
Appendix B (Tax-Equivalent Yield Chart) B-1
Appendix C (Industry Classifications) C-1
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objectives and policies
of the Fund are described in the Prospectus. Supplemental information
about those policies is set forth below. Certain capitalized terms used
in this Statement of Additional Information have the same meaning as those
terms have in the Prospectus.
Municipal Securities. There are variations in the security of Municipal
Securities, both within a particular classification and between
classifications, depending on numerous factors. The yields of Municipal
Securities depend on, among other things, general conditions of the
Municipal Securities market, size of a particular offering, the maturity
of the obligation and rating of the issue. The market value of Municipal
Securities will vary as a result of changing evaluations of the ability
of their issuers to meet interest and principal payments, as well as
changes in the interest rates payable on new issues of Municipal
Securities.
- Municipal Bonds. The principal classifications of long-term
municipal bonds are "general obligation" and "revenue" or "industrial
development" bonds.
- General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The
proceeds of these obligations are used to fund a wide range of public
projects, including construction or improvement of schools, highways and
roads, and water and sewer systems. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and
taxing power for the payment of principal and interest. The taxes that
can be levied for the payment of debt service may be limited or unlimited
as to the rate or amount of special assessments.
- Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or
the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
- Industrial Development Bonds. Industrial development bonds,
which are considered municipal bonds if the interest paid is exempt from
federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports, and pollution control. These bonds
are also used to finance public facilities such as airports, mass transit
systems, ports, and parking. The payment of the principal and interest
on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.
- Municipal Notes. Municipal Securities having a maturity when issued
of less than one year are generally known as municipal notes. Municipal
notes generally are used to provide for short-term working capital needs
and include:
- Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use or business taxes, and are payable from these specific future
taxes.
- Revenue Anticipation Notes. Revenue anticipation notes are
issued in expectation of receipt of other types of revenue, such as
Federal revenues available under the Federal revenue sharing programs.
- Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
- Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration.
- Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-
term obligation with a stated maturity of 365 days or less. It is issued
by state and local governments or their agencies to finance seasonal
working capital needs or as short-term financing in anticipation of
longer-term financing.
- Floating Rate/Variable Rate Obligations. Floating rate and variable
rate demand notes are tax-exempt obligations which may have a stated
maturity in excess of one year, but may include features that permit the
holder to recover the principal amount of the underlying security at
specified intervals not exceeding one year and upon no more than 30 days'
notice. The issuer of such notes normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding
principal amount of the note plus accrued interest upon a specified number
of days notice to the holder. The interest rate on a floating rate demand
note is based on a stated prevailing market rate, such as a bank's prime
rate, the 90-day U.S. Treasury Bill rate, or some other standard, and is
adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand note is also based on a stated prevailing market
rate but is adjusted automatically at specified intervals of no more than
one year. Generally, the changes in the interest rate on such securities
reduce the fluctuation in their market value. As interest rates decrease
or increase, the potential for capital appreciation or depreciation is
less than that for fixed-rate obligations of the same maturity. The
Trust's investment adviser, Oppenheimer Management Corporation (the
"Manager"), may determine that an unrated floating rate or variable rate
demand obligation meets the Fund's quality standards by reason of being
backed by a letter of credit or guarantee issued by a bank that meets the
Fund's quality standards.
- Inverse Floaters and Other Derivative Investments. Some inverse
floaters have a feature known as an interest rate "cap" as part of the
terms of the investment. Investing in inverse floaters that have interest
rate caps might be part of a portfolio strategy to try to maintain a high
current yield for the Fund when the Fund has invested in inverse floaters
that expose the Fund to the risk of short-term interest rate fluctuation.
Embedded caps hedge a portion of the Fund's exposure to rising interest
rates. When interest rates exceed the pre-determined rate, the cap
generates additional cash flows that offset the decline in interest rates
on the inverse floater, and the hedge is successful. However, the Fund
bears the risk that if interest rates do not rise above the pre-determined
rate, the cap (which is purchased for additional cost) will not provide
additional cash flows and will expire worthless.
- Municipal Lease Obligations. From time to time the Fund may invest
more than 5% of its net assets in municipal lease obligations, generally
through the acquisition of certificates of participation, that the Manager
has determined to be liquid under guidelines set by the Board of Trustees.
Those guidelines require the Manager to evaluate: (1) the frequency of
trades and price quotations for such securities; (2) the number of dealers
or other potential buyers willing to purchase or sell such securities; (3)
the availability of market-makers; and (4) the nature of the trades for
such securities. The Manager will also evaluate the likelihood of a
continuing market for such securities throughout the time they are held
by the Fund and the credit quality of the instrument. Municipal leases
may take the form of a lease or an installment purchase contract issued
by a state or local government authority to obtain funds to acquire a wide
variety of equipment and facilities. Although lease obligations do not
constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to budget for, appropriate and make
the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on
a yearly basis. 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 and do not constitute an obligation of the issuing
municipality or any of its political subdivisions.
In addition to the risk of "non-appropriation," municipal lease
securities do not yet have a highly developed market to provide the degree
of liquidity of conventional municipal bonds. Municipal leases, like
other municipal debt obligations, are subject to the risk of non-payment.
The ability of issuers of municipal leases to make timely lease payments
may be adversely affected in general economic downturns and as relative
governmental cost burdens are reallocated among federal, state and local
governmental units. Such non-payment would result in a reduction of
income to the Fund, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the
net asset value of the Fund.
- Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally did not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on obligations
issued by or on behalf of a state or local government, the proceeds of
which are used to finance the operations of such governments (e.g.,
general obligation bonds) continues to be tax-exempt. However, the Tax
Reform Act further limited the use of tax-exempt bonds for non-
governmental (private) purposes. More stringent restrictions were placed
on the use of proceeds of such bonds. Interest on certain private
activity bonds (other than those specified as "qualified" tax-exempt
private activity bonds, e.g., exempt facility bonds including certain
industrial development bonds, qualified mortgage bonds, qualified Section
501(c)(3) bonds, qualified student loan bonds, etc.) is taxable under the
revised rules.
Interest on certain private activity bonds issued after August 7, 1986,
which continues to be tax-exempt will be treated as a tax preference item
subject to the alternative minimum tax (discussed below) to which certain
taxpayers are subject. Further, a private activity bond which would
otherwise be a qualified tax-exempt private activity bond will not, under
Internal Revenue Code Section 147(a), be a qualified bond for any period
during which it is held by a person who is a "substantial user" of the
facilities or by a "related person" of such a substantial user. This
"substantial user" provision is applicable primarily to exempt facility
bonds, including industrial development bonds. The Fund may not be an
appropriate investment for entities which are "substantial users" (or
persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, limitations as to the amount of private
activity bonds which each state may issue were revised downward by the
Tax Reform Act, which will reduce the supply of such bonds. The value of
the Fund's portfolio could be affected if there is a reduction in the
availability of such bonds. That value may also be affected by a 1988
U.S. Supreme Court decision upholding the constitutionality of the
imposition of a Federal tax on the interest earned on Municipal Securities
issued in bearer form.
A Municipal Security is treated as a taxable private activity bond
under a test for: (a) a trade or business use and security interest, or
(b) a private loan restriction. Under the trade or business use and
security interest test, an obligation is a private activity bond if: (i)
more than 10% of bond proceeds are used for private business purposes and
(ii) 10% or more of the payment of principal or interest on the issue is
directly or indirectly derived from such private use or is secured by the
privately used property or the payments related to the use of the
property. For certain types of uses, a 5% threshold is substituted for
this 10% threshold. (The term "private business use" means any direct or
indirect use in a trade or business carried on by an individual or entity
other than a governmental unit.) Under the private loan restriction, the
amount of bond proceeds which may be used to make private loans is limited
to the lesser of 5% or $5.0 million of the proceeds. Thus, certain issues
of Municipal Securities could lose their tax-exempt status retroactively
if the issuer fails to meet certain requirements as to the expenditure of
the proceeds of that issue or use of the bond-financed facility. The Fund
makes no independent investigation of the users of such bonds or their use
of proceeds. Should the Fund hold a bond that loses its tax-exempt status
retroactively, there might be an adjustment to the tax-exempt income
previously paid to shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference
items in arriving at alternative minimum taxable income. The Tax Reform
Act, which makes tax-exempt interest from certain private activity bonds
a tax preference item for purposes of the alternative minimum tax on
individuals and corporations, specifically states that any exempt-interest
dividend paid by a regulated investment company will be treated as
interest on a specific private activity bond to the extent of its
proportionate share of the interest on such bonds received by the
regulated investment company. The Treasury is authorized to issue
regulations implementing the provision. The Fund may hold Municipal
Securities the interest on which (and thus a proportionate share of the
exempt-interest dividends paid by the Fund) will be subject to the Federal
alternative minimum tax on individuals and corporations. The Fund
anticipates that under normal circumstances it will not purchase any such
securities in an amount greater than 20% of the Fund's total assets.
- Ratings of Municipal Securities. Moody's and S&P's ratings (See
Appendix A) represent their respective opinions of the quality of the
Municipal Securities they undertake to rate. However, such ratings are
general and subjective and are not absolute standards of quality.
Consequently, Municipal Securities with the same maturity, coupon and
rating may have different yields, while Municipal Securities of the same
maturity and coupon with different ratings may have the same yield.
Investment in lower-quality securities may produce a higher yield than
securities rated in the higher rating categories described in the
Prospectus (or judged by the Manager to be of comparable quality).
However, the added risk of lower quality securities might not be
consistent with a policy of preservation of capital.
- Additional Information About Municipal Securities. From time to
time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Securities. Similar proposals may be introduced in the future. If such
a proposal were enacted, the availability of Municipal Securities for
investment by the Fund and the value of the portfolio of the Fund would
be affected. At such time, the Board of Trustees of the Trust would re-
evaluate the investment objectives and policies of the Fund and possibly
submit to shareholders proposals for changes in the structure of the Fund.
Other Investment Techniques and Strategies
- Hedging With Options and Futures Contracts. The Fund may use
hedging instruments for the purposes described in the Prospectus. When
hedging to attempt to protect against declines in the market value of the
Fund's portfolio, or to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell Interest
Rate Futures or Municipal Bond Index Futures, (ii) buy puts on such
Futures or securities, or (iii) write covered calls on securities held by
it, Interest Rate Futures, or Municipal Bond Index Futures. When hedging
to establish a position in the debt securities markets as a temporary
substitute for the purchase of individual debt securities the Fund may:
(i) buy Interest Rate Futures or Municipal Bond Index Futures, or (ii) buy
calls on such Futures or debt securities. Normally, the Fund would then
purchase the equity securities and terminate the hedging position.
The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's investment activities in the underlying cash
market. In the future, the Fund may employ hedging instruments and
strategies that are not presently contemplated but which may be developed,
to the extent such investment methods are consistent with the Fund's
investment objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments the Fund
may use is provided below.
- Writing Covered Calls. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call on an investment, it
receives a premium and agrees to sell the callable investment to a
purchaser of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the market
price of the underlying investment) regardless of market price changes
during the call period. To terminate its obligation on a call it has
written, the Fund may purchase a corresponding call in a "closing
purchase transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the premium
received on the call the Fund has written is more or less than the price
of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the
underlying investment and the premium received. Those profits are
considered short-term capital gains for Federal income tax purposes, as
are premiums on lapsed calls, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the
callable investment until the call lapsed or was exercised. The Fund will
not write covered call options in an amount exceeding 20% of the value of
its total assets.
The Fund may also write calls on Futures without owning a futures
contract or deliverable securities, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar value of deliverable securities or liquid assets. The Fund will
segregate additional liquid assets if the value of the escrowed assets
drops below 100% of the current value of the Future. In no circumstances
would an exercise notice as to a Future put the Fund in a short futures
position.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which
the Fund has written options that are traded on exchanges, or as to other
acceptable escrow securities, so that no margin will be required from the
Fund for such option transactions. OCC will release the securities
covering a call on the expiration of the call or when the Fund enters into
a closing purchase transaction. Call writing affects the Fund's turnover
rate and the brokerage commissions it pays. Commissions, normally higher
than on general securities transactions, are payable on writing or
purchasing a call.
- Interest Rate Futures. The Fund may buy and sell futures
contracts relating to interest rates ("Interest Rate Futures") and
municipal bond indices ("Municipal Bond Index Futures"). An Interest Rate
Future obligates the seller to deliver and the purchaser to take a
specific type of debt security at a specific future date for a fixed price
to settle the futures transaction, or to enter into an offsetting
contract. No monetary amount is paid or received by the Fund on the
purchase of an Interest Rate Future. 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.
For example, the Fund might buy Municipal Bond Futures and sell U.S.
Treasury Bond Futures (a type of Interest Rate Future). This type of
transaction would generally be profitable to the Fund if municipal bonds
outperform U.S. Treasury bonds after duration has been considered.
Duration is a volatility measure that refers to the expected percentage
change in the value of a bond resulting from a change in general interest
rates (measured by each 1% change in the rates on U.S. Treasury
securities). For example, if a bond has an effective duration of three
years, a 1% increase in general interest rates would be expected to cause
the bond to decline about 3%. Risks of this type of Futures transaction,
using the example above, would include (1) outperformance of U.S.
Treasuries relative to municipal bonds, on a duration-adjusted basis, and
(2) duration mismatch, with duration of municipal bonds relative to U.S.
Treasuries being greater than anticipated.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment, in cash or U.S. Treasury bills, with
the futures commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can
gain access to that account only under certain specified conditions. As
the Future is marked to market (that is, its value on the Fund's books is
changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures
broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect
to close out its position by taking an opposite position, at which time
a final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. Any gain or loss is then
realized by the Fund on the Future for tax purposes. Although Interest
Rate Futures call for the delivery of a specific debt security, in most
cases the settlement obligation is fulfilled without such delivery by
entering into an offsetting transaction. All Futures transactions are
effected through a clearing house associated with the exchange on which
the contracts are traded.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause
the sale of underlying investments, increasing portfolio turnover.
Although the decision whether to exercise a put it holds is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons that would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a
call, put or an underlying investment in connection with the exercise of
a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of
the underlying investments and, consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes
in the value of the underlying investments.
- Municipal Bond Index Futures. A "municipal bond index" assigns
relative values to the municipal bonds included in that index, and is used
to serve as the basis for trading long-term municipal bond Futures
contracts. Municipal Bond Index Futures are similar to Interest Rate
Futures except that settlement is made in cash. The obligation under such
contracts may also be satisfied by entering into an offsetting contract
to close out the futures position. Net gain or loss on options on such
Municipal Bond Index Futures depends on the price movements of the
securities included in the index. The strategies which the Fund employs
regarding Municipal Bond Index Futures are similar to those described
above with regard to Interest Rate Futures.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded
as parts of an integral agreement. If on any date amounts are payable in
the same currency in respect of one or more swap transactions, the net
amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a
loss to one part, the measure of that part's damages is calculated by
reference to the average cost of a replacement swap with respect to each
swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination
of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation." The Fund will not invest more
than 25% of its assets in interest rate swap transactions.
- Purchasing Puts and Calls. The Fund may purchase calls to protect
against the possibility that the Fund's portfolio will not participate in
an anticipated rise in the securities market. When the Fund purchases a
call, it pays a premium (other than in a closing purchase transaction)
and, except as to calls on Municipal Bond Index Futures, has the right to
buy the underlying investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise price. In
purchasing a call, the Fund benefits only if the call is sold at a profit
or if, during the call period, the market price of the underlying
investment is above the sum of the call price, transaction costs, and the
premium paid, and the call is exercised. If the call is not exercised or
sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right
to purchase the underlying investment. When the Fund purchases a call on
a municipal bond index, Municipal Bond Index Future or Interest Rate
Future, it pays a premium, but settlement is in cash rather than by
delivery of the underlying investment to the Fund. The Fund will not
purchase options if, as a result, the aggregate cost of all outstanding
options exceed 5% of the total assets.
When the Fund purchases a put, it pays a premium and, except as to puts
on municipal bond indices, has the right to sell the underlying investment
to a seller of a corresponding put on the same investment during the put
period at a fixed exercise price. Buying a put on a debt security,
Interest Rate Future or Municipal Bond Index Future the Fund owns (a
"protective put") enables the Fund to attempt to protect itself during the
put period against a decline in the value of the underlying investment
below the exercise price by selling the underlying investment at the
exercise price to a seller of a corresponding put. If the market price
of the underlying investment is equal to or above the exercise price and
as a result the put is not exercised or resold, the put will become
worthless at its expiration and the Fund will lose the premium payment and
the right to sell the underlying investment. However, the put may be sold
prior to expiration (whether or not at a profit).
An option position may be closed out only on a market which provides
trading for options of the same series, and there is no assurance that a
liquid secondary market will exist for any particular option. The Fund's
option activities may affect its portfolio turnover rate and brokerage
commissions. The exercise of calls written by the Fund may cause the Fund
to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of
underlying investments, increasing portfolio turnover. Although the
decision whether to exercise a put it holds is within the Fund's control,
holding a put might cause the Fund to sell the related investments for
reasons that would not exist in the absence of the put. The Fund will pay
a brokerage commission each time it buys or sells a call, put or an
underlying investment in connection with the exercise of a put or call.
Those commissions may be higher than the commissions for direct purchases
or sales of the underlying investments. </R.
Premiums paid for options are small in relation to the market value of
the underlying investments and, consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes
in the value of the underlying investments.
- Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use
of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
initial futures margin and related option premiums to no more than 5% of
the Fund's net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule. Under the Rule, the Fund also
must use short Futures and Futures options positions solely for "bona fide
hedging purposes" within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases an Interest Rate Future or Municipal Bond Index Future, the Fund
will maintain, in a segregated account or accounts with its Custodian,
cash or readily-marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Interest Rate Futures and Municipal Bond Index
Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii) purchasing
options which expire in less than three months; (iii) effecting closing
transactions with respect to calls or puts written or purchased less than
three months previously; (iv) exercising puts or calls held by the Fund
for less than three months; or (v) writing calls on investments held less
than three months.
- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging that are discussed in the Prospectus and above,
there is a risk in using short hedging by selling Interest Rate Futures
or Municipal Bond Index Futures. The risk is that the prices of such
Futures or the applicable index will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's securities.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the natures of those
markets. First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close out futures
contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity
of the futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures
markets could be reduced, thus producing distortion. Third, from the
point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the equity securities being hedged and movements in the price of
the hedging instruments, the Fund may use hedging instruments in a greater
dollar amount than the dollar amount of equity securities being hedged if
the historical volatility of the prices of the debt securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of debt securities held
in the Fund's portfolio may decline. If that occurred, the Fund would lose
money on the hedging instruments and also experience a decline in value
in its portfolio securities. However, while this could occur for a very
brief period or to a very small degree, over time the value of a
diversified portfolio of debt securities will tend to move in the same
direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
debt markets as a temporary substitute for the purchase of individual debt
securities (long hedging) by buying Interest Rate Futures or Municipal
Bond Futures and/or calls on such Futures, on securities or on stock
indices, it is possible that the market may decline. If the Fund then
concludes not to invest in such securities at that time because of
concerns as to a possible further market decline or for other reasons, the
Fund will realize a loss on the hedging instruments that is not offset by
a reduction in the price of the debt securities purchased.
- When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may invest in Municipal Securities on a "when-issued"
or "delayed delivery" basis. Payment for and delivery of the securities
generally settles within 45 days of the date the offer is accepted. The
purchase price and yield are fixed at the time the buyer enters into the
commitment. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund from
this investment. However, the Fund intends to be as fully invested as
possible and will not invest in when-issued securities if its income or
net asset value will be materially adversely affected. At the time the
Fund makes the commitment to purchase a Municipal Security on a when-
issued basis, it will record the transaction on its books and reflect the
value of the security in determining its net asset value. It will also
segregate cash or other high quality liquid Municipal Securities equal in
value to the commitment for the when-issued securities. While when-issued
securities may be sold prior to settlement date, the Fund intends to
acquire the securities upon settlement unless a prior sale appears
desirable for investment reasons. There is a risk that the yield
available in the market when delivery occurs may be higher than the yield
on the security acquired.
- Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Trust's Board
of Trustees from time to time. The resale price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective
for the period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery pursuant
to the resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote of the Fund is defined as
the vote of the holders of the lesser of: (i) 67% or more of the shares
present or represented by proxy at such meeting, if the holders of more
than 50% of the outstanding shares are present, or (ii) more than 50% of
the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) purchase or
sell real estate, commodities or commodity contracts except to the extent
that the Municipal Securities the Fund may invest in are considered to be
interests in real estate, and except to the extent that the options and
Futures contracts the Fund may trade are considered to be commodities or
commodity contracts; (2) invest in interests in oil, gas, or other mineral
exploration or development programs; (3) purchase securities on margin;
however, the deposit of initial or variation margin by the Fund in
connection with Futures contracts or related options transactions is not
considered the purchase of a security on margin; (4) make short sales of
securities; (5) underwrite securities except to the extent the Fund may
be deemed to be an underwriter in connection with the sale of securities
held in its portfolio; (6) invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or other acquisition; (7) make investments for the purpose
of exercising control of management; (8) purchase securities of any issuer
if, to the knowledge of the Fund, its officers and trustees and officers
and directors of the Manager or who individually own more than .5% of the
securities of such issuer together own beneficially more than 5% of such
issuer's outstanding securities; (9) purchase or retain securities if as
a result the Fund would have more than 5% of its total assets invested in
securities of private issuers having a record of less than three years'
continuous operation (such period may include the operation of predecessor
companies or enterprises) or in industrial development bonds if the
private entity on whose credit the security is based, directly or
indirectly, is less than three years old (including predecessors), unless
the security is rated by a nationally-recognized rating service; (10)
invest more than 25% of its assets in a single industry (as described in
the Prospectus, the Fund may, from time to time, invest more than 25% of
its assets in a particular segment of the Municipal Securities market,
however, the Fund will not invest more than 25% of its assets in
industrial revenue bonds in a single industry); or (11) invest in common
stock or any warrants related thereto.
In connection with the qualification of its shares in certain states,
the Fund has undertaken that in addition to the above, it will not: (i)
invest in real estate limited partnerships, or (ii) invest in oil, gas or
other mineral leases. In the event the Fund's shares cease to be
qualified under such laws or if such undertaking otherwise ceases to be
operative, the Fund would not be subject to such restriction. The
percentage restrictions described above and in the Prospectus apply only
at the time of investment and require no action by the Fund as a result
of subsequent changes in relative values.
For purposes of the Fund's policy not to concentrate described under
investment restriction number six in the Prospectus, the Fund has adopted
the industry classifications set forth in Appendix C to this Statement of
Additional Information.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers of the Trust. The Trust's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. All of the Trustees are also trustees, directors
or managing general partners of Oppenheimer Total Return Fund, Inc.,
Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer
Integrity Funds, Oppenheimer Cash Reserves, Oppenheimer Limited-Term
Government Fund, The New York Tax-Exempt Income Fund, Inc., Oppenheimer
Champion High Yield Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Strategic Funds Trust, Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer Strategic
Short-Term Income Fund and Oppenheimer Variable Account Funds; as well as
the following "Centennial Funds": Daily Cash Accumulation Fund, Inc.,
Centennial America Fund, L.P., Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax
Exempt Trust and Centennial California Tax Exempt Trust, (all of the
foregoing funds are collectively referred to as the "Denver-based
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver-based OppenheimerFunds. As of December 30, 1994, the Trustees
and officers of the Fund as a group owned of record or beneficially less
than 1% of each class of shares of the Fund or the Trust. The foregoing
statement does not reflect ownership of shares held of record by an
employee benefit plan for employees of the Manager (for which plan two of
the officers listed above, Messrs. Fossel and Donohue, are trustees),
other than the shares beneficially owned under the Plan by the officers
of the Fund listed above.
Robert G. Avis, Trustee; Age 63.*
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age 80.
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 64.
19411 Merion Circle, Huntington Beach, California, 92648
Vice President of McDonnell Douglas Space Systems, Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee; Age 52.*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Raymond J. Kalinowski, Trustee; Age 65.
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice Chairman
and a director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age 73.
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age 73.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age 79.
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a director of
Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee; Age 61.*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a Director of the Manager; President and Director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
Andrew J. Donohue, Vice President; Age 44.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; formerly a Partner in
Kraft & McManimon (a law firm), prior to which he was an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser) and a director and
an officer of the First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer; Age 58.
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Robert E. Patterson, Vice President and Portfolio Manager; Age 51.
Two World Trade Center, New York, N.Y. 10048-0203
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
Caryn Halbrecht, Vice President and Portfolio Manager; Age 38.
Two World Trade Center, New York, N.Y. 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly a Vice President of Fixed-Income portfolio management at Bankers
Trust.
Robert G. Zack, Assistant Secretary; Age 46.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert J. Bishop, Assistant Treasurer; Age 36.
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller of the Manager,
prior to which he was an
Accountant for Resolution Trust Corporation and previously an Accountant
and Commissions Supervisor for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age 29.
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting, an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Fossel and Swain, who are both officers and
Trustees) receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Messrs. Fossel and Swain) received the total amounts shown
below from all 22 of the Denver-based OppenheimerFunds (including the
Fund) listed in the first paragraph of this section, for services in the
positions shown:
Total Compensation
From All
Name Position Denver-based
OppenheimerFunds1
Robert G. Avis Trustee $53,000.00
William A. Baker Study and Audit
Committee $73,257.01
Chairman and Trustee
Charles Conrad, Jr. Study and Audit
Committee $68,293.67
Member and Trustee
Raymond J. Kalinowski Trustee $53,000.00
C. Howard Kast Trustee $53,000.00
Robert M. Kirchner Study and Audit
Committee $68,293.67
Member and Trustee
Ned M. Steel Trustee $53,000.00
______________
1 For the 1994 calendar year.
- Major Shareholders. As of December 30, 1994, (i) Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive EFL3, Jacksonville, Florida,
32246, owned 280,314.000 (5.10%) Class A shares of the Fund, and (ii)
Michael and Mary Melnarik, 59 Hickory Ridge Circle, Cicero, Indiana 46034,
beneficially owned 33,397.627 (6.11 %) Class C shares of the Fund. No
other person owned of record or was known by the Trust to own beneficially
5% or more of the shares of the Trust as a whole or either class of the
Fund's outstanding shares as of that date.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Fossel and Mr. Swain)
serve as Trustees of the Fund.
The Investment Advisory Agreement. The investment advisory agreement
between the Manager and the Trust requires the Manager, at its expense,
to provide the Fund with adequate office space, facilities and equipment,
and to provide and supervise the activities of all administrative and
clerical personnel required to provide effective corporate administration
for the Fund, including the compilation and maintenance of records with
respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements
for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. For the Fund's fiscal year ended September 30, 1994,
the management fees paid by the Fund to the Manager were $413,576. For
the Fund's fiscal year ended September 30, 1993, the management fees
payable by the Fund to the Manager were $243,742, of which $236,149 was
paid to the Manager due to its assumption of $7,593 of the Fund's
expenses. During the Fund's fiscal year ended September 30, 1992, the
management fees payable by the Fund were $125,755, of which $102,141 was
paid to the Manager, due to its assumption of $23,614 of the Fund's
expenses.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses
such as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Pursuant to the
undertaking, the Manager's fee will be reduced at the end of a month so
that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2% of the next $70 million of average annual net assets, and 1.5% of
average annual net assets in excess of $100 million. The Manager reserves
the right to terminate or amend the undertaking at any time. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
Prior to January 1, 1993, the Manager had, independently of the
advisory agreement, voluntarily undertaken to assume the expenses
(excluding extraordinary non-recurring expenses such as litigation) of the
Fund in the amount up to .10% of the Fund's average annual net assets.
The assumption of expenses under this undertaking lowered the Fund's
overall expense ratio and increased its yield and total return during the
time such expenses were assumed. Effective January 1, 1993, the Manager
eliminated the voluntary expense limitation.
From April 7, 1990 until January 31, 1992, Clayton Brown
Investment Management, Inc. ("CBIM"), an affiliate of Clayton Brown &
Associates, Inc., which was the Fund's general distributor until
January 31, 1992, was the sub-advisor for the Fund, pursuant to a Sub-
advisory Agreement with the Manager. The Manager paid subadvisory fees
to CBIM at the annual rates of .20% of the average daily net assets of the
Fund. During the fiscal year ended September 30, 1992, the Manager paid
fees of $15,928 to CBIM.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with its other investment activities.
If the Manager shall no longer act as investment adviser to the Fund, the
right of the Fund to use the name "Oppenheimer" as part of its corporate
name may be withdrawn.
- The Distributor. Oppenheimer Funds Distributor, Inc. (the
"Distributor"), formerly named "Oppenheimer Fund Management, Inc.," became
the Fund's Distributor on January 31, 1992. Prior to that date, Clayton
Brown & Associates, Inc. ("Clayton Brown") was the Fund's general
distributor. Under the General Distributor's Agreement between the Fund
and the Distributor, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class A and
Class C shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (other than those paid under the
Distribution Plan), including advertising and the cost of printing and
mailing prospectuses (other than those furnished to existing shareholders)
are borne by the Distributor.
During the period October 1, 1991 through January 31, 1992,
Clayton Brown retained commissions in the amount of $19 and reallowed
$16,464 to other dealers. From October 1, 1991 through January 1992,
OFDI, which served as sub-distributor during that period, received no
reallowance of commissions from Clayton Brown. During the period February
1, 1992 through September 30, 1992, and during the fiscal years ended
September 30, 1993 and 1994, the aggregate sales charges on the Fund's
Class A shares were $38,332 and $642,694 and $369,458 respectively, of
which the Distributor and an affiliated broker-dealer retained in the
aggregate $10,204, $221,619 and $140,136 in these respective years.
During the Fund's fiscal year ended September 30, 1994, the contingent
deferred sales charges collected on the Fund's Class C shares totalled
$4,641, all of which the Distibutor retained. For additional information
about distribution of the Fund's shares and the expenses connected with
such activities, please refer to "Distribution and Service Plans," below.
OFDI retained commissions in the amount of $7,475 and reallowed $30,857
to other dealers, including $2,729 paid to an affiliated broker-dealer.
During the fiscal year ended September 30, 1993, OFDI retained commissions
in the amount of $115,302 and paid $106,317 to an affiliated broker-
dealer. During the Fund's fiscal year ended September 30, 1994, OFDI
retained commission in the amount of $140,136 and the aggregate amount of
sales charges on sales of the Fund's Class A shares were $369,458.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid
and asked price.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon recommendations from the Manger's
portfolio managers. In certain instances, portfolio managers may directly
place traders and allocate brokerage, also subject to the provisions of
the advisory agreement and the procedures and rules described above.
Regardless, brokerage is allocated under the supervision of the Manager's
executive officers. As most purchases made by the Fund are principal
transactions at net prices, the Fund incurs little or no brokerage costs.
The Fund usually deals directly with the selling or purchasing principal
or market makers without incurring charges for the services of a broker
on its behalf unless it is determined that better price or execution can
be obtained by utilizing the services of a broker. Purchases of
securities from underwriters include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers include a spread
between the bid and asked price. The Fund seeks to obtain prompt
execution of orders at the most favorable net pace. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager or it affiliates are combined.
Transactions effected pursuant to such combined orders are averaged as to
price and allocated in accordance with the purchase or sale orders
actually placed for each account. Option commissions may be relatively
higher than those which would apply to direct purchases and sales of
portfolio securities.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "tax-equivalent yield," "dividend yield," "average annual total
return," "total return" and "total return at net asset value" of an
investment in each class of Fund shares may be advertised. An explanation
of how standardized yield, tax-equivalent yield, dividend yield, average
annual total return and total return are calculated for each class and the
components of those calculations is set forth below. Class C shares were
first publicly offered on December 1, 1993.
- Standardized Yields.
- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class
outstanding during the 30-day period that were entitled
to receive dividends.
d = the maximum offering price per share of that class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This
standardized yield is not based on actual distributions paid by the Fund
to shareholders in the 30-day period, but is a hypothetical yield based
on the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended September 30, 1994, the standardized yields for
the Fund's Class A and Class C shares were 4.58% and 3.68%, respectively.
- Tax-Equivalent Yield. The Fund's "tax-equivalent yield" adjusts
the Fund's current yield, as calculated above, by a stated combined
Federal and state tax rate. The tax equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's
current yield (as calculated above) by one minus a stated income tax rate
and adding the result to the portion (if any) of the Fund's current yield
that is not tax-exempt. The tax-equivalent yield may be used to compare
the tax effects of income derived from the Fund with income from taxable
investments at the tax rates stated. Appendix B includes a tax equivalent
yield table, based on various effective tax brackets for individual
taxpayers. Such tax brackets are determined by a taxpayer's Federal and
state taxable income (the net amount subject to Federal and state income
tax after deductions and exemptions). The tax-equivalent yield tables
assume that the investor is taxed at the highest bracket, regardless of
whether a switch to non-taxable investments would cause a lower bracket
to apply. For taxpayers with income above certain levels, otherwise
allowable itemized deductions are limited. The Fund's tax-equivalent
yield for its Class A and Class C shares for the 30-day period ended
September 30, 1994 were 7.58% and 6.09%, respectively, for an individual
in the 36% Federal tax bracket.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A or Class C share dividends derived
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum front-
end sales charge. For Class C shares, the maximum offering price is the
net asset value per share, without considering the effect of contingent
deferred sales charges.
From time to time, similar calculations may also be made using the
Class A net asset value (instead of its respective maximum offering price)
at the end of the period. The dividend yields on Class A shares for the
30-day period ended September 30, 1994 were 5.15% and 5.34% when
calculated at maximum offering price and net asset value, respectively.
The dividend yield on Class C shares for the 30-day period ended September
30, 1994 was 4.57% when calculated at net asset value.
- Total Return Information.
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "average annual total return" on an investment in Class A shares
of the Fund for the one and five year periods ended September 30, 1994
were (5.35)% and 6.86%, respectively, and for the period from the
inception of the Fund on November 11, 1986 through September 30, 1994 was
6.82%. The "average annual total return" on an investment in Class C
shares for the year ended September 30, 1994 was (4.18)%.
- Cumulative Total Return. The "cumulative total return" calculation
measures the change in the value of a hypothetical investment of $1,000
over an entire period of years. Its calculation uses some of the same
factors as average annual total return, but it does not average the rate
of return on an annual basis. Cumulative total return is determined as
follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 3.50% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class C shares, the payment of the
contingent deferred sales charge of 1.0% in the first year is applied, as
described in the Prospectus. Total returns also assume that all dividends
and capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment
is redeemed at the end of the period. The "total return" on an investment
in Class A shares of the Fund (using the method described above) for the
period from November 11, 1986 (inception of the Fund) through September
30, 1994, was 68.26%. The cumulative total return on Class C shares for
the period from December 1, 1993 (the inception of the class) through
September 30, 1994 was (3.48)%. During a portion of the periods for which
total returns are shown, the Fund's maximum sales charge rate was higher;
as a result, performance returns on actual investments during those
periods may be lower than the results shown.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A or Class C shares.
Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The "total return at net asset value"
on the Fund's Class A shares for the one-year period ended September 30,
1994 was (1.92)%. The total return at net asset value for the Fund's
Class C shares year ended September 30, 1994 was (2.54)%.
- Other Performance Comparisons. From time to time, the Fund may
publish the ranking of the performance of its Class A or Class B shares
by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund is ranked against (i) all other funds, other
than money market funds, and (ii) all other general municipal bond funds.
The Lipper performance analysis includes the reinvestment of capital gain
distributions and income dividends but does not take sales charge or taxes
into consideration. From time to time the Fund may include in its
advertisement and sales literature performance information about the Fund
cited in other newspapers and periodicals such as The New York Times,
which may include performance quotations from other sources, including
Lipper and Morningstar.
From time to time the Fund may publish the ranking of its performance
by Morningstar, Inc., an independent mutual fund monitoring service that
ranks mutual funds, including the Fund, monthly in broad investment
categories (equity, taxable bond, municipal bond and hybrid) based on
risk-adjusted investment return. Investment return measures a fund's
three, five and ten-year average annual total returns (when available) in
excess of 90-day U.S. Treasury bill returns after considering sales
charges and expenses. Risk reflects fund performance below 90-day U.S.
Treasury bill monthly returns. Risk and return are combined to produce
star rankings reflecting performance relative to the average fund in a
fund's category. Five stars is the "highest" ranking (top 10%), four
stars is "above average" (next 22.5%), three stars is "average" (next
35%), two stars is "below average" (next 22.5%) and one star is "lowest"
(bottom 10%). Morningstar ranks the Fund in relation to other municipal
bond funds. Rankings are subject to change.
Investors may also wish to compare the Fund's Class A or Class C
return to the returns on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary interest-
paying checking and savings accounts, and other forms of fixed or variable
time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed and will
fluctuate daily, while bank depository obligations may be insured by the
FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government. In order
to compare the Fund's dividends to the rate of return on taxable
investments, Federal income taxes on such investments should be
considered.
When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period will not be a
predication or representation by the Fund of future returns. The returns
of the Class A and Class C shares of the Fund are affected by portfolio
quality, the type of investments the Fund holds and its operating expenses
allocated to a particular class.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class C shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Trust, including a majority of
the Independent Trustees, cast in person at a meeting called for the
purpose of voting on that Plan, and (ii) the holders of a "majority" (as
defined in the Investment Company Act) of the shares of each class. For
the Distribution and Service Plan for Class C shares, that vote was cast
by the Manager as the sole initial holder of Class C shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically
approved at least annually by the Trust's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any payment. The report for the Class C Plan shall also
include the distribution costs for that quarter, and such costs for
previous fiscal periods that have been carried forward, as explained in
the Prospectus and below. Those reports, including the allocations on
which they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Trust who are not "interested persons" of the
Trust is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in such selection and
nomination if the final decision on selection or nomination is approved
by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers, did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate and set no minimum amount. For the fiscal year
ended September 30, 1994, payments under the Class A Plan totalled
$188,179, of which $171,382 was paid by the Distributor to Recipients,
including $16,797 paid to MML Investor Services, Inc., an affiliate of the
Distributor.
Any unreimbursed expenses incurred by the Distributor with respect
to Class A shares for any fiscal year may not be recovered in subsequent
years. Payments received by the Distributor under the Plan for Class A
shares will not be used to pay any interest expense, carrying charge, or
other financial costs, or allocation of overhead by the Distributor.
The Class C Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class C shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of the
Class C shares sold. An exchange of shares does not entitle the Recipient
to an advance service fee payment. In the event Class C shares are
redeemed during the first year that the shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of the advance
payment for those shares to the Distributor. For the year ended September
30, 1994, payments made under the Class C Plan totalled $39,120, all of
which was retained by the Distributor as reimbursement for Class C
Distribution-related expenses and sales commissions.
Although the Class C Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class C shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class C Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class C
Plan are subject to the limitations imposed by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees.
The Class C Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class C Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class C shares: (i) financing the advance of the service fee payment to
Recipients under the Class C Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class C
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class C Shares. The
availability of two classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class C shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class C shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
C shares and the dividends payable on Class C shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class C shares are subject.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per share
of Class A and Class C shares of the Fund are determined as of the close
of business of The New York Stock Exchange (the "NYSE") on each day that
the Exchange is open by dividing the value of the Fund's net assets
attributable to that class by the number of Fund shares of that class
outstanding. The NYSE normally closes at 4:00 P.M., New York time, but
may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The NYSE's most recent
annual holiday schedule (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may
also close on other days. Dealers may conduct trading at times when the
NYSE is closed (including weekends and holidays) so that debt securities
of the same type held by the Fund may be traded. Because the net asset
values of the Fund will not be calculated at such times, if debt
securities held in the Fund's portfolio are traded at such times, the net
asset values per share of Class A and Class C shares of the Fund may be
significantly affected at times when shareholders do not have the ability
to purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally, as follows: (i) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures; (ii)
long-term debt securities, and short-term debt securities having a
remaining maturity in excess of 60 days, are valued at the mean between
the asked and bid prices determined by a portfolio pricing service
appointed by the Fund's Board of Trustees or obtained from active market
makers in the security; and (iii) short-term debt securities having a
remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts. In the case of
Municipal Securities, where last sale information is not generally
available, such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, maturity
and other special factors involved (such as the tax-exempt status of the
interest paid by Municipal Securities). The Trustees will monitor the
accuracy of pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls, Interest Rate Futures and Municipal Bond Index Futures
are valued at the last sales prices on the principal exchanges on which
they are traded or on NASDAQ, as applicable. If there were no sales on
the principal exchange, the last sale on any exchange is used. In the
absence of any sales that day, value shall be the last reported sales
price on the prior trading day or closing bid or asked prices on the
principal exchange closest to the last reported sales price. When the
Fund writes an option, an amount equal to the premium received by the Fund
is included in its Statement of Assets and Liabilities as an asset and
an equivalent deferred credit is included in the liability section. The
deferred credit is adjusted ("marked-to-market") to reflect the current
market value of the option.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on shares
purchased by the proceeds or ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on some days. If the Federal Funds are
received after on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the next
regular business day. The proceeds of ACH transfers are normally received
by the Fund three days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares
resulting from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Rights of
Accumulation and Letters of Intent because of the economies of sales
efforts and expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain circumstances
described in the Prospectus because the Distributor or dealer or broker
incurs little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, parents, grandparents, parents-
in-law, brothers and sisters, sons- and daughters-in-law, siblings, and
a sibling's spouse and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
ppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A shares of the Fund (and other
eligible OppenheimerFunds) sold with a front-end sales charge during the
13-month period from the investor's first purchase pursuant to the Letter
(the "Letter of Intent period"), which may, at the investor's request,
include purchases made up to 90 days prior to the date of the Letter. The
Letter states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestments of dividends or
distributions or purchases made at net asset value without sales charge),
which together with the investor's holdings of such funds (calculated at
their respective public offering prices calculated on the date of the
Letter) will equal or exceed the amount specified in the Letter. This
enables the investor to obtain the reduced sales charge rate (as set forth
in the Prospectus) applicable to purchases of shares in that amount (the
"intended purchase amount"). Each purchase under the Letter will be made
at the public offering price applicable to a single lump-sum purchase of
shares in the intended purchase amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a sales
charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
Check Writing. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
- Selling Shares by Wire. The wire of redemptions proceeds may be
delayed if the Fund's custodian bank is not open for business on a day
when the Fund would normally authorize the wire to be made, which is
usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next
bank business day on which the Fund is open for business. No dividends
will be paid on the proceeds of redeemed shares awaiting transfer by wire.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Involuntary Redemptions. The Fund's Board of Trustees has the right
to cause the involuntary redemption of the shares held in any account if
the aggregate net asset value of those shares is less than $1,000 or such
lesser amount as the Board may fix. The Board of Trustees will not cause
the involuntary redemption of shares in an account if the aggregate net
asset value of the shares has fallen below the state minimum solely as a
result of market fluctuations. Should the Board elect to exercise the
right, it may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in question
(not less than 30 days), or the Board may set requirements for granting
permission to the Shareholder to increase the investment, and set other
terms and conditions so that the shares would not be involuntarily
redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class C shares that were subject to the Class C contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital
gain that was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares
of the Fund or another of the OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class C contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes (normally 4:00
P.M., but it may close earlier on some days) and the order was transmitted
to and received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Payment ordinarily will be made within seven days
after the Distributor's receipt of the required redemption documents, with
signature(s) guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange to
have Automatic Withdrawal Plan payments transferred to the bank account
designated on the OppenheimerFunds New Account Application or signature-
guaranteed instructions. The Fund cannot guarantee receipt of a payment
on the date requested and reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. Because
of the sales charge assessed on Class A share purchases, shareholders
should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class C shareholders
should not establish withdrawal plans that would require the redemption
of shares held less than 12 months, because of the imposition of the Class
C contingent deferred sales charge on such withdrawals (except where the
Class C contingent deferred sales charge is waived as described in the
Prospectus under "Class C Contingent Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated
below and in the provisions of the OppenheimerFunds Application relating
to such Plans, as well as the Prospectus. These provisions may be amended
from time to time by the Fund and/or the Distributor. When adopted, such
amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who
executed the Plan authorization and application submitted to the Transfer
Agent. The Transfer Agent shall incur no liability to the Planholder for
any action taken or omitted by the Transfer Agent in good faith to
administer the Plan. Certificates will not be issued for shares of the
Fund purchased for and held under the Plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the records of
the Fund. Any share certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the Plan application so that the
shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent
to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
OppenheimerFunds that have a single class designation are deemed "Class
A" shares for this purpose. All of the OppenheimerFunds offer Class A
shares (except for Oppenheimer Strategic Diversified Income Fund), but
only the following other OppenheimerFunds offer Class C shares:
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Target Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves (Class C and B shares are available only
by exchange)
Oppenheimer Strategic Diversified Income Fund
Oppenheimer U.S. Government Trust
Class A shares of OppenheimerFunds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund
purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class
C contingent deferred sales charge is imposed on Class C shares acquired
by exchange if they are redeemed within 12 months of the initial purchase
of the exchanged Class C shares.
When Class C shares are redeemed to effect an exchange, the priorities
described in "How To Buy Shares" in the Prospectus for the imposition of
the Class C contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Shareholders
should take into account the effect of any exchange on the applicability
and rate of any contingent deferred sales charge that might be imposed in
the subsequent redemption of remaining shares. Shareholders owning shares
of both classes must specify whether they intend to exchange Class A or
Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of,
the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans and Automatic Withdrawal Plans will be
switched to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations), shareholders
might not be able to request exchanges by telephone and would have to
submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Fund intends
to qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest
dividends which are derived from net investment income earned by the Fund
on Municipal Securities will be excludable from gross income of
shareholders for Federal income tax purposes. Net investment income
includes the allocation of amounts of income from the Municipal Securities
in the Fund's portfolio which are free from Federal income taxes. This
allocation will be made by the use of one designated percentage applied
uniformly to all income dividends made during the Fund's tax year. Such
designation will normally be made following the end of each fiscal year
as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of
the Fund's income that was tax-exempt for a given period. A portion of
the exempt-interest dividends paid by the Fund may be an item of tax
preference for shareholders subject to the alternative minimum tax. All
of the Fund's dividends (excluding capital gains distributions) paid
during 1994 were exempt from Federal personal income taxes. The amount
of any dividends attributable to tax preference items for purposes of the
alternative minimum tax will be identified when tax information is
distributed by the Fund. Corporate shareholders and "substantial users"
of facilities financed by Private Activity Municipal Securities should see
"Private Activity Municipal Securities."
A shareholder receiving a dividend from income earned by the Fund
from one or more of: (1) certain taxable temporary investments (such as
certificates of deposit, repurchase agreements, commercial paper and
obligations of the U.S. government, its agencies and instrumentalities);
(2) income from securities loans; or (3) an excess of net short-term
capital gain over net long-term capital loss from the Fund, treats the
dividend as a receipt of either ordinary income or long-term capital gain
in the computation of gross income, regardless of whether the dividend is
reinvested. The Fund's dividends will not be eligible for the dividends-
received deduction for corporations. Shareholders receiving Social
Security benefits should be aware that exempt-interest dividends are a
factor in determining whether such benefits are subject to Federal income
tax. Losses realized by shareholders on the redemption of Fund shares
within six months of purchase (which period may be shortened by
regulation) will be disallowed for Federal income tax purposes to the
extent of exempt-interest dividends received on such shares.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc. as promptly as possible after the return of such checks
to the Transfer Agent to enable the investor to earn a return on otherwise
idle funds.
Long-term capital gains distributions, if any, are taxable as long-term
capital gains whether received in cash or reinvested and regardless of how
long Fund shares have been held. Dividends paid by the Fund derived from
net short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested. For information on
"backup withholding" on taxable dividends, see "How To Redeem Shares."
Interest on loans used to purchase shares of the Fund may not be deducted
for Federal income tax purposes. Under rules used by the Internal Revenue
Service to determine when borrowed funds are deemed used for the purpose
of purchasing or carrying particular assets, the purchase of Fund shares
may be considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of shares.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation, will receive no tax deduction for
payments of dividends and distributions made to shareholders and would be
unable to pay "exempt-interest" dividends as discussed above.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1
through December 31 of that year and 98% of its capital gains realized in
the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. The Manager might determine in a particular year that it
might be in the best interest of shareholders for the Fund not to make
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital
gains available for distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or distributions in shares of the same class
of any of the other OppenheimerFunds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. Class C shareholders
should be aware that as of the date of this Statement of Additional
Information, not all of the OppenheimerFunds offer Class C shares. To
elect this option, a shareholder must notify the Transfer Agent in writing
and either must have an existing account in the fund selected for
investment or must obtain a prospectus for that fund and an application
from the Distributor to establish an account. The investment will be made
at the net asset value per share in effect at the close of business on
the payable date of the dividend or distribution. Dividends and
distributions from other Eligible Funds may be invested in shares of this
Fund on the same basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities and handling the delivery of portfolio
securities to and from the Fund. The Manager has represented to the Fund
that its banking relationships with the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Manager's and the Fund's financial statements and perform other related
audit services. They also act as auditors for certain other funds advised
by the Manager and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Intermediate
Tax-Exempt Bond Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Intermediate
Tax-Exempt Bond Fund as of September 30, 1994, the related statement of
operations for the year then ended, the statements of changes in net
assets for the years ended September 30, 1994 and 1993, and the financial
highlights for the period October 1, 1989 to September 30, 1994. These
financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits. The financial highlights (except for total return) for the period
November 11, 1986 (commencement of operations) to September 30, 1989 were
audited by other auditors whose report dated November 2, 1989, expressed
an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at September 30, 1994 by
correspondence with the custodian and brokers; and where confirmations
were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the financial
position of Oppenheimer Intermediate Tax-Exempt Bond Fund at September 30,
1994, the results of its operations, the changes in its net assets, and
the financial highlights for the respective stated periods, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1994
STATEMENT OF INVESTMENTS September 30, 1994
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
============
MUNICIPAL BONDS AND NOTES--97.2%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA--3.1% Corona, California Certificates of Participation,
Prerefunded, Series B, 10%, 11/1/20 Aaa/AAA $1,000,000 $1,313,422
-------------------------------------------------------------------------------------------------------
Palomar Pomerado, California Health System
Revenue Bonds, Capital Appreciation Project,
MBIA Insured, 0%, 11/1/04 Aaa/AAA 1,000,000 556,742
-------------------------------------------------------------------------------------------------------
San Bernardino County, California Certificates of
Participation, Medical Center Financing Project,
6%, 8/1/09 Baa1/A- 1,000,000 941,874
----------
2,812,038
- --------------------------------------------------------------------------------------------------------------------------------
COLORADO--0.6% Meridian Metropolitan District, Colorado General
Obligation Refunding Bonds, 7.50%, 12/1/11 A3/NR 500,000 545,381
- --------------------------------------------------------------------------------------------------------------------------------
CONNECTICUT--2.4% Connecticut State Special Tax Revenue Bonds,
Transportation Infrastructure Project,
Prerefunded, Series A, 7.125%, 6/1/07 NR/AAA 2,000,000 2,209,062
- --------------------------------------------------------------------------------------------------------------------------------
FLORIDA--1.8% Florida State Board of Education General
Obligation Bonds, Public Education Capital
Outlay, Prerefunded, Series B, 7.625%, 6/1/09 Aaa/AAA 1,500,000 1,628,721
- --------------------------------------------------------------------------------------------------------------------------------
GEORGIA--0.3% Georgia State Residential Finance Authority
Home Ownership Mtg. Revenue Bonds,
Series A-1, FHA Insured, 7.50%, 6/1/17 Aa/AA+ 245,000 253,152
- --------------------------------------------------------------------------------------------------------------------------------
HAWAII--1.1% Hawaii State General Obligation Bonds,
Series BT, 6%, 2/1/02 Aa/AA 1,000,000 1,040,158
- --------------------------------------------------------------------------------------------------------------------------------
ILLINOIS--7.7% Chicago, Illinois General Obligation Refunding
Bonds, Prerefunded, Series B, 9.25%, 1/1/13 A/A- 500,000 564,616
-------------------------------------------------------------------------------------------------------
Du Page County, Illinois First Preservation
District General Obligation Bonds, Prerefunded,
7.70%, 11/1/00 NR/AAA 1,000,000 1,097,666
-------------------------------------------------------------------------------------------------------
Du Page, Illinois Water Commission Revenue
Bonds, Prerefunded, 6.875%, 5/1/14 NR/AAA 1,000,000 1,065,904
-------------------------------------------------------------------------------------------------------
Illinois Development Finance Authority Pollution
Control Revenue Refunding Bonds, Central Illinois
Public Service Co., Series A, 7.60%, 3/1/14 Aa2/AA 250,000 271,886
-------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Revenue
Refunding Bonds, Lutheran Health Systems,
Prerefunded, Series C, MBIA Insured, 7.50%, 4/1/18 A/A+ 400,000 443,883
-------------------------------------------------------------------------------------------------------
Southwestern Illinois Development Authority
Hospital Revenue Bonds, Saint Elizabeth
Medical Center, 8%, 6/1/10 NR/A- 500,000 548,976
-------------------------------------------------------------------------------------------------------
Waukegan, Illinois General Obligation Bonds,
MBIA Insured, 7.50%, 12/30/03 Aaa/AAA 1,000,000 1,119,830
-------------------------------------------------------------------------------------------------------
Wheeling, Illinois Multi-Family Housing
Revenue Bonds, Arlington Club Project,
Series A, FHA Insured, 6.20%, 2/1/14 NR/AAA 2,000,000 1,927,886
------------
7,040,647
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDIANA--0.2% Indiana University Revenue Bonds, Hospital
Facilities Project, 7%, 1/1/09 A1/A+ $ 215,000 $ 221,199
- --------------------------------------------------------------------------------------------------------------------------------
IOWA--0.2% Des Moines, Iowa Hospital Revenue Bonds,
Iowa Methodist Medical Center, 7.875%, 8/15/15 A1/A+ 150,000 164,231
- --------------------------------------------------------------------------------------------------------------------------------
LOUISIANA--1.2% Louisiana State Revenue Bonds, Series A,
AMBAC Insured, 8%, 5/1/99 Aaa/AAA/AAA 1,000,000 1,120,228
- --------------------------------------------------------------------------------------------------------------------------------
MAINE--1.4% Maine Educational Loan Marketing Corp.
Student Loan Revenue Refunding Bonds,
Series A, 6.05%, 11/1/04 Aaa/NR 750,000 744,931
-------------------------------------------------------------------------------------------------------
Maine State Housing Authority Revenue Bonds,
Mtg. Purchase Project, Series A, 7.50%, 11/15/22 A1/AA 500,000 522,168
1,267,099
----------
- --------------------------------------------------------------------------------------------------------------------------------
MARYLAND--4.7% Howard County, Maryland Certificates of
Participation, Series A, 8.05%, 2/15/21 NR/AA+ 350,000 414,967
-------------------------------------------------------------------------------------------------------
Maryland Water Quality Financing Administration
Revenue Bonds, Revolving Loan Fund, Series A:
0%, 9/1/04 Aa/AA/AA- 900,000 520,872
0%, 9/1/05 Aa/AA/AA- 1,575,000 853,519
0%, 9/1/06 Aa2/AA/AA- 1,575,000 797,654
0%, 9/1/07 Aa/AA/AA- 1,575,000 744,003
-------------------------------------------------------------------------------------------------------
Washington Suburban Sanitation District,
Maryland Revenue Bonds, Sewage Disposal
Project, 5.60%, 6/1/01 Aa1/AA 1,000,000 1,019,964
----------
4,350,979
- --------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS--8.5% Massachusetts Bay Transportation Authority
Revenue Bonds, General Transportation Systems
Project, Series A, 6.25%, 3/1/12 A+/A/A+ 2,000,000 1,993,570
-------------------------------------------------------------------------------------------------------
Massachusetts Municipal Wholesale Electric Co.
Revenue Bonds, Power Supply Systems, Series E,
5.70%, 7/1/01 A/BBB+/A- 1,000,000 1,012,183
-------------------------------------------------------------------------------------------------------
Massachusetts State Dedicated Income Tax Bonds,
Series A, 7.875%, 6/1/97 A/A+/A+ 665,000 714,997
-------------------------------------------------------------------------------------------------------
Massachusetts State General Obligation Bonds,
FGIC Insured, 7.875%, 6/1/97 Aaa/AAA/AAA 500,000 538,630
-------------------------------------------------------------------------------------------------------
Massachusetts State Housing Finance Revenue
Bonds, Series A, AMBAC Insured, 6.35%, 1/1/08 Aaa/AAA/AAA 2,000,000 1,990,906
-------------------------------------------------------------------------------------------------------
Massachusetts State Special Obligation Revenue
Bonds, Series A, AMBAC Insured, 6.25%, 6/1/05 Aa/AA/A+ 1,500,000 1,562,179
----------
7,812,465
- --------------------------------------------------------------------------------------------------------------------------------
MICHIGAN--0.5% Michigan State Hospital Finance Authority
Revenue Bonds, McLaren Obligated Group,
Prerefunded, Series A, 7.50%, 9/15/21 Aaa/NR 435,000 495,028
-------------------------------------------------------------------------------------------------------
NEVADA--2.4% Clark County, Nevada School District General
Obligation Bonds, Series A, MBIA Insured,
9.75%, 6/1/01 Aaa/AAA 1,800,000 2,224,316
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW JERSEY--7.1% New Jersey State General Obligation Bonds,
5.80%, 8/1/01 Aa1/AA+/AA+ $2,000,000 $ 2,068,138
-------------------------------------------------------------------------------------------------------
New Jersey State Housing and Mtg. Finance
Agency Revenue Bonds, Series A, 6.50%, 11/1/03 NR/A+ 1,860,000 1,917,732
-------------------------------------------------------------------------------------------------------
New Jersey State Turnpike Authority Revenue
Bonds, Series A, 5.80%, 1/1/02 A/A/A 1,000,000 1,023,045
-------------------------------------------------------------------------------------------------------
Ocean County, New Jersey General Obligation
Bonds, 7.40%, 10/15/00 Aa/AA-/AA 1,400,000 1,557,896
-----------
6,566,811
- --------------------------------------------------------------------------------------------------------------------------------
NEW MEXICO--0.6% New Mexico State Hospital Equipment Loan
Council Revenue Bonds, San Juan Regional
Medical Center, Inc. Project, 7.90%, 6/1/11 A/NR 500,000 546,701
- --------------------------------------------------------------------------------------------------------------------------------
NEW YORK--13.3% City of New York General Obligation Bonds,
Series B, 6.75%, 10/1/06 Baa1/A-/NA 5,000,000 5,142,685
-------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Revenue Bonds, Terminal One Group Assn.
Project, 6%, 1/1/08 A/A/A- 2,000,000 1,974,630
-------------------------------------------------------------------------------------------------------
New York State General Obligation Refunding
Bonds, 7.80%, 11/15/99 A/A- 1,000,000 1,122,252
-------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance
Agency:
Revenue Bonds, Mental Health Services Facilities,
Series B, AMBAC Insured, 5.85%, 2/15/02 Aaa/AAA/AAA 955,000 974,971
Revenue Refunding Bonds, Mental Health
Services Facilities, Series F, 6%, 2/15/03 Baa1/BBB+ 1,000,000 1,027,047
-------------------------------------------------------------------------------------------------------
New York State Urban Development Corp.
Revenue Refunding Bonds, Correctional
Facilities Project 5.25%, 1/1/02 Baa1/BBB/A 2,035,000 1,969,304
-----------
12,210,889
- --------------------------------------------------------------------------------------------------------------------------------
OKLAHOMA--0.1% Oklahoma County, Oklahoma Home Finance
Authority Revenue Bonds, GNMA Collateral Mtg.
Program, 7.65%, 1/1/23 NR/AA+ 125,000 131,818
- --------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA--10.0% Pennsylvania Intergovernmental Cooperative
Authority Special Tax Revenue Bonds, City of
Philadelphia Funding Program, FGIC Insured,
5.25%, 6/15/06 Aaa/AAA/AAA 3,020,000 2,850,554
-------------------------------------------------------------------------------------------------------
Pennsylvania State Industrial Development
Authority Revenue Bonds, Economic
Development Project:
AMBAC Insured, 6%, 1/1/99 Aaa/AAA/AAA 2,000,000 2,068,626
Series A, 6.80%, 7/1/01 A/A-/AAA 3,000,000 3,250,569
-------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania School District
Revenue Bonds, Series A, MBIA Insured,
5.45%, 7/1/04 Aaa/AAA 1,000,000 979,934
----------
9,149,683
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOUTH CAROLINA--4.2% Richland County, South Carolina Hospital
Facilities Revenue Bonds, Community Provider
Pooled Loan Program, CGIC Insured, Series A,
7.125%, 7/1/17 Aaa/AAA $ 250,000 $ ,267,589
-------------------------------------------------------------------------------------------------------
South Carolina State Education Assistance
Authority Revenue Bonds, Insured Student Loan,
6.30%, 9/1/01 NR/AA 1,400,000 1,434,545
-------------------------------------------------------------------------------------------------------
South Carolina State Public Service Authority
Revenue Refunding Bonds, Prerefunded,
8%, 7/1/04 Aaa/AA-/A+ 2,000,000 2,169,862
----------
3,871,996
- --------------------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA--1.6% South Dakota Student Loan Finance Revenue
Bonds, Series A, 5.95%, 8/1/01 NR/A+ 1,500,000 1,489,077
- --------------------------------------------------------------------------------------------------------------------------------
TEXAS--4.5% Harris County, Texas Flood Control Bonds,
Series A, 7.125%, 10/1/98 Aa/AA+ 1,315,000 1,408,612
-------------------------------------------------------------------------------------------------------
Harris County, Texas Revenue Bonds, Toll Road
Project, Prerefunded, 10.375%, 8/1/14 Aaa/NR 1,500,000 1,743,996
-------------------------------------------------------------------------------------------------------
Texas National Research Laboratory Commission
Financing Corp. Lease Revenue Bonds,
Superconducting Super Collider, 6.25%, 12/1/00 NR/A-/A 1,000,000 1,007,514
----------
4,160,122
- --------------------------------------------------------------------------------------------------------------------------------
VERMONT--1.0% Vermont State Student Assistance Corp.
Educational Loan Revenue Bonds, Finance
Program, Series A-3, FSA Insured, 6.25%, 6/15/03 Aaa/AAA 900,000 933,514
- --------------------------------------------------------------------------------------------------------------------------------
VIRGINIA--4.7% Chesapeake, Virginia Public Improvement
General Obligation Bonds, 7%, 5/1/99 Aa/AA 2,155,000 2,336,908
-------------------------------------------------------------------------------------------------------
Virginia State Housing and Development
Commonwealth Authority Revenue Bonds,
Series G, 5.95%, 1/1/03 Aa/AA+ 2,000,000 1,992,062
----------
4,328,970
- --------------------------------------------------------------------------------------------------------------------------------
WASHINGTON--2.3% Port of Seattle, Washington Revenue Bonds,
Series B, 6.30%, 11/1/02 A1/AA-/AA- 1,000,000 1,034,455
-------------------------------------------------------------------------------------------------------
Washington State Public Power Supply System
Revenue Refunding Bonds, Nuclear Project No. 2,
Series B, 7%, 7/1/12 Aa/AA/AA 1,000,000 1,039,799
----------
2,074,254
- --------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA--0.9% West Virginia School Building Authority Revenue
Bonds, Prerefunded, MBIA Insured, 7.25%, 7/1/15 Aaa/AAA 750,000 834,304
- --------------------------------------------------------------------------------------------------------------------------------
WASHINGTON D.C.--1.5% District of Columbia General Obligation Bonds,
MBIA Insured, Series A-1, 4.85%, 6/1/04 AAA/Aaa/A- 1,500,000 1,347,166
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. POSSESSIONS--9.3% Puerto Rico Commonwealth General Obligation
Revenue Refunding Bonds, 6.60%, 7/1/97 Baa1/A $3,000,000 $ 3,133,482
-------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway and
Transportation Authority Revenue Bonds,
Series X, 6.51%, 7/1/04(1) Baa1/A 1,500,000 1,316,931
-------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue
Bonds, Series P, 6.75%, 7/1/03 Baa1/A- 2,000,000 2,134,396
-------------------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue Bonds,
AMBAC Insured, 4.77%, 1/1/03(1) AAA/AAA/AAA 2,350,000 1,974,258
-----------
8,559,067
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $91,219,540) 97.2%
89,389,076
- --------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.8 2,577,706
------ -----------
NET ASSETS 100.0% $91,966,782
====== ===========
</TABLE>
(1) Represents the current interest rate for a
variable rate bond. Variable rate bonds known as
"inverse floaters" pay interest at a rate that varies
inversely with short term interest rates. As interest
rates rise, inverse floaters produce less current
income. Their price may be more volatile than
the price of a comparable fixed-rate security.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
============================================================
ASSETS Investments, at value (cost $91,219,540)--see accompanying statement $89,389,076
-----------------------------------------------------------------------------------
Receivables:
Interest 1,662,897
Investments sold 958,588
Shares of beneficial interest sold 623,163
-----------------------------------------------------------------------------------
Other 1,651
-----------
Total assets 92,635,375
==========================================================
============================================================
LIABILITIES Bank overdraft 6,997
-----------------------------------------------------------------------------------
Payables and other liabilities:
Dividends 269,869
Distribution and service plan fees--Note 4 56,559
Shares of beneficial interest redeemed 295,757
Other 39,411
-----------
Total liabilities 668,593
==========================================================
============================================================
NET ASSETS $91,966,782
-----------
==========================================================
============================================================
COMPOSITION OF Paid-in capital $94,769,631
-----------------------------------------------------------------------------------
NET ASSETS Overdistributed net investment income (142,634)
-----------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (829,751)
-----------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (1,830,464)
-----------
Net assets $91,966,782
-----------
==========================================================
============================================================
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $83,456,110 and 5,865,458 shares of beneficial interest outstanding) $14.23
Maximum offering price per share (net asset value plus sales charge
of 3.50% of offering price) $14.75
-----------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $8,510,672 and 600,180 shares of beneficial interest
outstanding) $14.18
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
<TABLE>
<S> <C>
==========================================================
==========================================================
===========
INVESTMENT INCOME INTEREST $ 5,014,430
==========================================================
==========================================================
===========
EXPENSES Management fees--Note 4 413,576
-------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 188,179
Class C--Note 4 39,120
-------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 72,812
-------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 36,173
Class C 23,389
Shareholder reports 47,583
-------------------------------------------------------------------------------------------------
Custodian fees and expenses 17,334
-------------------------------------------------------------------------------------------------
Legal and auditing fees 12,303
-------------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,294
-------------------------------------------------------------------------------------------------
Other 22,418
------------
Total expenses 875,181
==========================================================
==========================================================
===========
NET INVESTMENT INCOME 4,139,249
==========================================================
==========================================================
===========
REALIZED AND UNREALIZED Net realized loss on investments (1,005,299)
LOSS ON INVESTMENTS
-------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (4,866,867)
------------
Net realized and unrealized loss on investments (5,872,166)
==========================================================
==========================================================
===========
NET DECREASE IN NET
ASSETS RESULTING FROM OPERATIONS $(1,732,917)
============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Intermediate Tax-Exempt Bond Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1994 1993
==========================================================
==========================================================
==============
<S> <C> <C> <C>
OPERATIONS Net investment income $ 4,139,249 $ 2,482,836
----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (1,005,299) 295,937
----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (4,866,867) 2,171,010
----------- -----------
Net increase (decrease) in net assets resulting from operations (1,732,917) 4,949,783
==========================================================
==========================================================
==============
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.6658 and $.75 per share, respectively) (3,542,656)
(2,380,648)
SHAREHOLDERS Class C ($.4535 per share) (144,854) --
----------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0914 per share) (486,109) --
Class C ($.0622 per share) (19,877) --
----------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.47 per share) -- (1,090,058)
----------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments:
Class A ($.0698 per share) (340,993) --
Class C ($.0698 per share) (271) --
==========================================================
==========================================================
==============
BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 19,304,315 38,932,453
----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class C
beneficial interest transactions--Note 2 8,794,633 --
==========================================================
==========================================================
==============
NET ASSETS Total increase 21,831,271 40,411,530
----------------------------------------------------------------------------------------------------
Beginning of year 70,135,511 29,723,981
----------- -----------
End of year [including undistributed (overdistributed)
net investment income of ($142,634) and $102,188, respectively] $91,966,782 $70,135,511
===========
===========
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Intermediate Tax-Exempt Bond Fund
<PAGE>
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>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Intermediate Tax-Exempt Bond Fund (the Fund) is a separate
series of Oppenheimer Tax-Exempt Bond Fund, a diversified, open-end
management investment company registered under The Investment Company Act
of 1940, as amended. The Fund's investment advisor is Oppenheimer
Management Corporation (the Manager). The Fund offers both Class A and
Class C shares. Class A shares are sold with a front-end sales charge.
Class C shares may be subject to a contingent deferred sales charge.
Both classes of shares have identical rights to earnings, assets and
voting privileges, except that
each class has its own distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting rights with
respect to matters affecting a single class. The
following is a summary of significant accounting policies consistently
followed by the Fund.
- -----------------------------------------------------------------------
- ------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading DAy. Long-term debt securities are valued by
a portfolio pricing service approved by the Board of Trustees. Long-term
debt securities which cannot be valued by the approved portfolio pricing
service are valued by averaging the mean between the bid and asked prices
obtained from two active market makers in such securities. Short-term debt
securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to
maturity of any Premium or discount. Securities for which market quotes
are not readily available are valued under procedures established by the
Board of Trustees to determine fair value in good faith.
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
FEDERAL INCOME TAXES. The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A and Class C from net investment income each day the
New York Stock Exchange is open for business and pay such dividends
monthly. Distributions from net realized gains on investments, if any,
will be declared at least once each year.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October
1, 1993, the Fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the Fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, subsequent to September 30, 1993, amounts have been
reclassified to reflect a decrease in paid-in capital of $33, a decrease
in undistributed net investment income of $7,341, and a decrease in
undistributed capital loss on investments of $7,374. During the year ended
September 30, 1994, in accordance with Statement of Position 93-2,
undistributed net investment income was decreased by $183,234 and
undistributed capital loss was decreased by $183,234.
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Original issue discount
on securities purchased is amortized over the life of the
respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same
basis used for federal income tax purposes. For bonds acquired after April
30, 1993, accrued market discount is recognized at maturity or disposition
as taxable ordinary income. Taxable ordinary income is realized to the
extent of the lesser of gain or accrued market discount.
2. SHARES OF
BENEFICAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994(1) YEAR ENDED SEPTEMBER 30, 1993
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Class A:
Sold 2,161,013 $32,133,399 3,115,937 $46,722,666
Dividends and
distributions
reinvested 201,137 2,968,987 160,105 2,381,702
Redeemed (1,067,987) (15,798,071) (674,670) (10,171,915)
---------- ----------- --------- -----------
Net increase 1,294,163 $19,304,315 2,601,372 $38,932,453
========== =========== =========
===========
-------------------------------------------------------------------------------------------
Class C:
Sold 664,985 $ 9,719,514 -- $ --
Dividends and
distributions
reinvested 8,536 122,637 -- --
Redeemed (73,341) (1,047,518) -- --
---------- ----------- -------- -----------
Net increase 600,180 $ 8,794,633 -- $ --
========== =========== =========
===========
</TABLE>
(1) For the year ended September 30, 1994 for
Class A shares and for the period from December
1, 1993 (inception of offering) to September 30,
1994 for Class C shares.
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1994, net unrealized depreciation on investments of
$1,830,464 was composed of gross appreciation of $497,536, and gross
depreciation of $2,328,000.
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .50%
on the first $100 million of net assets, .45% on the next $150 million,
.425% on the next $250 million and .40% on net assets in excess of $500
million.
The Manager has agreed to assume Fund expenses (with specified exceptions)
in excess of the most stringent applicable regulatory limit on Fund
expenses.
The Manager acts as the accounting agent for the Fund at an annual fee of
$12,000, plus out-of-pocket costs and expenses reasonably incurred.
For the year ended September 30, 1994, commissions (sales charges paid by
investors) on sales of Class A shares totaled $369,458, of which $140,136
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended September 30, 1994, OFDI received
contingent deferred sales charges of $4,641 upon redemption of Class C
shares, as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
Oppenheimer Shareholder Service (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net
assets annually to reimburse OFDI for costs incurred in connection with
the personal service and maintenance of accounts that hold shares of the
Fund, including amounts paid to brokers, dealers, banks and other
financial institutions. In addition, Class C shares are subject
to an asset-based sales charge of .75% of net assets annually, to
reimburse OFDI for sales commissions paid from its own resources at the
time of sale and associated financing costs.
In the event of termination or discontinuance of the Class C plan, the
Board of Trustees may allow the Fund to continue payment of the
asset-based sales charge to OFDI for distribution expenses incurred on
Class C shares sold prior to termination or discontinuance
of the plan. During the year ended September 30, 1994, OFDI paid $16,797
to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses and retained $39,120 as reimbursement for
Class C sales commissions and service fee advances,
as well as financing costs.
Appendix A
DESCRIPTION OF RATINGS
Municipal Bond Ratings.
Moody's Investor Services, Inc. The four highest ratings of Moody's
for Municipal Securities are "Aaa," "Aa," "A" and "Baa." Moody's basis
of such ratings is as follows. Municipal Securities rated "Aaa" are
judged to be of the "best quality." The rating "Aa" is assigned to bonds
which are of "high quality by all standards," but as to which margins of
protection or other elements make long-term risks appear somewhat larger
than "Aaa" rated Municipal Securities. The "Aaa" and "Aa" rated bonds
comprise what are generally known as "high grade bonds." Municipal
Securities which are rated "A" by Moody's possess many favorable
investment attributes and are considered "upper medium grade obligations."
Factors giving security to principal and interest of bonds rated "A" are
considered adequate, but elements may be present which suggest a
susceptibility to impairment at some time in the future. Municipal
Securities rated "Baa" are considered "medium grade" obligations. They
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Those bonds in the "Aa," "A" and "Baa" groups which
Moody's believes possess the strongest attributes are designated "Aa1,"
"A1" and "Baa1."
In addition to the alphabetical rating system described above,
Municipal Securities rated by Moody's which have a demand feature that
provides the holder with the ability periodically to tender (put) the
portion of the debt covered by the demand feature, may also have a short-
term rating assigned to such demand feature. The short-term rating uses
the symbol VMIG to distinguish characteristics which include payment upon
periodic demand rather than fund or scheduled maturity dates and potential
reliance upon external liquidity, as well as other factors. The highest
investment quality is designated by the VMIG 1 rating and the lowest by
VMIG 4.
Standard & Poor's Corporation. The four highest ratings of S&P for
Municipal Securities are AAA (Prime), AA (High Grade), A (Good Grade), and
BBB (Medium Grade). Standard & Poor's basis of such ratings is as
follows. Municipal Securities rated AAA are "obligations of the highest
quality." The rating AA is accorded issues with investment
characteristics "only slightly less marked than those of the prime quality
issues." The rating A describes "the third strongest capacity for payment
of debt service." Principal and interest payments on bonds in this
category are regarded as safe. It differs from the two higher ratings
because, with respect to general obligation bonds, there is some weakness,
either in the local economic base, in debt burden, in the balance between
revenues and expenditures, or in quality of management. Under certain
adverse circumstances, any one such weakness might impair the ability of
the issuer to meet debt obligations at some future date. With respect to
revenue bonds rated A, debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management
performance appears adequate.
The BBB rating is the lowest "investment grade" security rating. The
difference between A and BBB ratings is that the latter shows more than
one fundamental weakness, or one very substantial fundamental weakness,
whereas the former shows only one deficiency among the factors considered.
With respect to revenue bonds, debt coverage is only fair. Stability of
the pledged revenues could show variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger. The ratings AA,
A, and BBB may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
Municipal Note Ratings.
Moody's. Moody's ratings for state and Municipal Notes and other
short-term loans are designated "Moody's Investment Grade" ("MIG"). Notes
bearing the designation "MIG 1" are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for financing.
Notes bearing the designation "MIG 2" are of high quality, with ample
margins of protection, although not so large as notes rated "MIG 1." Such
short-term notes which have demand features may also carry a rating using
the symbol "VMIG" as described above, with the designation "MIG 1/VMIG 1"
denoting best quality, with superior liquidity support in addition to
those characteristics attributable to the designation "MIG 1."
Standard & Poor's. Standard & Poor's ratings for Municipal Notes due
in three years or less are "SP1" and "SP2." "SP1" describes issues with
a very strong or strong capacity to pay principal and interest and
compares with bonds rated "A" by Standard & Poor's; if modified by a plus
sign, it compares with bonds rated "AA" or "AAA" by Standard & Poor's.
"SP2" describes issues with a satisfactory capacity to pay principal and
interest, and compares with bonds rated "BBB" by Standard & Poor's.
In addition to the alphabetical rating system described above,
Municipal Bonds rated by Moody's which have a demand feature that provides
the holder with the ability periodically to tender (put) the portion of
the debt covered by the demand feature, may also have a short-term rating
assigned to such demand feature. The short-term rating uses the symbol
"VMIG" to distinguish characteristics which include payment upon periodic
demand rather than fund or scheduled maturity dates and potential reliance
upon external liquidity, as well as other factors. The highest investment
quality is designated by the "VMIG 1" rating and the lowest by "VMIG 4."
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield tables below compare tax-free income with taxable
income under Federal income tax rates effective in 1994. The tables assume
that an investor's highest tax bracket applies to the change in taxable
income resulting from a switch between taxable and non-taxable
investments, that the investor is not subject to the Alternative Minimum
Tax, and that state income tax payments are fully deductible for Federal
income tax purposes. The income tax brackets are subject to indexing in
future years to reflect changes in the Consumer Price Index.
Example: Assuming a 4.0% tax-free yield, the equivalent taxable yield
would be 6.25% for a person in the 30% tax bracket.
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Intermediate
Tax Tax-Exempt Bond Fund Yield of
Joint Return Bracket 3.5% 4.0% 4.5% 5.0%
Is Equivalent to a Taxable Yield of:
Over Not Over
- ----- --------
<S> <C> <C> <C> <C> <C> <C>
$0 $ 39,000 15.00% 4.12% 4.71% 5.29% 5.88%
$ 39,000 $ 92,450 28.00% 4.86% 5.56% 6.25% 6.94%
$ 92,450 $143,600 31.00% 5.07% 5.80% 6.52% 7.25%
$143,600 $256,500 36.00% 5.47% 6.25% 7.03% 7.81%
$256,500 and above 39.60% 5.79% 6.62% 7.45% 8.28%
</TABLE>
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Intermediate
Tax Tax-Exempt Bond Fund Yield of
Joint Return Bracket 5.5% 6.0% 6.5%
Is Equivalent to a Taxable Yield of:
Over Not Over
- ----- --------
<S> <C> <C> <C> <C> <C>
$0 $ 39,000 15.00% 6.47% 7.06% 7.65%
$ 39,000 $ 92,450 28.00% 7.64% 8.33% 9.03%
$ 92,450 $143,600 31.00% 7.97% 8.70% 9.42%
$143,600 $256,500 36.00% 8.59% 9.38% 10.16%
$256,500 and above 39.60% 9.11% 9.93% 10.76%
</TABLE>
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Intermediate
Tax Tax-Exempt Bond Fund Yield of
Single Return Bracket 3.5% 4.0% 4.5% 5.0%
Is Equivalent to a Taxable Yield of:
Over Not Over
- ----- --------
<S> <C> <C> <C> <C> <C> <C>
$0 $ 23,500 15.00% 4.12% 4.71% 5.29% 5.88%
$ 23,500 $ 56,550 28.00% 4.86% 5.56% 6.25% 6.94%
$ 56,550 $117,950 31.00% 5.07% 5.80% 6.52% 7.25%
$117,950 $256,500 36.00% 5.47% 6.25% 7.03% 7.81%
$256,500 and over 39.60% 5.79% 6.62% 7.45% 8.28%
</TABLE>
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Intermediate
Tax Tax-Exempt Bond Fund Yield of
Single Return Bracket 5.5% 6.0% 6.5%
Is Equivalent to a Taxable Yield of:
Over Not Over
- ----- --------
<S> <C> <C> <C> <C> <C>
$0 $ 23,500 15.00% 6.47% 7.06% 7.65%
$ 23,500 $ 56,550 28.00% 7.64% 8.33% 9.03%
$ 56,500 $117,950 31.00% 7.97% 8.70% 9.42%
$117,950 $256,500 36.00% 8.59% 9.38% 10.16%
$256,500 and over 39.60% 9.11% 9.93% 10.76%
</TABLE>
<PAGE>
Appendix C
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Investment Adviser
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 and Shareholder Servicing 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
<PAGE>
OPPENHEIMER TAX-EXEMPT BOND FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Highlights (See Part A, Prospectus and Part B, Statement
of Additional Information): Filed herewith.
(2) Independent Auditors' Report (See Part B, Statement of Additional
Information): Filed herewith.
(3) Statement of Investments (See Part B, Statement of Additional
Information): Filed herewith.
(4) Statement of Assets and Liabilities (See Part B, Statement of
Additional Information): Filed herewith.
(5) Statement of Operations (See Part B, Statement of Additional
Information): Filed herewith.
(6) Statements of Changes in Net Assets (See Part B, Statement of
Additional Information): Filed herewith.
(7) Notes to Financial Statements (See Part B, Statement of Additional
Information): Filed herewith.
(b) Exhibits
(1) (i) Amended and Restated Agreement and Declaration of Trust dated
11/29/93: Filed herewith.
(2) By-Laws, as amended through 8/90: Previously filed with Post-
Effective Amendment No. 7 to Registrant's Registration Statement,
2/1/91, and refiled herewith pursuant to Item 102 of Regulation S-T
and incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Share Certificate for Class A shares of Oppenheimer
Intermediate Tax-Exempt Bond Fund: Previously filed with Post-
Effective Amendment No. 10 to Registrant's Registration
Statement, 11/24/93 and incorporated herein by reference.
(ii) Specimen Share Certificate for Class C shares of Oppenheimer
Intermediate Tax-Exempt Bond Fund: Previously filed with Post-
Effective Amendment No. 10 to Registrant's Registration Statement,
11/24/93 and incorporated herein by reference.
(iii) Specimen Share Certificate for Class A shares of Oppenheimer
Insured Tax-Exempt Bond Fund: Previously filed with Post-Effective
Amendment No. 10 to Registrant's Registration Statement, 11/24/93 and
incorporated herein by reference.
(iv) Specimen Share Certificate for Class B shares of Oppenheimer
Insured Tax-Exempt Bond Fund: Previously filed with Post-Effective
Amendment No. 10 to Registrant's Registration Statement, 11/24/93 and
incorporated herein by reference.
(5)(i) Investment Advisory Agreement dated October 22, 1990 (Insured
Series): Previously filed with Post-Effective Amendment No. 6 to
Registrant's Registration Statement 12/3/90, and refiled herewith pursuant
to Item 102 of Regulation S-T and incorporated herein by reference.
(ii) Investment Advisory Agreement dated 10/22/90 (Income Series):
Previously filed with Post-Effective Amendment No. 6 to Registrant's
Registration Statement 12/3/90, and refiled herewith pursuant to Item 102
of Regulation S-T and incorporated herein by reference.
(6)(i) General Distributor's Agreement dated 10/13/92, with Oppenheimer
Fund Management, Inc.: Previously filed with Post-Effective Amendment No.
9 to Registrant's Registration Statement, 1/29/93, and refiled herewith
pursuant to Item 102 of Regulation S-T and incorporated herein by
reference.
(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer Agreement: Filed
with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker Agreement: Filed
with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency Agreement:
Filed with Post-Effective Amendment No. 4 of Oppenheimer Main Street
Funds, Inc, (Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(7) Not applicable.
(8) Custodian Agreement dated 6/1/90 with Citibank, N.A.: Previously
filed with Post-Effective Amendment No. 7 to Registrant's
Registration Statement 2/1/91, and refiled herewith pursuant to Item
102 of Regulation S-T, and incorporated herein by reference.
(9) Insurance Agreement between the Registrant and Financial Guaranty
Insurance Corporation: Previously filed with Registrant's
Registration Statement and refiled herewith pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(10) Opinion and Consent of Counsel dated 10/29/86: Previously filed with
Post-Effective Amendment No. 9 to Registrant's Registration Statement,
1/29/93, and refiled herewith pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(11) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15)(i) Service Plan and Agreement dated 6/22/93 for Class A Shares of
Oppenheimer Intermediate Tax-Exempt Bond Fund pursuant to Rule 12b-1 under
the Investment Company Act of 1940: Filed with Post-Effective Amendment
No. 11, January 25, 1994 and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement dated 12/1/93 for Class
C Shares of Oppenheimer Intermediate Tax-Exempt Bond Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940: Filed with Post-Effective
Amendment No. 11, January 25, 1994, and incorporated herein by reference.
(iii) Service Plan and Agreement dated 6/22/93 for Class A Shares of
Oppenheimer Insured Tax-Exempt Bond Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940: Filed with Post-Effective Amendment No.
11, January 25, 1994 and incorporated herein by reference.
(iv) Distribution and Service Plan and Agreement dated 2/23/94 for Class
B Shares of Oppenheimer Insured Tax-Exempt Bond Fund pursuant to Rule 12b-
1 under the Investment Company Act of 1940: Filed herewith.
(16)(i) Performance Data Computation Schedule of Oppenheimer Insured Tax-
Exempt Bond Fund: Filed herewith.
(ii) Performance Data Computation Schedule of Oppenheimer
Intermediate Tax-Exempt Bond Fund: Filed herewith.
(17)(i) Financial Data Schedule for Class A shares of Oppenheimer Insured
Tax-Exempt Bond Fund: Filed herewith.
(ii) Financial Data Schedule for Class B shares of Oppenheimer
Insured Tax-Exempt Bond Fund: Filed herewith.
(iii) Financial Data Schedule for Class A shares of Oppenheimer
Intermediate Tax-Exempt Bond Fund: Filed herewith.
(iv) Financial Data Schedule for Class C shares of Oppenheimer
Intermediate Tax-Exempt Bond Fund: Filed herewith.
-- Powers of Attorney and Certified Board Resolutions signed by
Registrant's Trustees: Previously filed with Post-Effective Amendment
No. 10 to Registrant's Registration Statement, 11/24/93 and
incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
None
Item 26. Number of Holders of Securities
Number of
Record Holders as
Title of Class of December 30, 1994
Shares of Beneficial Interest - Class A
Shares (Oppenheimer Intermediate
Tax-Exempt Bond Fund) 3,223
Shares of Beneficial Interest - Class C
Shares (Oppenheimer Intermediate
Tax-Exempt Bond Fund) 287
Shares of Beneficial Interest - Class A
Shares (Oppenheimer Insured
Tax-Exempt Bond Fund) 4,290
Shares of Beneficial Interest - Class B
Shares (Oppenheimer Insured
Tax-Exempt Bond Fund) 337
Item 27. Indemnification
Reference is made to Article VIII of Registrant's Agreement and
Declaration of Trust filed as Exhibit 24(b)(1) to the Registration
Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment adviser
of the Registrant; it and certain subsidiaries and affiliates act
in the same capacity to other registered investment companies as
described in Parts A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in
which each officer and director of Oppenheimer Management
Corporation is, or at any time during the past two fiscal years
has been, engaged for his/her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position
with Oppenheimer Other Business and Connections
Management Corporation During the Past Two Years
- ----------------------- ------------------------------
<S> <C>
Lawrence Apolito, None.
Vice President
James C. Ayer, Jr., Vice President and Portfolio Manager of
Assistant Vice President Oppenheimer Gold & Special Minerals Fund and
Oppenheimer Global Emerging Growth Fund.
Victor Babin, None.
Senior Vice President
Robert J. Bishop Assistant Treasurer of the OppenheimerFunds
Assistant Vice President (listed below); previously a Fund Controller
for Oppenheimer Management Corporation (the
"Manager").
Christopher O. Blunt, Vice President of Oppenheimer Funds
Vice President Distributor, Inc. Formerly a Vice President
of CIC/DISC Subsidiary.
George Bowen Treasurer of the New York-based
Senior Vice President OppenheimerFunds; Vice President, Secretary
and Treasurer and Treasurer of the Denver-based
OppenheimerFunds. Vice President and
Treasurer of Oppenheimer Funds Distributor,
Inc. (the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment adviser
subsidiary of OMC; Senior Vice President,
Treasurer, Assistant Secretary and a
director of Centennial Asset Management
Corporation ("Centennial"), an investment
adviser subsidiary of the Manager; Vice
President, Treasurer and Secretary of
Shareholder Services, Inc. ("SSI") and
Shareholder Financial Services, Inc.
("SFSI"), transfer agent subsidiaries of
OMC; President, Treasurer and Director of
Centennial Capital Corporation; Vice
President and Treasurer of Main Street
Advisers; formerly Senior Vice President/
Comptroller and Secretary of Oppenheimer
Asset Management Corporation ("OAMC"), an
investment adviser which was a subsidiary of
the OMC.
Michael A. Carbuto, Vice President and Portfolio Manager of
Vice President Oppenheimer Tax-Exempt Cash Reserves,
Centennial California Tax Exempt Trust,
Centennial New York Tax Exempt Trust and
Centennial Tax Exempt Trust; Vice President
of Centennial.
William Colbourne, Formerly, Director of Alternative Staffing
Assistant Vice President Resources, and Vice President of Human
Resources, American Cancer Society.
Lynn Coluccy, Vice President Formerly Vice President/Director of Internal
Audit of the Manager.
O. Leonard Darling, Formerly Co-Director of Fixed Income for
Executive Vice President State Street Research & Management Co.
Robert A. Densen, None.
Vice President
Robert Doll, Jr., Vice President and Portfolio Manager of
Executive Vice President Oppenheimer Growth Fund and Oppenheimer
Target Fund; Senior Vice President and
Portfolio Manager of Strategic Income &
Growth Fund.
John Doney, Vice President Vice President and Portfolio Manager of
Oppenheimer Equity Income Fund.
Andrew J. Donohue, Secretary of the New York-based
Executive Vice President OppenheimerFunds; Vice President of the
& General Counsel Denver-based OppenheimerFunds; Executive
Vice President, Director and General Counsel
of the Distributor; formerly Senior Vice
President and Associate General Counsel of
the Manager and the Distributor.
Kenneth C. Eich, Treasurer of Oppenheimer Acquisition
Executive Vice President/ Corporation
Chief Financial Officer
George Evans, Vice President Vice President and Portfolio Manager of
Oppenheimer Global Securities Fund.
Scott Farrar, Assistant Treasurer of the OppenheimerFunds;
Assistant Vice President previously a Fund Controller for the
Manager.
Katherine P.Feld Vice President and Secretary of Oppenheimer
Vice President and Funds Distributor, Inc.; Secretary of
Secretary HarbourView, Main Street Advisers, Inc. and
Centennial; Secretary, Vice President and
Director of Centennial Capital Corp.
Jon S. Fossel, President and director of Oppenheimer
Chairman of the Board, Acquisition Corp. ("OAC"), the Manager's
Chief Executive Officer parent holding company; President, CEO and
and Director a director of HarbourView; a director of SSI
and SFSI; President, Director, Trustee, and
Managing General Partner of the Denver-based
OppenheimerFunds; formerly President of the
Manager. President and Chairman of the Board
of Main Street Advisers, Inc.
Robert G. Galli, Trustee of the New York-based
Vice Chairman OppenheimerFunds; Vice President and Counsel
of OAC; formerly he held the following
positions: a director of the Distributor,
Vice President and a director of HarbourView
and Centennial, a director of SFSI and SSI,
an officer of other OppenheimerFunds and
Executive Vice President & General Counsel
of the Manager and the Distributor.
Linda Gardner, None.
Assistant Vice President
Ginger Gonzalez, Formerly 1st Vice President/Director of
Vice President Creative Services for Shearson Lehman
Brothers.
Dorothy Grunwager, None.
Assistant Vice President
Caryn Halbrecht, Vice President and Portfolio Manager of
Vice President the Registrant; an officer of other
OppenheimerFunds; formerly Vice President of Fixed Income
Portfolio Management at Bankers Trust.
Barbara Hennigar, President and Director of Shareholder
President and Chief Financial Service, Inc.
Executive Officer of
Oppenheimer Shareholder
Services, a division of OMC.
Alan Hoden, Vice President None.
Merryl Hoffman, None.
Vice President
Scott T. Huebl, None.
Assistant Vice President
Jane Ingalls, Formerly a Senior Associate with Robinson,
Assistant Vice President Lake/Sawyer Miller.
Stephen Jobe, None.
Vice President
Avram Kornberg, Formerly a Vice President with Bankers
Vice President Trust.
Paul LaRocco, Portfolio Manager of Oppenheimer Capital
Assistant Vice President Appreciation Fund; Associate Portfolio
Manager of Oppenheimer Discovery Fund and
Oppenheimer Time Fund. Formerly a
Securities Analyst for Columbus Circle
Investors.
Mitchell J. Lindauer, None.
Vice President
Loretta McCarthy, None.
Senior Vice President
Bridget Macaskill, Director of HarbourView; Director of Main
President and Director Street Advisers, Inc.; and Chairman of
Shareholder Services, Inc.
Sally Marzouk, None.
Vice President
Denis R. Molleur, None.
Vice President
Kenneth Nadler, None.
Vice President
David Negri, Vice President and Portfolio Manager of
Vice President Oppenheimer Strategic Bond Fund, Oppenheimer
Multiple Strategies Fund, Oppenheimer
Strategic Investment Grade Bond Fund,
Oppenheimer Asset Allocation Fund,
Oppenheimer Strategic Diversified Income
Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Short-Term Income
Fund, Oppenheimer High Income Fund and
Oppenheimer Bond Fund; an officer of other
OppenheimerFunds.
Barbara Niederbrach, None.
Assistant Vice President
Stuart Novek, Formerly a Director Account Supervisor for
Vice President J. Walter Thompson.
Robert A. Nowaczyk, None.
Vice President
Julia O'Neal, None.
Assistant Vice President
Robert E. Patterson, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Main Street California Tax-
Exempt Fund, the Registrant, Oppenheimer
Florida Tax- Exempt Fund, Oppenheimer New Jersey Tax-
Exempt Fund, Oppenheimer Pennsylvania Tax-
Exempt Fund, Oppenheimer California Tax-
Exempt Fund, Oppenheimer New York Tax-Exempt
Fund and Oppenheimer Tax- Free Bond Fund;
Vice President of the New York Tax-Exempt
Income Fund, Inc.; Vice President of Oppenheimer Multi-Sector Income
Trust.
Tilghman G. Pitts III, Chairman and Director of the Distributor.
Executive Vice President
and Director
Jane Putnam, Associate Portfolio Manager of Oppenheimer
Assistant Vice President Growth Fund and Oppenheimer Target Fund and
Portfolio Manager for Oppenheimer Variable
Account Funds-Growth Fund; Senior Investment
Officer and Portfolio Manager with Chemical
Bank.
Russell Read, Formerly an International Finance Consultant
Assistant Vice President for Dow Chemical.
Thomas Reedy, Vice President of Oppenheimer Multi-Sector
Vice President Income Trust and Oppenheimer Multi-
Government Trust; an officer of other
OppenheimerFunds; formerly a Securities
Analyst for the Manager.
David Rosenberg, Vice President and Portfolio Manager of
Vice President Oppenheimer Limited-Term Government Fund and
Oppenheimer U.S. Government Trust. Formerly
Vice President and Senior Portfolio Manager
for Delaware Investment Advisors.
Richard H. Rubinstein, Vice President and Portfolio Manager of
Vice President Oppenheimer Asset Allocation Fund,
Oppenheimer Fund and Oppenheimer Multiple
Strategies Fund; an officer of other
OppenheimerFunds; formerly Vice President
and Portfolio Manager/Security Analyst for
Oppenheimer Capital Corp., an investment
adviser.
Lawrence Rudnick, Formerly Vice President of Dollar Dry Dock
Assistant Vice President Bank.
Ellen Schoenfeld, None.
Assistant Vice President
Nancy Sperte, None.
Senior Vice President
Donald W. Spiro, President and Trustee of the New York-based
Chairman Emeritus OppenheimerFunds; formerly Chairman of the
and Director Manager and the Distributor.
Arthur Steinmetz, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Strategic Diversified Income
Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Investment Grade Bond
Fund, Oppenheimer Strategic Short-Term
Income Fund; an officer of other
OppenheimerFunds.
Ralph Stellmacher, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Champion High Yield Fund and
Oppenheimer High Yield Fund; an officer of
other OppenheimerFunds.
John Stoma, Vice President Formerly Vice President of Pension Marketing
with Manulife Financial.
James C. Swain, Chairman, CEO and Trustee, Director or
Vice Chairman of the Managing Partner of the Denver-based
Board of Directors OppenheimerFunds; President and a Director
and Director of Centennial; formerly President and
Director of OAMC, and Chairman of the Board
of SSI.
James Tobin, Vice President None.
Jay Tracey, Vice President Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Time Fund and Oppenheimer
Discovery Fund. Formerly Managing Director
of Buckingham Capital Management.
Gary Tyc, Vice President, Assistant Treasurer of the Distributor and
Assistant Secretary SFSI.
and Assistant Treasurer
Ashwin Vasan, Vice President of Oppenheimer Multi-Sector
Vice President Income Trust and Oppenheimer Multi-
Government Trust: an officer of other
OppenheimerFunds.
Valerie Victorson, None.
Vice President
John Wallace, Vice President and Portfolio Manager of
Vice President Oppenheimer Total Return Fund, and
Oppenheimer Main Street Income and Growth
Fund; an officer of other OppenheimerFunds;
formerly a Securities Analyst and Assistant
Portfolio Manager for the Manager.
Dorothy Warmack, Vice President and Portfolio Manager of
Vice President Daily Cash Accumulation Fund, Inc.,
Oppenheimer Cash Reserves, Centennial
America Fund, L.P., Centennial Government
Trust and Centennial Money Market Trust;
Vice President of Centennial.
Christine Wells, None.
Vice President
William L. Wilby, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Global Fund and Oppenheimer
Global Growth & Income Fund; Vice President
of HarbourView; an officer of other
OppenheimerFunds.
Carol Wolf, Vice President and Portfolio Manager of
Vice President Oppenheimer Money Market Fund, Inc.,
Centennial America Fund, L.P., Centennial
Government Trust, Centennial Money Market
Trust and Daily Cash Accumulation Fund,
Inc.; Vice President of Oppenheimer Multi-
Sector Income Trust; Vice President of
Centennial.
Robert G. Zack, Associate General Counsel of the Manager;
Senior Vice President Assistant Secretary of the OppenheimerFunds;
and Assistant Secretary Assistant Secretary of SSI, SFSI; an officer
of other OppenheimerFunds.
Eva A. Zeff, Vice President and Portfolio Manager of
Assistant Vice President Oppenheimer Mortgage Income Fund; an officer
of other OppenheimerFunds; formerly a
Securities Analyst for the Manager.
Arthur J. Zimmer, Vice President and Portfolio Manager of
Vice President Centennial America Fund, L.P., Oppenheimer
Money Fund, Centennial Government Trust,
Centennial Money Market Trust and Daily Cash
Accumulation Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income Trust; Vice
President of Centennial; an officer of other
OppenheimerFunds.
</TABLE>
The OppenheimerFunds include the New York-based OppenheimerFunds and
the Denver-based OppenheimerFunds set forth below:
New York-based OppenheimerFunds
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Mortgage Income Fund
Oppenheimer Multi-Government Trust
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt Trust
Oppenheimer Fund
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Time Fund
Oppenheimer U.S. Government Trust
Denver-based OppenheimerFunds
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Champion High Yield Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Tax-Exempt Bond Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
The address of Oppenheimer Management Corporation, the New York-
based OppenheimerFunds, Oppenheimer Funds Distributor, Inc., Harbourview
Asset Management Corp., Oppenheimer Partnership Holdings, Inc., and
Oppenheimer Acquisition Corp. is Two World Trade Center, New York, New
York 10048-0203.
The address of the Denver-based OppenheimerFunds, Shareholder
Financial Services, Inc., Shareholder Services, Inc., Oppenheimer
Shareholder Services, Centennial Asset Management Corporation, Centennial
Capital Corp., and Main Street Advisers, Inc. is 3410 South Galena Street,
Denver, Colorado 80231.
Item 29. Principal Underwriter
(a) Oppenheimer Funds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the other
registered open-end investment companies for which Oppenheimer Management
Corporation is the investment adviser, as described in Part A and B of
this Registration Statement and listed in Item 28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Vice
President, Secretary &
Treasurer
Christopher Blunt Vice President None
6 Baker Avenue
Westport, CT 06880
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Mary Ann Bruce* Senior Vice President - None
Financial Institution Div.
Robert Coli Vice President None
12 Whitetail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Ronald Corlew Vice President None
1020 Montecito Drive
Los Angeles, CA 90031
Mary Crooks+ Vice President None
Paul Della Bovi Vice President None
750 West Broadway
Apt. 5M
Long Beach, NY 11561
Andrew John Donohue* Executive Vice Vice President
President & Director
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Gregory Farley Vice President - None
1116 Westbury Circle Financial Institution Div.
Eagan, MN 55123
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Wendy Fishler* Vice President - None
Financial Institution Div.
Wayne Flanagan Vice President - None
36 West Hill Road Financial Institution Div.
Brookline, NH 03033
Ronald R. Foster Vice President - None
11339 Avant Lane Eastern Division Manager
Cincinnati, OH 45249
Patricia Gadecki Vice President None
6026 First Ave. South,
Apt. 10
St. Petersburg, FL 33707
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Carla Jiminez Vice President None
609 Chimney Bluff Drive
Mt. Pleasant, SC 29464
Terry Lee Kelley Vice President - None
1431 Woodview Lane Financial Institution Div.
Commerce Township, MI 48382
Michael Keogh* Vice President None
Richard Klein Vice President None
4011 Queen Avenue South
Minneapolis, MN 55410
Hans Klehmet II Vice President None
26542 Love Lane
Ramona, CA 92065
Ilene Kutno* Assistant Vice President None
Wayne A. LeBlang Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Laura Mulhall* Vice President - None
Director of Key Accounts
Gina Munson Vice President None
120 Fisherville Road
Apt. 136
Concord, NH 03301
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
1900 Eight Avenue
San Francisco, CA 94116
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.
Minnie Ra Vice President - None
109 Peach Street Financial Institution Div.
Avenel, NJ 07001
David Robertson Vice President None
9 Hawks View
Hoeoye Falls, NY 14472
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Robert Romano Vice President None
1512 Fallingbrook Drive
Fishers, IN 46038
James Ruff* President None
Timothy Schoeffler Vice President None
3118 N. Military Road
Arlington, VA 22207
Mark Schon Vice President None
10483 E. Corrine Dr.
Scottsdale, AZ 85259
Michael Sciortino Vice President None
785 Beau Chene Dr.
Mandeville, LA 70448
James A. Shaw Vice President - None
5155 West Fair Place Financial Institution Div.
Littleton, CO 80123
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker Vice President - None
2017 N. Cleveland, #2 Financial Institution Div.
Chicago, IL 60614
Michael Stenger Vice President None
C/O America Building
30 East Central Pkwy
Suite 1008
Cincinnati, OH 45202
Paul Stickney Vice President None
1314 Log Cabin Lane
St. Louis, MO 63124
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
Gregory K. Wilson Vice President None
2 Side Hill Road
Westport, CT 06880
Bernard J. Wolocko Vice President None
33915 Grand River
Farmington, MI 48335
William Harvey Young+ Vice President None
</TABLE>
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver and State of Colorado on
the 26th day of January, 1995.
OPPENHEIMER TAX-EXEMPT BOND FUND
By: /s/ James C. Swain*
---------------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ James C. Swain* Chairman, Trustee January 26, 1995
- ------------------ & Principal
James C. Swain Executive Officer
/s/ George C. Bowen* Treasurer and January 26, 1995
- ------------------- Principal Financial
George C. Bowen and Accounting Officer
Jon S. Fossel* President & Trustee January 26, 1995
- -----------------
/s/ Jon S. Fossel
Officer
/s/ Robert G. Avis* Trustee January 26, 1995
- ------------------
Robert G. Avis
/s/ William A. Baker* Trustee January 26, 1995
- --------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee January 26, 1995
- -----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee January 26, 1995
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee January 26, 1995
- ------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 26, 1995
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee January 26, 1995
- ----------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER TAX-EXEMPT BOND FUND
EXHIBIT INDEX
Form N-1A
Item No. Description
24 (a) (8) Independent Auditors' Consent
24(b) (1) (i) Amended and Restated Agreement and Declaration of
Trust dated 11/29/93
24 (b) (2) By-Laws (as amended through 8/90)
24 (b) (5) (i) Investment Advisory Agreement dated 10/22/90
(Insured Series)
24(b) (5) (ii) Investment Advisory Agreement dated 10/22/90
(Income Series)
24 (b) (6) (ii) General Distributor's Agreement dated 10/13/92
24 (b) (8) (i) Custodian Agreement dated 6/1/90
24 (b) (9) Insurance Agreement between the Registrant and
Financial Guaranty Insurance Corporation
24 (b) (10) Opinion and Consent of Counsel dated 10/29/86
24(b)(15)(iv) Distribution and Service Plan and Agreement dated
2/23/94 for Class B shares of Oppenheimer
Insured Tax-Exempt Bond Fund
24 (b) (16) (i) Performance Data Computation Schedule for
Oppenheimer Insured Tax-Exempt Bond Fund
24 (b) (16) (ii) Performance Data Computation Schedule for
Oppenheimer Intermediate Tax-Exempt Bond Fund
24 (b) (17) (i) Financial Data Schedule for Class A shares of
Oppenheimer Insured Tax-Exempt Fund
24 (b) (17) (ii) Financial Data Schedule for Class B shares of
Oppenheimer Insured Tax-Exempt Fund
24 (b) (17) (iii) Financial Data Schedule for Class A shares of
Oppenheimer Intermediate Tax-Exempt Fund
24(b) (17) (iv) Financial Data Schedule for Class C shares of
Oppenheimer Intermediate Tax-Exempt Fund
AGREEMENT AND DECLARATION OF TRUST
OF
OPPENHEIMER TAX-EXEMPT BOND FUND
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made
this 29th day of November, 1993, by the Trustees whose signatures are set
forth below (together with all other persons from time to time duly
elected, qualified and serving as Trustees in accordance with the
provision of Article IV hereof, the "Trustees"), and by the holders of
shares of beneficial interest heretofore issued or to be issued hereunder
as hereinafter provided.
WITNESSETH
WHEREAS, the Trustees previously formed a trust for the purposes
of carrying on the business of a management investment company under an
Agreement and Declaration of Trust dated August 5, 1986 as amended July
10, 1992 and further amended April 29, 1993; and in furtherance of such
purposes, the Trustees have acquired and may hereafter acquire assets and
properties, to hold and manage as trustees of a Massachusetts voluntary
association with transferable shares in accordance with the provisions
hereinafter set forth; and
WHEREAS, the Shareholders of the Trust have duly authorized and
approved amendments to the Declaration of Trust, said approval having been
given at a meeting of the Shareholders duly called for said purpose, and
the Trustees hereby amend the Declaration of Trust to incorporate said
amendments.
NOW, THEREFORE, the Trustees hereby declare that they will hold
all cash, securities and other assets and properties, which they may from
time to time acquire in any manner as Trustees hereunder IN TRUST to
manage and dispose of the same upon the following terms and conditions for
the pro rata benefit of the holders from time to time of Shares in the
Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Name and Registered Agent
Section 1. This Trust shall be known as "Oppenheimer Tax-Exempt
Bond Fund" and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine. The
registered agent for the Trust in Massachusetts shall be Massachusetts
Mutual Life Insurance Company, 1295 State Street, Springfield,
Massachusetts 01111, Attention: Stephen Kuhn, Esq., or such other person
as the Trustees may from time to time designate.
Definitions
Section 2. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The "Trust" refers to the Massachusetts voluntary
association established by this Agreement and Declaration of Trust, as it
may be amended from time to time, pursuant to Massachusetts General Laws,
Chapter 182;
(b) "Trustees" refers to the Trustees of the Trust named herein
or elected in accordance with Article IV and then in office;
(c) "Shares" mean the transferable units of interest into which
the beneficial interest in the Trust or any Series or Class of the Trust
shall be divided from time to time, and includes fractions of Shares as
well as whole Shares;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940
(and any successor statute) and the Rules and Regulations thereunder, all
as amended from time to time;
(f) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person," "Principal Underwriter" and "vote of a majority of
the outstanding voting securities" and other terms which are defined in
the 1940 Act shall have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time;
(i) "Net asset value" shall have the meaning set forth in
Section 5 of Article VI hereof;
(j) "Class" means a class of a Series of Shares established and
designated in accordance with the provisions of this Declaration of Trust;
and
(k) "Series" means the Series of Shares established and
designated in accordance with the provisions of this Declaration of Trust.
ARTICLE II
Nature and Purpose
The Trust is a voluntary association (commonly known as a
business trust) of the type referred to in Chapter 182 of the General Laws
of the Commonwealth of Massachusetts. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as, a general or a
limited partnership, joint venture, corporation or joint stock company,
nor shall the Trustees or Shareholders or any of them for any purpose be
deemed to be, or be treated in any way whatsoever as though they were,
liable or responsible hereunder as partners or joint venturers. The
purpose of the Trust is to engage in, operate and carry on the business
of an open-end management investment company and to do any and all acts
or other things as are necessary, convenient, appropriate, incidental or
customary in connection therewith.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The beneficial interest in the Trust shall be
divided into Shares, all without par value, but the Trustees shall have
the authority from time to time, without obtaining Shareholder approval,
to create one or more Series of Shares in addition to the Series
specifically established and designated in Section 3 of this Article III,
and to divide the shares of any Series into two or more Classes pursuant
to Section 2 of this Article III, all as they deem necessary or desirable,
to establish and designate such Series and Classes, and to fix and
determine the relative rights and preferences as between the different
Series or Classes of Shares as to right of redemption and the price, terms
and manner of redemption, liabilities and expenses to be borne by any
Series or Class, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion on liquidation, conversion rights, and conditions under which
the several Series or Classes shall have individual voting rights or no
voting rights. Except as aforesaid, all Shares of the different Series
shall be identical.
(a) The number of authorized Shares and the number of Shares
of each Series and each Class of a Series that may be issued is unlimited,
and the Trustees may issue Shares of any Series or Class of any Series for
such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without
action or approval of the Shareholders. All Shares when so issued on the
terms determined by the Trustees shall be fully paid and non-assessable.
The Trustees may classify or reclassify any unissued Shares or any Shares
previously issued and reacquired of any Series into one or more Series or
Classes of Series that may be established and designated from time to
time; and the Trustees may from time to time divide or combine the Shares
of any Series or Class into a greater or lesser number without thereby
changing the proportionate beneficial interests in the Series or Class.
The Trustees may hold as treasury Shares (of the same or some other
Series), reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Shares
of any Series reacquired by the Trust.
(b) The establishment and designation of any Series or any
Class of any Series in addition to that established and designated in
Section 3 of this Article III shall be effective upon the execution by a
majority of the Trustees of an instrument setting forth such establishment
and designation and the relative rights and preferences of such Series or
such Class of such Series or as otherwise provided in such instrument.
At any time that there are no Shares outstanding of any particular Series
previously established and designated, and as provided in Article IX,
Section 1, the Trustees may by an instrument executed by a majority of
their number abolish that Series and the establishment and designation
thereof. Each instrument referred to in this paragraph shall be an
amendment to this Declaration of Trust, and the Trustees may make any such
amendment without shareholder approval.
Section 2. The Trustees shall have the authority from time
to time to divide the Shares of any Series into two or more Classes as
they deem necessary or desirable, and to establish and designate such
Classes. In such event, each Class of a Series shall represent interests
in the designated Series of the Trust and have such voting, dividend,
liquidation and other rights as may be established and designated by the
Trustees. Expenses and liabilities related directly or indirectly to the
Shares of a Class of a Series may be borne solely by such Class (as shall
be determined by the Trustees) and, as provided in Article V, a Class of
a Series may have exclusive voting rights with respect to matters relating
solely to such Class. The bearing of expenses and liabilities solely by
a Class of Shares of a Series shall be appropriately reflected (in the
manner determined by the Trustees) in the net asset value, dividend and
liquidation rights of the Shares of such Class of a Series. The division
of the Shares of a Series into Classes and the terms and conditions
pursuant to which the Shares of the Classes of a Series will be issued
must be made in compliance with the 1940 Act. No division of Shares of
a Series into Classes shall result in the creation of a Class of Shares
having a preference as to dividends or distributions or a preference in
the event of any liquidation, termination or winding up of the Trust, to
the extent such a preference is prohibited by Section 18 of the 1940 Act
as to the Trust.
The relative rights and preferences of Shares of different
Classes shall be the same in all respects except that, unless and until
the Board of Trustees shall determine otherwise: (i) when a vote of
Shareholders is required under this Declaration of Trust or when a meeting
of Shareholders is called by the Board of Trustees, the Shares of a Class
shall vote exclusively on matters that affect that Class only, (ii) the
liabilities and expenses related to a Class shall be borne solely by such
Class (as determined and allocated to such Class by the Trustees from time
to time in a manner consistent with Sections 2 and 3 of this Article III);
and (iii) pursuant to Section 10 of Article III, the Shares of each Class
shall have such other rights and preferences as are set forth from time
to time in the then-effective Prospectus and/or Statement of Additional
Information relating to the Shares. Dividends and distributions on one
class may differ from the dividends and distributions on another Class,
and the net asset value of the Shares of one Class may differ from the net
asset value of the Shares of another Class.
Section 3. Without limiting the authority of the Trustees set
forth in Section 1 of this Article III to establish and designate any
further Series, the Trustees hereby establish two Series of Shares known
as "Oppenheimer Intermediate Tax-Exempt Bond Fund" and "Oppenheimer
Insured Tax-Exempt Bond Fund." The Shares of Oppenheimer Insured Tax-
Exempt Bond Fund are divided into two Classes, which are designated "Class
A" and "Class B," as follows: the Shares of the Series outstanding since
the inception of the Trust are designated Class A Shares, and the Shares
of the Class initially created upon the division of the Shares of that
Series into two Classes pursuant to the Trust's Amended and Restated
Agreement and Declaration of Trust dated April 29, 1993 are designated
Class B Shares. The Shares of Oppenheimer Intermediate Tax-Exempt Bond
Fund shall be divided into two Classes, which shall be designated "Class
A" and "Class C," as follows: the Shares of the Series outstanding since
the inception of the Trust are hereby designated Class A Shares, and the
Shares of the Class initially created upon the division of the Shares of
that Series into two Classes are hereby designated Class C Shares. The
Shares of each Series and any Shares of any further Series or Classes that
may from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some further
Series or Classes at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds,
in whatever form the same may be, together with any General Items
allocated to that Series as provided in the following sentence, are herein
referred to as "assets belonging to" that Series. In the event that there
are any assets, income, earnings, profits and proceeds thereof, funds or
payments which are not readily identifiable as belonging to any particular
Series (collectively "General Items"), the Trustees shall allocate such
General Items to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable; and any General Items so
allocated to a particular Series shall belong to that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the
shareholders of all Series for all purposes.
(b) (1) Liabilities Belonging to the Series. The liabilities,
expenses, costs, charges and reserves attributable to each Series shall
be charged and allocated to the assets belonging to each particular
Series. Any general liabilities, expenses, costs, charges and reserves
of the Trust which are not identifiable as belong to any particular Series
shall be allocated and charged by the Trustees to and among any one or
more of the Series established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to each Series are herein referred to
as "liabilities belonging to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall
be conclusive and binding upon the shareholders of all Series for all
purposes.
(2) Liabilities Belonging to a Class. If a Series is
divided into more than one Class, the liabilities, expenses, costs,
charges and reserves attributable to a Class shall be charged and
allocated to the Class to which such liabilities, expenses, costs, charges
or reserves are attributable. Any general liabilities, expenses, costs,
charges or reserves belonging to the Series which are not identifiable as
belonging to any particular Class shall be allocated and charged by the
Trustees to and among any one or more of the Classes established and
designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges and reserves allocated and so
charged to each Class are herein referred to as "liabilities belonging to"
that Class. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the holders
of all Classes for all purposes.
(c) Dividends. Dividends and distributions on Shares of a
particular Series or Class may be paid to the holders of Shares of that
Series or Class, with such frequency as the Trustees may determine, which
may be daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine,
from such of the income, capital gains accrued or realized, and capital
and surplus, from the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities belonging
to such Series or Class. All dividends and distributions on Shares of a
particular Series or Class shall be distributed pro rata to the holders
of such Series or Class in proportion to the number of Shares of such
Series or Class held by such holders at the date and time of record
established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure
the Trustees may determine that the Shareholder's purchase order and/or
payment have not been received by the time or times established by the
Trustees under such program or procedure. Such dividends and
distributions may be made in cash or Shares or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with Section 5 of Article
VI.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of all Classes of each Series
that have been established and designated shall be entitled to receive,
as a Series or Class, when and as declared by the Trustees the excess of
the assets belonging to that Series over the liabilities belonging to that
Series or Class. The assets so distributable to the Shareholders of any
particular Class and Series shall be distributed among such Shareholders
in proportion to the number of Shares of such Class of that Series held
by them and recorded on the books of the Trust.
(e) Transfer. All Shares of each particular Series shall be
transferable, but transfers of Shares of a particular Class or Series will
be recorded on the Share transfer records of the Trust applicable to such
Class of that Series only at such times as Shareholders shall have the
right to require the Trust to redeem Shares of such Series or Class of
that Series and at such other times as may be permitted by the Trustees.
(f) Equality. Each Share of a Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to
the liabilities belonging to such Series or any Class of that Series), and
each Share of any particular Series shall be equal to each other Share of
that Series and Shares of each Class of a Series shall be equal to each
other Share of such Class; but the provisions of this sentence shall not
restrict any distinctions permissible under this Article III that may
exist with respect to Shares of the different Classes of a Series. The
Trustees may from time to time divide or combine the Shares of any
particular Class or Series into a greater or lesser number of Shares of
that Class or Series without thereby changing the proportionate beneficial
interest in the assets belonging to the Class or Series or in any way
affecting the rights of Shares of any other Class or Series.
(g) Fractions. Any fractional Share of any Class and Series,
if any such fractional Share is outstanding, shall carry proportionately
all the rights and obligations of a whole Share of that Class and Series,
including those rights and obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares, and liquidation of the
Trust.
(h) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to
provide that (i) holders of Shares of any Series shall have the right to
exchange said Shares into Shares of one or more other Series of Shares,
(ii) holders of Shares of any Class shall have the right to exchange said
Shares into Shares of one or more other Classes of the same or a different
Series, and/or (iii) the Trust shall have the right to carry out the
aforesaid exchanges, in each case in accordance with such requirement and
procedures as may be established by the Trustees. Except as otherwise
determined by the Trustees in their sole discretion, Shareholders shall
have no exchange or conversion right with respect to their Shares.
(i) Preemptive Rights. Shareholders shall have no preemptive
or other rights to receive, purchase or subscribe for any additional
Shares or other securities issued by the Trust. The Shareholders shall
have no appraisal rights with respect to their Shares.
Ownership of Shares
Section 4. The ownership and transfer of Shares shall be
recorded on the books of the Trust or its transfer agent or similar agent,
which books shall be maintained separately for the Shares of each Class
and Series. No certificates certifying the ownership of Shares shall be
issued except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the use of facsimile signatures, the
transfer of Shares and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent of the Trust, as the
case may be, shall be conclusive as to who are the Shareholders of each
Series or Class and as to the number of Shares of each Series and Class
held from time to time by each Shareholder.
Investments in the Trust
Section 5. The Trustees may issues Shares of the Trust to such
persons and on such terms and, subject to any requirements of law, for
such consideration, which may consist of cash or tangible or intangible
property or a combination thereof, as they may from to time to time
authorize.
Right to Refuse Orders
Section 6. The Trust by action of its Trustees shall have the
right to refuse to accept any subscription for its Shares at any time
without any cause or reason therefor whatsoever. Without limiting the
foregoing, the Trust shall have the right not to accept subscriptions
under circumstances or in amounts as the Trustees in their sole discretion
consider to be disadvantageous to existing Shareholders, and the Trustees
may from time to time set minimum and/or maximum amounts which may be
invested in Shares by a subscriber. The Trustees may authorize any
distributor, principal underwriter, custodian, transfer agent or other
person to accept orders for the purchase or sale of Shares that conform
to such authorized terms and to reject any purchase or sale orders for
Shares whether or not conforming to such authorized terms.
Time for Determining Sales Price
Section 7. The time or times as of which the net asset value
shall be determined for the purpose of determining the sales price for
Shares issued pursuant to this Article III shall be at such times as the
Trustees may establish from time to time in accordance with applicable
provisions of the 1940 Act.
Order in Proper Form
Section 8. The criteria for determining what constitutes an
order in proper form and the time of receipt of such an order by the Trust
shall be prescribed by resolution of the Trustees and such criteria may
be established in the Trust's then current prospectus or established by
the Trust's distributor or transfer agent, subject to approval of the
Trustees.
When Shares Become Outstanding
Section 9. Shares subscribed for and for which an order in
proper form has been received shall be deemed to be outstanding as of the
time of acceptance of the order therefor and the determination of the net
price thereof, which price shall be then deemed to be an asset of the
Trust.
Merger or Consolidation
Section 10. In connection with the acquisition of all or
substantially all the assets or stock of another investment company,
investment trust, or of a company classified as a personal holding company
under Federal Income Tax laws, the Trustees may issue or cause to be
issued Shares of a Series or Class and accept in payment therefor, in lieu
of cash, such assets at their market value, or such stock at the market
value of the assets held by such investment company or investment trust,
either with or without adjustment for contingent costs or liabilities.
Status of Shares and Limitation of Personal Liability
Section 11. Shares shall be deemed to be personal property
giving only the rights provided in this instrument. Every Shareholder by
virtue of having become a Shareholder shall be held to have expressly
assented and agreed to the terms of the Declaration of Trust and to have
become a party thereto. The death of a Shareholder during the continuance
of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only
to succeed to the rights of said decedent under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole
or any part of the Trust property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of
Shares constitute the Shareholders partners. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust shall have any
power to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of any sum
of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
Shareholder Inspection Rights
Section 12. Any Shareholder or his or her agent may inspect and
copy during normal business hours any of the following documents of the
Trust: By-Laws, minutes of the proceedings of the Shareholders and annual
financial statements of the Trust, including a balance sheet and financial
statements of operations. The foregoing rights of inspection of
Shareholders of the Trust are the exclusive and sole rights of the
Shareholders with respect thereto and no Shareholder of the Trust shall
have, as a Shareholder, the right to inspect or copy any of the books,
records or other documents of the Trust except as specifically provided
in this Section 12 of this Article III or except as otherwise determined
by the Trustees.
ARTICLE IV
The Trustees
Number, Designation, Election, Term, Etc.
Section 1.
(a) Number. The Trustees who have executed this Amended and
Restated Declaration of Trust may increase or decrease the number of
Trustees to a number other than the number theretofore determined which
number shall not be less than three nor more than fifteen. No decrease
in the number of Trustees shall have the effect of removing any Trustee
from office prior to the expiration of his or her term, but the number of
Trustees may be decreased in conjunction with the removal of a Trustee
pursuant to subsection (d) of this Section 1.
(b) Term. Each Trustee, whether now incumbent or hereafter
becoming a Trustees, shall serve as a Trustee until the next meeting of
Shareholders, if any, called for the purpose of considering the election
or re-election of such Trustee or of a successor to such Trustee, and
until the election and qualification of his successor, if any, elected at
such meeting, or until such Trustee sooner dies, resigns, retires or is
removed. Upon the election and qualification of a new Trustee, the Trust
estate shall vest in the new Trustee (together with the continuing or
other new Trustees) without any further act or conveyance.
(c) Resignation and Retirement. Any Trustee may resign his or
her trust or retire as a Trustee, by written instrument signed by him or
her and delivered to the other Trustees or to any officer of the Trust,
and such resignation or retirement shall take effect upon such delivery
or upon such later date as is specified in such instrument.
(d) Removal. Any Trustee may be removed for cause at any time
by written instrument, signed by at least a majority of the number of
Trustees prior to such removal, specifying the date upon which such
removal shall become effective. Any Trustee may be removed with or
without cause (i) by the vote of the Shareholders entitled to be cast on
the matter voting together without regard to Series or Class at any
meeting called for such purpose, or (ii) by a written consent filed with
the custodian of the Trust's portfolio securities and executed by the
Shareholders entitled to vote more than fifty percent (50%) of the votes
entitled to be cast on the matter voting together without regard to Series
or Class.
Whenever ten or more Shareholders of record who have been such
for at least six months preceding the date of application, and who hold
in the aggregate Shares constituting at least one percent of the
outstanding Shares of the Trust, shall apply to the Trustees in writing,
stating that they wish to communicate with other Shareholders with a view
to obtaining signatures to a request for a meeting to consider removal of
a Trustee and accompanied by a form of communication and request that they
wish to transmit, the Trustees shall within five business days after
receipt of such application inform such applicants as to the approximate
cost of mailing to the Shareholders of record the proposed communication
and form of request. Upon the written request of such applicants,
accompanied by a tender of the material to be mailed and of the reasonable
expenses of mailing, the Trustees shall, within reasonable promptness,
mail such material to all Shareholders of record at their addresses as
recorded on the books of the Trust. Notwithstanding the foregoing, the
Trustees may refuse to mail such material on the basis and in accordance
with the procedures set forth in the last two paragraphs of Section 16(c)
of the 1940 Act.
(e) Vacancies. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or resulting
from an increase in the number of Trustees by the other Trustees may (but
so long as there are at least three remaining Trustees, need not unless
required by the 1940 Act) be filled either by a majority of the remaining
Trustees, even if less than a quorum, through the appointment in writing
of such other person as such remaining Trustees in their discretion shall
determine or, whenever deemed appropriate by the remaining Trustees, by
the election by the Shareholders, at a meeting called for such purpose,
of a person to fill such vacancy, and such appointment or election shall
be effective upon the written acceptance of the person named therein to
serve as a Trustee and agreement by such person to be bound by the
provisions of this Declaration of Trust, except that any such appointment
or election in anticipation of a vacancy to occur by reason of retirement,
resignation, or increase in number of Trustees to be effective at a later
date shall become effective only at or after the effective date of said
retirement, resignation, or increase in number of Trustees. As soon as
any Trustee so appointed or elected shall have accepted such appointment
or election and shall have agreed in writing to be bound by this
Declaration of Trust and the appointment or election is effective, the
Trust estate shall vest in the new Trustee, together with the continuing
Trustees, without any further act or conveyance.
(f) Mandatory Election by Shareholders. Notwithstanding the
foregoing provisions of this Section 1, the Trustees shall call a meeting
of the Shareholders for the election of one or more Trustees at such time
or times as may be required in order that the provisions of the 1940 Act
may be complied with, and the authority hereinabove provided for the
Trustees to appoint any successor Trustee or Trustees shall be restricted
if such appointment would result in failure of the Trust to comply with
any provision of the 1940 Act.
(g) Effect of Death, Resignation, Etc. The death, resignation,
retirement, removal or incapacity of the Trustees, or any one of them,
shall not operate to annul or terminate the Trust or to revoke or
terminate any existing agency or contract created or entered into pursuant
to the terms of this Declaration of Trust.
(h) No Accounting. Except under circumstances which would
justify his or her removal for cause, no person ceasing to be a Trustee
as a result of his or her death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required to make
an accounting to the Shareholders or remaining Trustees upon such
cessation.
Powers
Section 2. The Trustees, subject only to the specific
limitations contained in this Declaration of Trust or otherwise imposed
by the 1940 Act or other applicable law, shall have, without further or
other authorization and free from any power or control of the
Shareholders, full, absolute and exclusive power, control and authority
over the Trust assets and the business and affairs of the Trust to the
same extent as if the Trustees were the sole and absolute owners thereof
in their own right and to do all such acts and things as in their sole
judgment and discretion are necessary and incidental to, or desirable for,
the carrying out of any of the purposes of the Trust or conducting the
business of the Trust. Any determination made in good faith by the
Trustees of the purposes of the Trust or the existence of any power or
authority hereunder shall be conclusive. In construing the provisions of
this Declaration of Trust, there shall be a presumption in favor of the
grant of power and authority to the Trustees. Without limiting the
foregoing, the Trustees may adopt By-Laws not inconsistent with this
Declaration of Trust containing provisions relating to the business of the
Trust, the conduct of its affairs, its rights or powers and the rights or
powers of its Shareholders, Trustees, officers, employees and other agents
and may amend and repeal them to the extent that such By-Laws do not
reserve that right to the Shareholders; fill vacancies in their number,
including vacancies resulting from increases in their number, unless a
vote of the Trust's Shareholders is required to fill such vacancies
pursuant to the 1940 Act; elect and remove such officers and appoint and
terminate such agents as they consider appropriate; appoint from their own
number, and terminate, any one or more committees consisting of two or
more Trustees, including an executive committee which may, when the
Trustees are not in session, exercise some or all of the powers and
authority of the Trustees as the Trustees may determine; appoint an
advisory board, the members of which shall not be Trustees and need not
be Shareholders; employ one or more investment advisers or managers as
provided in Section 6 of this Article IV; employ one or more custodians
of the assets of the Trust and authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a system
or systems for the central handling of securities; retain a transfer agent
or a Shareholder services agent, or both, provide for the distribution of
Shares by the Trust, through one or more principal underwriters or
otherwise; set record dates for the determination of Shareholders with
respect to various matters; and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of the
Trustees and to any agent or employee of the Trust or to any such
custodian or underwriter.
In furtherance of and not in limitation of the foregoing, the
Trustees shall have power and authority:
(a) To invest and reinvest in, to buy or otherwise acquire, to
hold, for investment or otherwise, to sell or otherwise dispose of, to
lend or to pledge, to trade in or deal in securities or interests of all
kinds, however evidenced, or obligations of all kinds, however evidenced,
or rights, warrants, or contracts to acquire such securities, interests,
or obligations, of any private or public company, corporation,
association, general or limited partnership, trust or other enterprise or
organization, foreign or domestic, or issued or guaranteed by any national
or state government, foreign or domestic, or their agencies,
instrumentalities or subdivisions (including but not limited to, bonds,
debentures, bills, time notes and all other evidences of indebtedness);
negotiable or non-negotiable instruments; any and all futures contracts;
government securities and money market instruments (including but not
limited to, bank certificates of deposit, finance paper, commercial paper,
bankers acceptances, and all kinds of repurchase agreements);
(b) To invest and reinvest in, to buy or otherwise acquire, to
hold, for investment or otherwise, to sell or otherwise dispose of foreign
currencies, and funds and exchanges, and make deposits in banks, savings
banks, trust companies, and savings and loan associations, foreign or
domestic;
(c) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop, and dispose of (by sale or otherwise) any
property, real or personal, and any interest therein;
(d) To sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of the Trust;
(e) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to
execute and deliver proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities or property
as the Trustees shall deem proper;
(f) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(g) To hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form, or
in the name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or otherwise;
(h) To consent or to participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security or property of which is or was held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect to
any security held in the Trust;
(i) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and
to pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(j) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including but
not limited to claims for taxes;
(k) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(l) To borrow funds;
(m) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof; and to mortgage and
pledge the Trust property or any part thereof to secure any of or all such
obligations;
(n) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the
agents of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers or managers,
principal underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature arising
by reason of holding, being or having held any such office or position,
or by reason of any action alleged to have been taken or omitted by any
such person as Shareholder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify
such person against such liability; and
(o) To pay pensions for faithful service, as deemed appropriate
by the Trustees, and to adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including
the purchasing of life insurance and annuity contracts as a means of
providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any
present future law or custom in regard to investments by trustees of
common law trusts. Except as otherwise provided herein or from time to
time in the By-Laws, any action to be taken by the Trustees may be taken
by a majority of the Trustees present at a meeting of Trustees (if a
quorum be present), within or without Massachusetts, including any meeting
held by means of a conference telephone or other communications equipment
by means of which all persons participating in the meeting can communicate
with each other simultaneously and participation by such means shall
constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office.
Payment of Expenses
Section 3. Consistent with the provisions of Section 3 of
Article III, the Trustees are authorized to pay or to cause to be paid out
of the principal or income of the Trust or of its respective Series and
Classes, or partly out of principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and
such expenses and charges for the services of the Trust's officers,
employees, investment adviser or manager, principal underwriter, auditor,
counsel, custodian, transfer agent, shareholder servicing agent, and such
other agents or independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur.
Section 4. The Trustees shall have the power, as frequently as
they may determine, to cause each Shareholder to pay directly, in advance
or arrears, for charges of the Trust's custodian or transfer or
shareholder service or similar agent, an amount fixed from time to time
by the Trustees, by setting off such charges due from such Shareholder
from declared but unpaid dividends owed such Shareholder and/or by
reducing the number of Shares in the account of such Shareholder by that
number of full and/or fractional Shares which represents the outstanding
amount of such charges due from such Shareholder.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each Series of the
Trust and of the Trust shall at all times be considered as vested in the
Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable vote of a majority of the
outstanding voting securities of a Series of the Trust, the Trustees may
on behalf of such Series, at any time and from time to time, contract for
exclusive or nonexclusive advisory and/or management services with a
corporation, trust, association or other organization, every such contract
to comply with such requirements and restrictions as may be set forth in
the By-Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and restrictions as
the Trustees may determine, including, without limitation, authority to
determine from time to time what investments shall be purchased, held,
sold or exchanged and what portion, if any, of the assets of such Series
shall be held uninvested and to make changes in such Series' investments.
The Trustees may also, at any time and from time to time, contract with
a corporation, trust association or other organization, appointing it
exclusive or nonexclusive distributor or principal underwriter for the
Shares, every such contract to comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such contract may
contain such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine.
The fact that:
(a) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee, manager,
advisor, principal underwriter, or distributor or agent of or for any
corporation, trust, association, or other organization, or of or for any
parent or affiliate of any organization, with which an advisory or
management or principal underwriter's or distributor's contract, or
transfer, Shareholder services or other agency contract may have been or
may hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has interest in the Trust, or that
(b) any corporation, trust, association or other organization
with which an advisory or management or principal underwriter's or
distributor's contract, or transfer, Shareholder services or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, Shareholder services or other agency contract with one or
more other corporations, trusts, associations, or other organizations, or
has other businesses or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing
the same or create any liability or accountability to the Trust or its
Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. The Shareholders shall have power to vote only: (a)
for the election or removal of Trustees as provided in Article IV, Section
1; (b) with respect to any investment advisor or manager as provided in
Article IV, Section 6; (c) with respect to any termination or
reorganization of the Trust or any series thereof to the extent and as
provided in Article IX, Section 1; (d) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Article IX,
Section 4; (e) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or
claim should or should not be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders; and (f) with
respect to such additional matters relating to the Trust as may be
required by law, the 1940 Act, this Declaration of Trust, the By-Laws or
any then-effective registration of the Trust filed with the Securities and
Exchange Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable.
Each whole share shall be entitled to one vote as to any matter
on which it is entitled to vote and each fractional share shall be
entitled to a proportionate fractional vote. Notwithstanding any other
provision of the Declaration of Trust, on any matter submitted to a vote
of Shareholders all Shares of the Trust then entitled to vote shall be
voted by individual Series and not in the aggregate, except (a) when
required by the 1940 Act, Shares shall be voted in the aggregate and not
by individual Series; and (b) when the Trustees have determined that the
matter affects only the interests of one or more Series or Class of
Series, then only Shareholders of such Series or Class shall be entitled
to vote thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy.
A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by any one of them unless at or prior
to the exercise of the proxy the Trust receives a specific written notice
to the contrary from any one of them. A proxy purporting to be executed
by or on behalf of a Shareholder shall be deemed valid unless challenged
at or prior to its exercise and the burden of proving invalidity shall
rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights
of Shareholders and may take any action required by law, this Declaration
of Trust or the By-Laws to be taken by Shareholders.
Shareholder Meetings
Section 2. Meetings of Shareholders (including meetings
involving only one or more but less than all Series or Classes) may be
called and held from time to time for the purpose of taking action upon
any matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be necessary
or desirable. Such meetings shall be held at the principal office of the
Trust as set forth in the By-Laws of the Trust, or at any such other place
within the United States as may be designated in the call thereof, which
call shall be made by the Trustees or the Chairman of the Trust. Meetings
of Shareholders may be called by the Trustees or such other person or
persons as may be specified in the By-Laws and shall be called by the
Trustees or such other person or persons as may be specified in the By-
Laws upon written application by Shareholders holding at least 25% (or ten
percent (10%) if the purpose of the meeting is to determine if a Trustee
is to be removed from office) of the Shares then outstanding requesting
a meeting be called for a purpose requiring action by the Shareholders as
provided herein or in the By-Laws which purpose shall be specified in any
such written application.
Shareholders shall be entitled to at least seven days' written
notice of any meeting of the Shareholders.
Quorum and Required Vote
Section 3. The presence at a meeting of Shareholders in person
or by proxy of Shareholders entitled to vote at least thirty percent (30%)
of all votes entitled to be cast at the meeting of each Series or Class
entitled to vote as a Series or Class shall be a quorum for the
transaction of business at a Shareholders' meeting, except that where any
provision of law or of this Declaration of Trust permits or requires that
the holders of Shares shall vote in the aggregate and not as a Series or
Class, then the presence in person or by proxy of Shareholders entitled
to vote at least thirty percent (30%) of all votes entitled to be cast at
the meeting (without regard to Series or Class) shall constitute a quorum.
Any lesser number, however, shall be sufficient for adjournments. Any
adjourned session or sessions may be held within a reasonable time after
the date set for the original meeting without the necessity of further
notice.
Except when a larger vote is required by any provisions of the
1940 Act, this Declaration of Trust or the By-Laws, a majority of the
Shares of each Series or Class voted on any matter shall decide such
matter insofar as that Series or Class is concerned, provided that where
any provision of law or of this Declaration of Trust permits or requires
that the holders of Shares vote in the aggregate and not as a Series or
Class, then a majority of the Shares voted on the matter (without regard
to Series or Class) shall decide such matter and a plurality shall elect
a Trustee.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken
without a meeting if Shareholders entitled to vote more than fifty percent
(50%) of the votes entitled to be cast on the matter of each Series or
Class or, where any provision of law or of this Declaration of Trust
permits or requires that the holders of Shares vote in the aggregate and
not as a Series or Class, if Shareholders entitled to vote more than fifty
percent (50%) of the votes entitled to be cast thereon (without regard to
Series or Class) (or in either case such larger vote as shall be required
by any provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records
of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
Additional Provisions
Section 5. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters not inconsistent with
the provisions hereof.
ARTICLE VI
Redemptions and Repurchases, and
Determination of Net Asset Value
Redemptions and Repurchases
Section 1. Any holder of Shares of the Trust may by
presentation of a request in proper form, together with his or her
certificates, if any, for such Shares, in proper form, for transfer to the
Trust or duly authorized agent of the Trust, request redemption of his or
her shares for the net asset value thereof determined and computed in
accordance with the provisions of this Section 1 and the provisions of
Section 5 of this Article VI.
Upon receipt by the Trust or its duly authorized agent, as the
case may be, of such a request for redemption of Shares in proper form,
such Shares shall be redeemed at the net asset value per share of the
particular Series or Class next determined after such request is received
or determined as of such other time fixed by the Trustees as may be
permitted or required by the 1940 Act. The criteria for determining what
constitutes a proper request for redemption and the time of receipt of
such request shall be fixed by the Trustees, and such criteria may be
established in the Trust's then current prospectus or established by the
Trust's distributor or transfer agent, subject to approval by the
Trustees.
This obligation of the Trust to redeem its Shares of each Series
or Class as set forth above in this Section 1 shall be subject to the
condition that such obligation may be suspended by the Trust by or under
authority of the Trustees during any period or periods when and to the
extent permissible under the 1940 Act. If there is such a suspension, any
Shareholder may withdraw any request for redemption which has been
received by the Trust during any such period and the applicable net asset
value with respect to which would but for such suspension be calculated
as of a time during such period. Upon such withdrawal, the Trust shall
return to the Shareholder the certificates therefor, if any.
The Trust may also purchase, repurchase or redeem Shares in
accordance with such other methods, upon such other terms and subject to
such other conditions as the Trustees may from time to time authorize at
a price not exceeding the net asset value of such Shares in effect when
the purchase or repurchase or any contract to purchase or repurchase is
made. Shares of any Series or Class redeemed or repurchased by the Trust
hereunder shall be canceled upon such redemption or repurchase without
further action by the Trust or the Trustees and the number of issued and
outstanding Shares of such Series shall thereupon be reduced by such
amount, or Shares redeemed or repurchased may be held by the Trust for
resale.
Payment for Shares Redeemed
Section 2. Payment of the redemption price for Shares redeemed
pursuant to this Article VI shall be made by the Trust or its duly
authorized agent after receipt by the Trust or its duly authorized agent
of a request for redemption in proper for (together with any certificates
for such Shares as provided in Section 1 above) in accordance with
procedures and subject to conditions prescribed by the Trustees; provided,
however, that payment may be postponed during the period in which the
redemption of Shares is suspended under Section 1 above. Subject to any
generally applicable limitation imposed by the Trustees, any payment on
redemption, purchase or repurchase by the Trust of Shares may, if
authorized by the Trustees, be made wholly or partly in kind, instead of
cash. Such payment in kind shall be made by distributing securities or
other property, constituting, in the opinion of the Trustees, a fair
representation of the various types of securities and other property then
held by the Series of Shares being redeemed, purchased or repurchased (but
not necessarily involving a portion of each of the Series' holdings) and
taken at their value used in determining the net asset value of the Shares
in respect of which payment is made.
Redemptions at the Option of the Trust
Section 3. The Trust shall have the right at its option and at any
time and from time to time to redeem Shares of any Shareholder at the net
asset value thereof as determined in accordance with Section 5 of this
Article VI, if at such time such Shareholder owns fewer Shares of a Series
or Class than, or Shares of a Series or Class having an aggregate net
asset value of less than, an amount determined from time to time by the
Trustees. Any such redemption at the option of the Trust shall be made
in accordance with such other criteria and procedures for determining the
Shares to be redeemed, the redemption date and the means of effecting such
redemptions as the Trustees may from time to time authorize.
Additional Provisions Relating to Redemptions and Repurchases
Section 4. The completion of redemption, purchase or repurchase of
Shares shall constitute a full discharge of the Trust and the Trustees
with respect to such Shares. No dividend or distribution (including,
without limitation, any distribution paid upon termination of the Trust
or of any Series or Class) with respect to, nor any redemption or
repurchase of, the Shares of any Series or Class shall be effected by the
Trust other than from the assets of such Series.
Determination of Net Asset Value
Section 5. The term "net asset value" of each Share or a Series or
Class as of any particular time shall be the quotient, rounded to such
extent as the Trustees shall determine from time to time in a manner
consistent with the 1940 Act, obtained by dividing the value, as at such
time, of the net assets of such Series or Class (i.e., the value of the
assets of such Series less the liabilities chargeable or allocated to such
Series or Class pursuant to the provisions of Article III, exclusive of
liabilities represented by the Shares of such Series or Class) by the
total number of Shares of such Series outstanding at such time, all
determined and computed in accordance with the Trust's current prospectus
and statement of additional information.
The Trustees, or any officer, or officers or agent of the Trust
designated for the purpose by the Trustees shall determine the net asset
value of the Shares of each Series or Class, and the Trustees shall fix
the time or times as of which the net asset value of the Shares of each
Series or Class shall be determined and shall fix the periods during
which any such net asset value shall be effective as to sales, redemptions
and repurchases of, and other transactions in, the Shares of such Series
of Class, except as such time and periods for any such transaction may be
fixed by other provision of this Declaration of Trust or by the By-Laws.
Determinations in accordance with this Section 5 made in good faith
shall be binding on all parties concerned.
How Long Shares are Outstanding
Section 6. Shares of the Trust surrendered to the Trust for
redemption by it pursuant to the provisions of Section 1 of this Article
VI shall be deemed to be outstanding until the redemption price thereof
is determined pursuant to this Article VI and, thereupon and until paid,
the redemption price thereof shall be deemed to be a liability of the
Trust. Shares of the Trust purchased by the Trust in the open market
shall be deemed to be outstanding until confirmation of purchase thereof
by the Trust and, thereupon and until paid, the purchase price thereof
shall be deemed to be a liability of the Trust. Shares of the Trust
redeemed by the Trust pursuant to Section 3 of this Article VI shall be
deemed to be outstanding until said Shares are deemed to be redeemed in
accordance with procedures adopted by the Trustees pursuant to said
Section 3.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust if the rate thereof is prescribed in advance
by such Trustees. Nothing herein shall in any way prevent the employment
of any Trustee for advisory, management, legal, accounting, investment
banking or other services and payment for the same by the Trust, it being
recognized that such employment may result in such Trustee being
considered an Affiliated Person or an Interested Person.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee,
investment advisor or manager, principal underwriter or custodian, nor
shall any Trustee be responsible for the act or omission of any other
Trustee. Nothing in this Declaration of Trust shall protect any Trustee
against any liability to which such Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by
or on behalf of the Trust or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been executed or done
only in or with respect to their or his or her capacity as Trustees or
Trustee and neither such Trustees or Trustee nor the Shareholders shall
be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officers or officer shall give
notice that this Declaration of Trust is on file with the Secretary of The
Commonwealth of Massachusetts and shall recite that the same was executed
or made by or on behalf of the Trust by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders
individually but are binding only upon the assets and property of the
Trust or a particular Series or Shares, and may contain such further
recital as he or she or they may deem appropriate, but the omission
thereof shall not operate to bind any Trustees or Trustee or officers or
officer of Shareholders or Shareholder individually.
All persons extending credit to, contracting with or having any claim
against the Trust or a particular Series of Shares shall look only to the
assets of the Trust or the assets of that particular Series of Shares, as
the case may be, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past present or future, shall be
personally liable therefor.
Trustees' Good Faith Action, Expert Advice, No Bond or Surety
Section 3. The exercise by the Trustees of their powers and
discretion hereunder shall be binding upon everyone interested. A Trustee
shall be liable only for or her his own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees
may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees
hereunder, and shall be under no liability for any act or omission in
accordance with such advice of for failing to follow such advice. In
discharging their duties, the Trustees, when acting in good faith, shall
be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant and (with respect to the subject matter of
the contract involved) any officer, partner or responsible employee of any
other party to any contract entered into pursuant to Section 2 of Article
IV. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 4. No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made or to be
made by the Trustees or to see to the application of any payments made or
property transferred to the Trust or upon its order.
ARTICLE VIII
Indemnification
Subject to the exceptions and limitations contained in this Article,
every person who is, or has been, a Trustee or officer of the Trust
(including persons who serve at the request of the Trust as directors,
officers or trustees of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise) hereinafter referred to
as a "Covered Person," shall be indemnified by the Trust to the fullest
extent permitted by law against liability and against all expenses
reasonably incurred or paid by him or her in connection with any claim,
action, suit or proceedings in which he or she becomes involved as a party
or otherwise by virtue of his or her being or having been such a Trustee,
director or officer and against amounts paid or incurred by him or her in
settlement thereof.
No indemnification shall be provided to a Covered Person:
(a) against any liability to the Trust or its Shareholders by
reason of a final adjudication by the court of other body before which the
proceeding was brought that he or she engaged in willful misfeasance bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his or her office;
(b) with respect to any matter as to which he or she shall have
been finally adjudicated not to have acted in good faith in the reasonable
belief that his or her action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not
involving a final adjudication (as provided in paragraph (a) or (b)) and
resulting in a payment by a Covered Person, unless there has been either
a determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office by the court of other
body approving the settlement or other disposition or a reasonable
determination, based on a review of readily available facts (as opposed
to a full trial-type inquiry) that he or she did not engage in such
conduct:
(i) by a vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect
any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be such a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect
any rights to indemnification to which the Trust personnel other than
Covered Persons may be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding subject to a claim for indemnification under
this Article shall be advanced by the Trust prior to final disposition
thereof upon receipt of an undertaking by or on behalf of the recipient
to repay such amount if it is ultimately determined that he or she is not
entitled to indemnification under this Article, provided that either:
(1) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising
out of any such advances; or
(2) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter) or independent legal counsel in a written
opinion shall determine, based upon a review of the readily available
facts (as opposed to a full trial-type inquiry), that there is reason to
believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Article, a "Disinterested Trustee" is one (a) who is
not an "interested person" of the Trust (as defined by the 1940 Act
including anyone who has been exempted from being an "interested person"
by any rule, regulation or order of the Securities and Exchange
Commission), and (b) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending.
As used in this Article, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of the particular Series
of Shares of which he or she is or was a Shareholder to be held harmless
from and indemnified against all loss and expense arising from such
liability; provided, however, there shall be no liability or obligation
of the Trust arising hereunder to reimburse any Shareholder for taxes paid
by reason of such Shareholder's ownership of Shares or for losses suffered
by reason of any changes in value of any trust assets.
Article IX
Miscellaneous
Duration, Termination and Reorganization of Trust
Section 1. Unless terminated as provided herein, the Trust shall
continue without limitation of time. The Trust may be terminated at any
time by the Trustees by written notice to the Shareholders without a vote
of the Shareholders of the Trust or by the vote of the Shareholders
entitled to vote more than fifty percent (50%) of the votes of each Series
entitled to be cast on the matter. Any Series or Class of Shares may be
terminated at any time by the Trustees by written notice to the
Shareholders of such Series or Class without a vote of the Shareholders
of such Series or Class or by the vote of the Shareholders of such Series
or Class entitled to vote more than fifty percent (50%) of the votes
entitled to be cast on the matter.
Upon termination of the Trust or of any one or more Series or Classes
of Shares, after paying or otherwise providing for all charges, taxes,
expenses and liabilities, whether due or accrued or anticipated, of the
particular Series or Class as may be determined by the Trustees, the Trust
shall in accordance with such procedures as the Trustees consider
appropriate reduce the remaining assets of the particular Series to
distributable form in cash or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders of the Series
involved, ratably according to the number of Shares of such Series held
by the several Shareholders of such Series on the date of termination.
At any time by the affirmative vote of the Shareholders of the
affected Series entitled to vote more than fifty percent (50%) of all the
votes entitled to be cast on the matter, the Trustees may sell, convey and
transfer the assets of the Trust, or the assets belonging to any one or
more Series, to another trust, partnership, association or corporation
organized under the laws of any state of the United States, or to the
Trust to be held as assets belonging to another Series of the Trust, in
exchange for cash, shares or other securities (including, in the case of
a transfer to another Series of the Trust, in exchange for cash, shares
or other securities (including, in the case of a transfer to another
Series of the Trust, Shares of such other Series)) with such transfer
being made subject to, or with the assumption by the transferee of, the
liabilities belonging to each Series the assets of which are so
distributed. Following such transfer, the Trustees shall distribute such
cash, shares or other securities (giving due effect to the assets and
liabilities belonging to and any other differences among the various
Series the assets belonging to which have so been transferred) among the
Shareholders of the Series the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so
transferred, the Trust shall be terminated.
Filing of Copies, References, Headings
Section 2. The original or a copy of this instrument and of each
amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each
amendment hereto shall be filed by the Trust with the Secretary of The
Commonwealth of Massachusetts and with the Boston City Clerk, as well as
any other governmental office where such filing may from time to time be
required. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such amendments have been
made and as to any matters in connection with the Trust hereunder; and,
with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this instrument or
of any such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein,"
"hereof," and "hereunder," shall be deemed to refer to this instrument as
amended from time to time. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or
affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which
shall be deemed an original.
Applicable Law
Section 3. This Declaration of Trust is created under and is to be
governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust shall be of the type commonly
called a Massachusetts business trust, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily exercised
by such a trust.
Amendments
Section 4. This Declaration of Trust may be amended at any time by
an instrument in writing signed by a majority of the then Trustees when
authorized so to do by vote of Shareholders holding more than a majority
of the outstanding voting securities (as defined in the 1940 Act) of each
Series entitled to vote, except that an amendment which shall affect the
holders of one or more Series of Classes of Shares but not the holders of
all outstanding Series and Classes shall be authorized by vote of the
Shareholders holding more than a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Shares entitled to vote of
each Series or Class affected and no vote of Shareholders of a Series not
affected shall be required. Amendments having the purpose of changing the
name of the Trust or of supplying any omission, curing any ambiguity or
curing, correcting or supplementing any provision which is defective or
inconsistent with the 1940 Act or with the requirements of the Internal
Revenue Code and the regulations thereunder for the trust's obtaining the
most favorable treatment thereunder available to regulated investment
companies or of establishing and designating or abolishing any Series of
Shares in accordance with Section 1 of Article III hereof shall not
require authorization by Shareholder vote.
Use of the Name
Section 5. The use of the name of the Trust and of any Series or
Class of shares of the Trust is granted pursuant to a royalty-free, non-
exclusive license from Oppenheimer Management Corporation ("OMC"), and
such license shall allow OMC to inspect and, subject to the control of the
Trustees, to control the nature and quality of services offered by the
Trust under such name. The license may be terminated by OMC upon
termination of any advisory, management or supervisory contact between OMC
and the Trust or without cause upon 60 days' written notice to the Trust
by OMC in which case neither the Trust nor any Series or class of the
Trust shall have any further right to use the name "Oppenheimer" in its
name or otherwise, and the Trust, its Shareholders, and its officers and
Trustees shall promptly take whatever action may be necessary to change
its name accordingly.
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of the 29th day of November, 1993.
/s/ William A. Baker /s/ Charles Conrad, Jr.
- ----------------------- -------------------------
William A. Baker, Trustee Charles Conrad, Jr., Trustee
197 Desert Lakes Drive 19411 Merion Court
Palm Springs, CA 92264 Huntington Beach, CA 92648
/s/ Ned M. Steel /s/ Robert M. Kirchner
- ---------------------- ----------------------------
Ned M. Steel, Trustee Robert M. Kirchner, Trustee
3236 S. Steele Street 2800 S. University Boulevard
Denver, CO Denver, CO 80210
/s/ Raymond J. Kalinowski /s/ C. Howard, Kast
- ------------------------- --------------------------
Raymond J. Kalinowski, Trustee C. Howard Kast, Trustee
44 Portland Drive 2552 East Alameda
St. Louis, MO Denver, CO 80209
/s/ James C. Swain /s/ Robert G. Avis
- ------------------------ --------------------------
James C. Swain, Trustee Robert G. Avis, Trustee
23554 Wayne's Way 1706 Warson Estates Drive
Golden, CA 90401 St. Louis, MO 63124
/s/ Jon S. Fossel
- ---------------------------
Jon S. Fossel, Trustee
Box 44 - Mead Street
Waccabuc, New York 10597
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Tax-Exempt Bond Fund
We consent to the use in this Post-Effective Amendment No. 12 to the
Registration Statement No. 33-08054 of our reports dated October 21, 1994
on the financial statements of Oppenheimer Intermediate Tax-Exempt Bond
Fund and Oppenheimer Insured Tax-Exempt Bond Fund appearing in the
Statements of Additional Information, which are a part of such
Registration Statement, and to the references to us under the caption
"Financial Highlights" appearing in the Prospectuses, which are also a
part of such Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 25, 1995
AMENDED
BY-LAWS
OF
FIRST TRUST TAX-FREE BOND FUND
Section 1. Agreement and Declaration of Trust
and Principal Office
1.1. Agreement and Declaration of Trust. These By-Laws shall
be subject to the Agreement and Declaration of Trust, as from time to time
in effect (the "Declaration of Trust"), of FIRST TRUST TAX-FREE BOND FUND,
the Massachusetts business trust established by the Agreement and
Declaration of Trust (the "Trust").
1.2. Principal Office of the Trust; Resident Agent. The
principal office of the Trust shall be located in Denver, Colorado. Its
resident agent in Massachusetts shall be CT Corporation System, 2 Oliver
Street, Boston, Massachusetts or such other person as the Trustees may
from time to time select.
Section 2. Shareholders
2.1. Shareholder Meetings. Meetings of the shareholders may
be called at any time by the Trustees, by the Chairman or, if the Trustees
and the Chairman shall fail to call any meeting of shareholders for a
period of 30 days after written application of one or more shareholders
who hold at least 25% of all shares issued and outstanding and entitled
to vote at the meeting, then such shareholders may call such meeting.
Each call of a meeting shall state the place, date, hour and purposes of
the meeting.
2.2. Place of Meetings. All meetings of the shareholders shall
be held at the principal office of the Trust, or, to the extent permitted
by the Declaration of Trust, at such other place within the United States
as shall be designated by the Trustees or the Chairman of the Trust.
2.3. Notice of Meetings. A written notice of each meeting of
shareholders, stating the place, date and hour and the purposes of the
meeting, shall be given at least seven days before the meeting to each
shareholder entitled to vote thereat by leaving such notice with him or
at his residence or usual place of business or by mailing it, postage
prepaid, and addressed to such shareholder at his address as it appears
in the records of the Trust. Such notice shall be given by the secretary
or an assistant secretary or by an officer designated by the Trustees.
No notice of any meeting of shareholders need be given to a shareholder
if a written waiver of notice, executed before or after the meeting by
such shareholder or his attorney thereunto duly authorized, is filed with
the records of the meeting.
2.4. Ballots. No ballot shall be required for any election
unless requested by a shareholder present or represented at the meeting
and entitled to vote in the election.
2.5. Proxies and Voting. Shareholders entitled to vote may
vote either in person or by proxy in writing, which proxies shall be filed
with the secretary or other person responsible to record the proceedings
of the meeting before being voted. Unless otherwise specifically limited
by their terms, such proxies shall entitle the holders thereof to vote at
any adjournment of such meeting but shall not be valid after the final
adjournment of such meeting. At all meetings of shareholders, unless the
voting is conducted by inspectors, all questions relating to the
qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided by the Chairman of the meeting.
Section 3. Trustees
3.1. Committees and Advisory Board. The Trustees may appoint
from their number an executive committee and other committees. Any such
committee may be abolished and reconstituted at any time and from time to
time by the Trustees. Except as the Trustees may otherwise determine, any
such committee may make rules for conduct of its business.
3.2. Regular Meetings. Regular meetings of the Trustees may
be held without call or notice at such places and at such times as the
Trustees may from time to time determine, provided that notice of the
first regular meeting following any such determination shall be given to
absent Trustees. A regular meeting of the Trustees may be held without
call or notice immediately after and at the same place as any meeting of
the shareholders.
3.3. Special Meetings. Special meetings of the Trustees may
be held at any time and at any place designated in the call of the
meeting, when called by the Chairman or by two or more Trustees,
sufficient notice thereof being given to each Trustee by the secretary or
an assistant secretary or by the officer or one of the Trustees calling
the meeting.
3.4. Notice. It shall be sufficient notice to a Trustee to
send notice by mail at least three days or by telegram at least twenty-
four hours before the meeting addressed to the Trustee at his or her usual
or last known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before or after the
meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Neither notice of a
meeting nor a waiver of a notice need specify the purposes of the meeting.
3.5. Quorum. At any meeting of the Trustees a majority of the
Trustees then in office shall constitute a quorum. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be held
as adjourned without further notice.
3.6. Composition of Board. During the term this Section of the
By-Laws is in effect, no person shall be elected to serve as a member of
the Board, and the Board is prohibited from taking any action to nominate,
elect or propose any person to serve as a Board member, if his election
would then cause the Board not to be in compliance with the standards set
forth in Section 15 (f) (1) (a) of the Investment Company Act of 1940, as
amended (the "Act"), as such Section of the Act may be amended from
time to time. During the term this Section of the By-Laws is in effect,
any Board member who becomes an "interested person" (as defined in the
Act) and thereby causes the composition of the Board not to be in
compliance with the standards set forth in Section 15 (f) (1) (a) of the
Act, as such Section of the Act may be amended from time to time, shall
cease automatically, immediately upon the existence of such status as an
"interested person," to be qualified to serve as a Board member and shall
cease to be a Board member, without any further action required on the
part of the remaining Board members or the shareholders to remove such
Board member from office. This Section of the By-Laws may be altered or
repealed only by a vote of a majority of the outstanding shares of the
Trust but shall expire automatically and cease to be of any effect on such
date as is three years from the closing of the Asset Sale Agreement among
Clayton Brown & Associates, Inc., Clayton Brown Advisors, Inc., Clayton
Brown Financial & Advertising Services, Inc. and Oppenheimer Management
Corporation.
3.7. Composition of Board. During the term this Section of the
By-Laws is in effect, and with respect to the Plan and Agreement of Merger
herein below identified, no person shall be elected to serve as a member
of the Board, and the Board is prohibited from taking any action to
nominate, elect or propose any person to serve as a Board member, if his
election would then cause the Board not to be in compliance with standards
set forth in Section 15 (f) (1) (a) of the Investment Company Act of 1940,
as amended (the "Act"), as such Section of the Act may be amended from
time to time. During the term this Section of the By-Laws is in effect,
any Board member who becomes an "interested person" (as defined in the
Act) and thereby causes the composition of the Board not to be in
compliance with the standards set forth in Section 15 (f) (1) (a) of the
Act, as such Section of the Act may be amended from time to time, shall
cease automatically, immediately upon the existence of such status as an
"interested person," to be qualified to serve as a Board member and shall
cease to be a Board member, without any further action required on the
part of the remaining Board members or the shareholders to remove such
Board member from office. This Section of the By-Laws may be altered or
repealed only by a vote of a majority of the outstanding shares of the
Trust but shall expire automatically and cease to be of any effect on such
date as is three years from the closing of the Plan and Agreement of
Merger among mercantile House (Overseas) Limited, Oppenheimer Acquisition
Corp., OAC Merger Corp., and Maximum Holdings, Inc.
Section 4. Officers and Agents
4.1. Enumeration; Qualification. The officers of the Trust
shall be a Chairman of the Board, a president, a treasurer, a secretary
and such other officers, if any, as the Trustees from time to time may in
their discretion elect or appoint. The Trust may also have such agents,
if any, as the Trustees from time to time may in their discretion appoint.
Any officer may be but none need be a Trustee or shareholder.
4.2. Powers. Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers herein and
in the Declaration of Trust set forth, such duties and powers as are
commonly incident to his or her office as if the Trust were organized as
a Massachusetts business corporation and such other duties and powers as
the Trustees may from time to time designate.
4.3. Election. The Chairman, the president, the treasurer and
the secretary shall be elected annually by the Trustees at their last
meeting in each calendar year or at such other meeting in such year as the
Trustees shall determine. Other officers or agents, if any, may be
elected or appointed by the Trustees at said meeting or at any other time.
4.4. Tenure. The Chairman, president, treasurer and secretary
shall hold office until the first meeting of Trustees in each calendar
year and until their respective successors are chosen and qualified, or
in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each officer shall hold office and each agent shall retain
his or her authority at the pleasure of the Trustees.
4.5. Chairman of the Board. The Chairman of the Board of
Trustees shall be the chief executive officer of the Trust; shall, subject
to the control of the Trustees, have general charge and supervision of the
Trust; shall preside at all meetings of the shareholders and of the
Trustees at which he is present; and shall see that all orders and
resolutions of the Board of Trustees are carried into effect (sometimes
referred to herein as the "Chairman").
4.6. President and Vice Presidents. The president shall be the
chief administrative officer of the Trust. The president shall at the
request or in the absence or disability of the Chairman exercise the
powers of the Chairman and shall perform such other duties and have such
other powers as the Trustees shall prescribe from time to time. Any vice
president shall at the request or in the absence or disability of the
president exercise the powers of the president and perform such other
duties and have such other powers as shall be designated from time to time
by the Trustees.
4.7. Treasurer and Controller. The treasurer shall be the
chief financial officer of the Trust and subject to any arrangement made
by the Trustees with a bank or trust company or other organization as
custodian or transfer or shareholder services agent, shall be in charge
of its valuable papers and shall have such other duties and powers as may
be designated from time to time by the Trustees or by the Chairman. The
treasurer shall also be the chief accounting officer of the Trust and
shall have the duties and power prescribed herein for the controller. Any
assistant treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.
4.8. Secretary and Assistant Secretaries. The secretary shall
record all proceedings of the shareholders and the Trustees in books to
be kept therefor, which books shall be kept at the principal office of the
Trust. In the absence of the secretary from any meeting of shareholders
or Trustees, an assistant secretary or if there be none or he or she is
absent, a temporary clerk chosen at the meeting shall record the
proceedings thereof in the aforesaid books.
Section 5. Resignations and Removals
Any Trustee or officer may resign at any time by delivering his
or her resignation in writing to the Chairman of the Board, the president
or the secretary or to a meeting of the Trustees. The Trustees may remove
any officer elected or appointed by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee,
officer, or advisory board member resigning, and no officer or advisory
board member removed shall have any right to any compensation for any
period following his or her resignation or removal, or any right to
damages on account of such removal.
Section 6. Vacancies
A vacancy in the office of Trustee shall be filled in accordance
with the Declaration of Trust. Vacancies resulting from the death,
resignation, incapacity or removal of any officer may be filled by the
Trustees. Each successor of any such officer shall hold office for the
unexpired term, and in the case of the Chairman, the president, the
treasurer and the secretary, until his or her successor is chosen and
qualified, or in each case until he or she sooner dies, resigns, is
removed or becomes disqualified.
Section 7. Shares of Beneficial Interest
7.1. Share Certificates. No certificates certifying the
ownership of shares shall be issued except as the Trustees may otherwise
authorize. In the event that the Trustees authorize the issuance of share
certificates, subject to the provisions of Section 7.3, each shareholder
shall be entitled to a certificate stating the number of shares owned by
him or her, in such form as shall be prescribed from time to time by the
Trustees. Such certificate shall be signed by the Chairman, the
President or a Vice President and by the Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary. Such signatures may be facsimiles if
the certificate is signed by a transfer or shareholder services agent or
by a registrar, other than a Trustee, officer or employee of the Trust.
In case any officer who has signed or whose facsimile signature has been
placed on such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the Trust with the same
effect as if he or she were such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the
transfer or shareholder services agent may either issue receipts therefor
or may keep accounts upon the books of the Trust for the record holders
of such shares, who shall in either case be deemed, for all purposes
hereunder, to be the holders of certificates for such shares as if they
had accepted such certificates and shall be held to have expressly
assented and agreed to the terms hereof.
7.2. Loss of Certificates. In the case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as the
Trustees may prescribe.
7.3. Discontinuance of Issuance of Certificates. The Trustees
may at any time discontinue the issuance of share certificates and may,
by written notice to each shareholder, require the surrender of share
certificates to the Trust for cancellation. Such surrender and
cancellation shall not affect the ownership of shares in the Trust.
Section 8. Record Date
The Trustees may fix in advance a time, which shall not be more
than 60 days before the date of any meeting of shareholders or the date
for the payment of any dividend or making of any other distribution to
shareholders, as the record date for determining the shareholders having
the right to notice and to vote at such meeting and any adjournment
thereof or the right to receive such dividend or distribution, and in such
case only shareholders of record on such record date shall have such
right, notwithstanding any transfer of shares on the books of the Trust
after the record date.
Section 9. Seal
The seal of the Trust shall, subject to alteration by the
Trustees, consist of a flat-faced circular die with the word
"Massachusetts" together with the name of the Trust and the year of its
organization, cut or engraved thereon; but, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its
absence shall not impair the validity of, any document, instrument or
other paper executed and delivered by or on behalf of the Trust.
Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other obligations
made, accepted or endorsed by the Trust shall be executed, by the Chairman
or the President or by one of the Vice Presidents or by the Treasurer or
by whomsoever else shall be designated for that purpose by the vote of the
Trustees and need not bear the seal of the Trust.
Section 11. Fiscal Year
The fiscal year of the Trust shall end on such date in each year
as the Trustees shall from time to time determine.
Section 12. Amendments
These By-Laws may be amended or repealed, in whole or in part,
by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such majority.
August, 1990
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 10th day of October, 1990, by and between FIRST TRUST
TAX-FREE BOND FUND, a Massachusetts business trust (hereinafter referred
to as the "Fund"), and OPPENHEIMER MANAGEMENT CORPORATION (hereinafter
referred to as "OMC").
WHEREAS, the Fund is an open-end, diversified management investment
company registered as such with the Securities and Exchange Commission
(the "Commission") pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), and OMC is a registered investment adviser.
WHEREAS, the Fund wishes to employ OMC as investment adviser of the Fund
for that series of the Fund's shares called the INSURED SERIES (the
"Series") (hereinafter, the term "Fund" shall refer to the Fund and such
Series, as the context may require) on the terms and conditions set forth
below;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as
follows:
1. General Provision.
(a) The Fund hereby employs OMC and OMC hereby undertakes to act
as the investment adviser of the Insured Series of the Fund and to perform
for the Fund such other duties and functions as are hereinafter set forth.
OMC shall, in all matters, give to the Fund and the Fund's Board of
Trustees the benefit of its best judgment, effort, advice and
recommendations and shall, at all times conform to, and use its best
efforts to enable the Fund to conform to (i) the provisions of the
Investment Company Act and any rules or regulations thereunder; (ii) any
other applicable provisions of state or Federal law; (iii) the provisions
of the Declaration of Trust and By-Laws of the Fund as amended from time
to time; (iv) policies and determinations of the Board of Trustees of the
Fund; (v) the fundamental policies and investment restrictions of the Fund
as reflected in the Fund's registration statement under the Investment
Company Act or as such policies may, from time to time, be amended by the
Fund's shareholders; and (vi) the Prospectus and Statement of Additional
Information of the Fund in effect from time to time. The appropriate
officers and employees of OMC shall be available upon reasonable notice
for consultation with any of the Trustees and officers of the Fund with
respect to any matters dealing with the business and affairs of the Fund
including the valuation of portfolio securities of the Fund which
securities are either not registered for public sale or not traded on any
securities market.
(b) At its option, OMC may appoint a subadviser to perform all
or such responsibilities of OMC under this Agreement as shall be delegated
by OMC to such subadviser, provided, however, that the appointment of any
subadviser and the assumption by such subadviser of any responsibilities
of OMC shall be subject to the approval of the Board of Trustees of the
Fund, and, to the extent necessary, the shareholders of the Series. OMC
agrees to give the Fund prompt written notice of the termination of, or
any notice to terminate, any subadviser agreement.
2. Investment Management.
(a) OMC shall, subject to the direction and control by the
Fund's Board of Trustees, (i) regularly provide investment advice and
recommendations to the Fund with respect to its investments, investment
policies and the purchase and sale of securities; (ii) supervise
continuously the investment program of the Fund and the composition of its
portfolio and determine what securities shall be purchased or sold by the
Fund; and (iii) arrange, subject to the provisions of paragraph 6 hereof,
for the purchase of securities and other investments for the Fund and the
sale of securities and other investments held in the Fund's portfolio.
(b) Provided that the Fund shall not be required to pay any
compensation other than as provided by the terms of this Agreement and
subject to the provisions of paragraph 6 hereof, OMC may obtain investment
information, research or assistance from any other person, firm or
corporation to supplement, update or otherwise improve its investment
management services.
(c) Provided that nothing herein shall be deemed to protect OMC
from willful misfeasance, bad faith or gross negligence in the performance
of its duties, or reckless disregard of its obligations and duties under
this Agreement, OMC shall not be liable for any loss sustained by reason
of good faith errors or omissions in connection with any matters to which
this Agreement relates.
(d) Nothing in this Agreement shall prevent OMC or any officer
thereof from acting as investment adviser for any other person, firm or
corporation or in any way limit or restrict OMC or any of its directors,
officers, stockholders or employees from buying, selling or trading any
securities for its or their own account or for the account of others for
whom it or they may be acting, provided that such activities will not
adversely affect or otherwise impair the performance by OMC of its duties
and obligations under this Agreement.
3. Other Duties of OMC.
OMC shall, at its own expense, provide and supervise the
activities of all administrative and clerical personnel as shall be
required to provide effective administration for the Fund, including the
compilation and maintenance of such records with respect to its operations
as may reasonably be required; the preparation and filing of such reports
with respect thereto as shall be required by the Commission; composition
of periodic reports with respect to operations of the Fund for its
shareholders; composition of proxy materials for meetings of the Fund's
shareholders; and the composition of such registration statements as may
be required by Federal and state securities laws for continuous public
sale of shares of the Fund. OMC shall, at its own cost and expense, also
provide the Fund with adequate office space, facilities and equipment.
OMC shall, at its own expense, provide such officers for the Fund as the
Fund's Board may request.
4. Allocation of Expenses.
All other costs and expenses of the Fund not expressly assumed
by OMC under this Agreement, or to be paid by the Distributor of the
shares of the Fund, shall be paid by the Fund, including, but not limited
to: (i) interest and taxes; (ii) brokerage commissions; (iii) insurance
premiums for fidelity and other coverage requisite to its operations;
(iv) compensation and expenses of its trustees other than those associated
or affiliated with OMC; (v) legal and audit expenses; (vi) custodian and
transfer agent fees and expenses; (vii) expenses incident to the
redemption of its shares; (viii) expenses incident to the issuance of its
shares against payment therefor by or on behalf of the subscribers thereto
including without limitation the cost of share certificates; (ix) fees and
expenses, other than as hereinabove provided, incident to the registration
under Federal law of shares of the Fund for public sale and for qualifying
additional shares of the Fund for sale under the securities laws of the
various states after the initial registration of the Fund's shares in such
states; (x) expenses of printing and mailing reports, notices and proxy
materials to shareholders of the Fund; (xi) except as noted above, all
other expenses incidental to holding meetings of the Fund's shareholders;
(xii) expenses incurred in connection with the valuation of portfolio
securities and the calculation of its net asset value; (xiii) membership
dues in the Investment Company Institute or any similar organization; and
(xiv) such extraordinary non-recurring expenses as may arise, including
litigation, affecting the Fund and any legal obligation which the Fund may
have to indemnify its officers and trustees with respect thereto. Any
officers or employees of OMC or any entity controlling, controlled by or
under common control with OMC who also serve as officers, trustees or
employees of the Fund shall not receive any compensation from the Fund for
their services.
5. Compensation of OMC.
(a) The Fund agrees to pay OMC and OMC agrees to accept as full
compensation for the performance of all functions and duties on its part
to be performed pursuant to the provisions hereof, a fee computed on the
aggregate net assets of the Fund as of the close of each business day and
payable monthly at the following annual rate:
.450% of the first $100 million of net assets;
.400% of the next $150 million;
.375% of the next $250 million; and
.350% of the net assets in excess of $500 million.
(b) OMC's compensation for any fiscal year of the Fund shall be
reduced by the amount, if any, by which the Series' expenses for such
fiscal year exceed the most stringent applicable expense limitation
prescribed by any statute or regulatory authority of any jurisdiction in
which the Series' shares are qualified for offer and sale, as such
limitation is set forth in the most recent notice thereof furnished by OMC
to the Series. For purposes of this paragraph there shall be excluded
from the computation of the Series' expenses any amount borne directly or
indirectly by the Series which is permitted to be excluded from the
computation of such limitation by such statute or regulatory authority.
If for any month the expenses of the Series properly included in such
calculation exceed 1/12 of the amount permitted annually by such expense
limitation, the payment to OMC for that month shall be reduced or
eliminated, as necessary, and, if necessary, OMC shall reimburse the Fund
for the amount of its fee which exceeds such limitation. Such
computations and payments shall be adjusted at the end of the Fund's
fiscal year so that the aggregate fee payable to OMC for the year is equal
to the fee calculated under subparagraph (a) of this section, reduced by
the amount required so that such fee does not exceed such expense
limitation on an annual basis.
6. Portfolio Transactions and Brokerage.
(a) OMC is authorized, in arranging the purchase and sale of the
Fund's portfolio securities, to employ or deal with such members of
securities or commodities exchanges, brokers or dealers (hereinafter
"broker-dealers") including "affiliated" broker-dealers (as that term is
defined in the Investment Company Act), as may, in its best judgment,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
security price obtainable) of the Fund's portfolio transactions as well
as to obtain, consistent with the provisions of subparagraph (c) of this
paragraph 6, the benefit of such investment information or research as
will be of significant assistance to the performance by OMC of its
investment management functions.
(b) OMC shall select broker-dealers to effect the Fund's
portfolio transactions on the basis of its estimate of their ability to
obtain best execution of particular and related portfolio transactions.
The abilities of a broker-dealer to obtain best execution of particular
portfolio transaction(s) will be judged by OMC on the basis of all
relevant factors and considerations including, insofar as feasible, the
execution capabilities required by the transaction or transactions; the
ability and willingness of the broker-dealer to facilitate the Fund's
portfolio transactions by participating therein for its own account; the
importance to the Fund of speed, efficiency or confidentiality; the
broker-dealer's apparent familiarity with sources from or to whom
particular securities might be purchased or sold; as well as any other
matters relevant to the selection of a broker-dealer for particular and
related transactions of the Fund.
(c) OMC shall have discretion, in the interests of the Fund, to
allocate brokerage on the Fund's portfolio transactions to broker-dealers,
other than an affiliated broker-dealer, qualified to obtain best execution
of such transactions who provide brokerage and/or research services (as
such services are defined in Section 28(e)(3) of the Securities Exchange
Act of 1934) for the Fund and/or other accounts for which OMC or its
affiliates exercise "investment discretion" (as that term is defined in
Section 3(a)(35) of the Securities Exchange Act of 1934) and to cause the
Fund to pay such broker-dealers a commission for effecting a portfolio
transaction for the Fund that is in excess of the amount of commission
another broker-dealer adequately qualified to effect such transaction
would have charged for effecting that transaction, if OMC determines, in
good faith, that such commission is reasonable in relation to the value
of the brokerage and/or research services provided by such broker-dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of OMC or its affiliates with respect to the accounts as
to which they exercise investment discretion. In reaching such
determination, OMC will not be required to place or attempt to place a
specific dollar value on the brokerage and/or research services provided
or being provided by such broker-dealer. In demonstrating that such
determinations were made in good faith, OMC shall be prepared to show that
all commissions were allocated for purposes contemplated by this Agreement
and that the total commissions paid by the Fund over a representative
period selected by the Fund's trustees were reasonable in relation to the
benefits to the Fund.
(d) OMC shall have no duty or obligation to seek advance
competitive bidding for the most favorable commission rate applicable to
any particular portfolio transactions or to select any broker-dealer on
the basis of its purported or "posted" commission rate but will, to the
best of its ability, endeavor to be aware of the current level of the
charges of eligible broker-dealers and to minimize the expense incurred
by the Fund for effecting its portfolio transactions to the extent
consistent with the interests and policies of the Fund as established by
the determinations of the Board of Trustees of the Fund and the provisions
of this paragraph 6.
(e) The Fund recognizes that an affiliated broker-dealer (i) may
act as one of the Fund's regular brokers so long as it is lawful for it
so to act; (ii) may be a major recipient of brokerage commissions paid by
the Fund; and (iii) may effect portfolio transactions for the Fund only
if the commissions, fees or other remuneration received or to be received
by it are determined in accordance with procedures contemplated by any
rule, regulation or order adopted under the Investment Company Act for
determining the permissible level of such commissions.
(f) Subject to the foregoing provisions of this paragraph 6, OMC
may also consider sales of shares of the Fund and the other funds advised
by OMC and its affiliates as a factor in the selection of broker-dealers
for its portfolio transactions.
7. Duration.
This Agreement will take effect on the date first set forth
above. Unless earlier terminated pursuant to paragraph 9 hereof, this
Agreement shall continue in effect until December 31, 1991, and thereafter
from year to year, so long as such continuance shall be approved at least
annually by the Fund's Board of Trustees, including the vote of the
majority of the trustees of the Fund who are not parties to this Agreement
or "interested person" (as defined in the Investment Company Act) of any
such party, cast in person at a meeting called for the purpose of voting
on such approval, or by the holders of a "majority" (as defined in the
Investment Company Act) of the outstanding voting securities of the Fund
and by such a vote of the Fund's Board of Trustees.
8. Disclaimer of Shareholder and Trustee Liability.
OMC understands and agrees that this Agreement is executed and
delivered by the Fund by its duly authorized officer, and OMC is expressly
put on notice of the limitation of shareholder and Trustee liability set
forth in the Fund's Declaration of Trust which is on file with the
Secretary of the Commonwealth of Massachusetts, and that this Agreement
has been executed by and on behalf of the Fund by its officer as such
officer and not individually, and the obligations of the Fund under this
Agreement are not binding upon any shareholder, officer or Trustee of the
Fund individually, but bind only the assets and property of the Fund or
a particular series of the Fund.
9. Termination.
This Agreement may be terminated: (i) by OMC at any time without
penalty upon sixty days' written notice to the Fund (which notice may be
waived by the Fund); or (ii) by the Fund at any time without penalty upon
sixty days' written notice to OMC (which notice may be waived by OMC)
provided that such termination by the Fund shall be directed or approved
by the vote of a majority of all of the trustees of the Fund then in
office or by the vote of the holders of a "majority" of the outstanding
voting securities of the Fund (as defined in the Investment Company Act).
10. Assignment or Amendment.
This Agreement may not be amended or the rights of OMC hereunder
sold, transferred, pledged or otherwise in any manner encumbered without
the affirmative vote or written consent of the holders of a "majority" of
the outstanding voting securities of the Fund. This Agreement shall
automatically and immediately terminate in the event of its "assignment,"
as defined in the Investment Company Act.
11. Definitions.
The terms and provisions of this Agreement shall be interpreted
and defined in a manner consistent with the provisions and definitions
contained in the Investment Company Act.
FIRST TRUST TAX-FREE BOND FUND
Attest:
By: /s/ Robert G. Galli
---------------------------
Robert G. Galli, Vice President
OPPENHEIMER MANAGEMENT CORPORATION
Attest:
By: /s/ Katherine P. Feld
-----------------------------
Katherine P. Feld
Vice President & Secretary
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 10th day of October, 1990, by and between FIRST TRUST
TAX-FREE BOND FUND, a Massachusetts business trust (hereinafter referred
to as the "Fund"), and OPPENHEIMER MANAGEMENT CORPORATION (hereinafter
referred to as "OMC").
WHEREAS, the Fund is an open-end, diversified management investment
company registered as such with the Securities and Exchange Commission
(the "Commission") pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), and OMC is a registered investment adviser;
WHEREAS, the Fund wishes to employ OMC as investment adviser of the Fund
for that series of the Fund's shares called the INCOME SERIES (the
"Series") (hereinafter, the term "Fund" shall refer to the Fund and such
Series, as the context may require) on the terms and conditions set forth
below;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as
follows:
1. General Provision.
(a) The Fund hereby employs OMC and OMC hereby undertakes to act as
the investment adviser of the Income Series of the Fund and to perform for
the Fund such other duties and functions as are hereinafter set forth.
OMC shall, in all matters, give to the Fund and the Fund's Board of
Trustees the benefit of its best judgment, effort, advice and
recommendations and shall, at all times conform to, and use its best
efforts to enable the Fund to conform to (i) the provisions of the
Investment Company Act and any rules or regulations thereunder; (ii) any
other applicable provisions of state or Federal law; (iii) the provisions
of the Declaration of Trust and By-Laws of the Fund as amended from time
to time; (iv) policies and determinations of the Board of Trustees of the
Fund; (v) the fundamental policies and investment restrictions of the Fund
as reflected in the Fund's registration statement under the Investment
Company Act or as such policies may, from time to time, be amended by the
Fund's shareholders; and (vi) the Prospectus and Statement of Additional
Information of the Fund in effect from time to time. The appropriate
officers and employees of OMC shall be available upon reasonable notice
for consultation with any of the Trustees and officers of the Fund with
respect to any matters dealing with the business and affairs of the Fund
including the valuation of portfolio securities of the Fund which
securities are either not registered for public sale or not traded on any
securities market.
(b) At its option, OMC may appoint a subadviser to perform all or
such responsibilities of OMC under this Agreement as shall be delegated
by OMC to such subadviser, provided, however, that the appointment of any
subadviser and the assumption by such subadviser of any responsibilities
of OMC shall be subject to the approval of the Board of Trustees of the
Fund, and, to the extent necessary, the shareholders of the Series. OMC
agrees to give the Fund prompt written notice of the termination of, or
any notice to terminate, any subadviser agreement.
2. Investment Management.
(a) OMC shall, subject to the direction and control by the Fund's
Board of Trustees, (i) regularly provide investment advice and
recommendations to the Fund with respect to its investments, investment
policies and the purchase and sale of securities; (ii) supervise
continuously the investment program of the Fund and the composition of its
portfolio and determine what securities shall be purchased or sold by the
Fund; and (iii) arrange, subject to the provisions of paragraph 6 hereof,
for the purchase of securities and other investments for the Fund and the
sale of securities and other investments held in the Fund's portfolio.
(b) Provided that the Fund shall not be required to pay any
compensation other than as provided by the terms of this Agreement and
subject to the provisions of paragraph 6 hereof, OMC may obtain investment
information, research or assistance from any other person, firm or
corporation to supplement, update or otherwise improve its investment
management services.
(c) Provided that nothing herein shall be deemed to protect OMC from
willful misfeasance, bad faith or gross negligence in the performance of
its duties, or reckless disregard of its obligations and duties under this
Agreement, OMC shall not be liable for any loss sustained by reason of
good faith errors or omissions in connection with any matters to which
this Agreement relates.
(d) Nothing in this Agreement shall prevent OMC or any officer
thereof from acting as investment adviser for any other person, firm or
corporation or in any way limit or restrict OMC or any of its directors,
officers, stockholders or employees from buying, selling or trading any
securities for its or their own account or for the account of others for
whom it or they may be acting, provided that such activities will not
adversely affect or otherwise impair the performance by OMC of its duties
and obligations under this Agreement.
3. Other Duties of OMC.
OMC shall, at its own expense, provide and supervise the activities
of all administrative and clerical personnel as shall be required to
provide effective administration for the Fund, including the compilation
and maintenance of such records with respect to its operations as may
reasonably be required; the preparation and filing of such reports with
respect thereto as shall be required by the Commission; composition of
periodic reports with respect to operations of the Fund for its
shareholders; composition of proxy materials for meetings of the Fund's
shareholders; and the composition of such registration statements as may
be required by Federal and state securities laws for continuous public
sale of shares of the Fund. OMC shall, at its own cost and expense, also
provide the Fund with adequate office space, facilities and equipment.
OMC shall, at its own expense, provide such officers for the Fund as the
Fund's Board may request.
4. Allocation of Expenses.
All other costs and expenses of the Fund not expressly assumed by OMC
under this Agreement, or to be paid by the Distributor of the shares of
the Fund, shall be paid by the Fund, including, but not limited to: (i)
interest and taxes; (ii) brokerage commissions; (iii) insurance premiums
for fidelity and other coverage requisite to its operations; (iv)
compensation and expenses of its trustees other than those associated or
affiliated with OMC; (v) legal and audit expenses; (vi) custodian and
transfer agent fees and expenses; (vii) expenses incident to the
redemption of its shares; (viii) expenses incident to the issuance of its
shares against payment therefor by or on behalf of the subscribers thereto
including without limitation the cost of share certificates; (ix) fees and
expenses, other than as hereinabove provided, incident to the registration
under Federal law of shares of the Fund for public sale and for qualifying
additional shares of the Fund for sale under the securities laws of the
various states after the initial registration of the Fund's shares in such
states; (x) expenses of printing and mailing reports, notices and proxy
materials to shareholders of the Fund; (xi) except as noted above, all
other expenses incidental to holding meetings of the Fund's shareholders;
(xii) expenses incurred in connection with the valuation of portfolio
securities and the calculation of its net asset value; (xiii) membership
dues in the Investment Company Institute or any similar organization; and
(xiv) such extraordinary non-recurring expenses as may arise, including
litigation, affecting the Fund and any legal obligation which the Fund may
have to indemnify its officers and trustees with respect thereto. Any
officers or employees of OMC or any entity controlling, controlled by or
under common control with OMC who also serve as officers, trustees or
employees of the Fund shall not receive any compensation from the Fund for
their services.
5. Compensation of OMC.
(a) The Fund agrees to pay OMC and OMC agrees to accept as full
compensation for the performance of all functions and duties on its part
to be performed pursuant to the provisions hereof, a fee computed on the
aggregate net assets of the Fund as of the close of each business day and
payable monthly at the following annual rate:
.500% of the first $100 million of net assets;
.450% of the next $150 million;
.425% of the next $250 million; and
.400% of the net assets in excess of $500 million.
(b) OMC's compensation for any fiscal year of the Fund shall be
reduced by the amount, if any, by which the Series' expenses for such
fiscal year exceed the most stringent applicable expense limitation
prescribed by any statute or regulatory authority of any jurisdiction in
which the Series' shares are qualified for offer and sale, as such
limitation is set forth in the most recent notice thereof furnished by OMC
to the Series. For purposes of this paragraph there shall be excluded
from the computation of the Series' expenses any amount borne directly or
indirectly by the Series which is permitted to be excluded from the
computation of such limitation by such statute or regulatory authority.
If for any month the expenses of the Series properly included in such
calculation exceed 1/12 of the amount permitted annually by such expense
limitation, the payment to OMC for that month shall be reduced or
eliminated, as necessary, and, if necessary, OMC shall reimburse the Fund
for the amount of its fee which exceeds such limitation. Such
computations and payments shall be adjusted at the end of the Fund's
fiscal year so that the aggregate fee payable to OMC for the year is equal
to the fee calculated under subparagraph (a) of this section, reduced by
the amount required so that such fee does not exceed such expense
limitation on an annual basis.
6. Portfolio Transactions and Brokerage.
(a) OMC is authorized, in arranging the purchase and sale of the
Fund's portfolio securities, to employ or deal with such members of
securities or commodities exchanges, brokers or dealers (hereinafter
"broker-dealers") including "affiliated" broker-dealers (as that term is
defined in the Investment Company Act), as may, in its best judgment,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
security price obtainable) of the Fund's portfolio transactions as well
as to obtain, consistent with the provisions of subparagraph (c) of this
paragraph 6, the benefit of such investment information or research as
will be of significant assistance to the performance by OMC of its
investment management functions.
(b) OMC shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities
of a broker-dealer to obtain best execution of particular portfolio
transaction(s) will be judged by OMC on the basis of all relevant factors
and considerations including, insofar as feasible, the execution
capabilities required by the transaction or transactions; the ability and
willingness of the broker-dealer to facilitate the Fund's portfolio
transactions by participating therein for its own account; the importance
to the Fund of speed, efficiency or confidentiality; the broker-dealer's
apparent familiarity with sources from or to whom particular securities
might be purchased or sold; as well as any other matters relevant to the
selection of a broker-dealer for particular and related transactions of
the Fund.
(c) OMC shall have discretion, in the interests of the Fund, to
allocate brokerage on the Fund's portfolio transactions to broker-dealers,
other than an affiliated broker-dealer, qualified to obtain best execution
of such transactions who provide brokerage and/or research services (as
such services are defined in Section 28(e)(3) of the Securities Exchange
Act of 1934) for the Fund and/or other accounts for which OMC or its
affiliates exercise "investment discretion" (as that term is defined in
Section 3(a)(35) of the Securities Exchange Act of 1934) and to cause the
Fund to pay such broker-dealers a commission for effecting a portfolio
transaction for the Fund that is in excess of the amount of commission
another broker-dealer adequately qualified to effect such transaction
would have charged for effecting that transaction, if OMC determines, in
good faith, that such commission is reasonable in relation to the value
of the brokerage and/or research services provided by such broker-dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of OMC or its affiliates with respect to the accounts as
to which they exercise investment discretion. In reaching such
determination, OMC will not be required to place or attempt to place a
specific dollar value on the brokerage and/or research services provided
or being provided by such broker-dealer. In demonstrating that such
determinations were made in good faith, OMC shall be prepared to show that
all commissions were allocated for purposes contemplated by this Agreement
and that the total commissions paid by the Fund over a representative
period selected by the Fund's trustees were reasonable in relation to the
benefits to the Fund.
(d) OMC shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any
particular portfolio transactions or to select any broker-dealer on the
basis of its purported or "posted" commission rate but will, to the best
of its ability, endeavor to be aware of the current level of the charges
of eligible broker-dealers and to minimize the expense incurred by the
Fund for effecting its portfolio transactions to the extent consistent
with the interests and policies of the Fund as established by the
determinations of the Board of Trustees of the Fund and the provisions of
this paragraph 6.
(e) The Fund recognizes that an affiliated broker-dealer (i) may act
as one of the Fund's regular brokers so long as it is lawful for it so to
act; (ii) may be a major recipient of brokerage commissions paid by the
Fund; and (iii) may effect portfolio transactions for the Fund only if the
commissions, fees or other remuneration received or to be received by it
are determined in accordance with procedures contemplated by any rule,
regulation or order adopted under the Investment Company Act for
determining the permissible level of such commissions.
(f) Subject to the foregoing provisions of this paragraph 6, OMC may
also consider sales of shares of the Fund and the other funds advised by
OMC and its affiliates as a factor in the selection of broker-dealers for
its portfolio transactions.
7. Duration.
This Agreement will take effect on the date first set forth above.
Unless earlier terminated pursuant to paragraph 9 hereof, this Agreement
shall continue in effect until December 31, 1991, and thereafter from year
to year, so long as such continuance shall be approved at least annually
by the Fund's Board of Trustees, including the vote of the majority of the
trustees of the Fund who are not parties to this Agreement or "interested
person" (as defined in the Investment Company Act) of any such party, cast
in person at a meeting called for the purpose of voting on such approval,
or by the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding voting securities of the Fund and by such a vote
of the Fund's Board of Trustees.
8. Disclaimer of Shareholder and Trustee Liability.
OMC understands and agrees that this Agreement is executed and
delivered by the Fund by its duly authorized officer, and OMC is expressly
put on notice of the limitation of shareholder and Trustee liability set
forth in the Fund's Declaration of Trust which is on file with the
Secretary of the Commonwealth of Massachusetts, and that this Agreement
has been executed by and on behalf of the Fund by its officer as such
officer and not individually, and the obligations of the Fund under this
Agreement are not binding upon any shareholder, officer or Trustee of the
Fund individually, but bind only the assets and property of the Fund or
a particular series of the Fund.
9. Termination.
This Agreement may be terminated: (i) by OMC at any time without
penalty upon sixty days' written notice to the Fund (which notice may be
waived by the Fund); or (ii) by the Fund at any time without penalty upon
sixty days' written notice to OMC (which notice may be waived by OMC)
provided that such termination by the Fund shall be directed or approved
by the vote of a majority of all of the trustees of the Fund then in
office or by the vote of the holders of a "majority" of the outstanding
voting securities of the Fund (as defined in the Investment Company Act).
10. Assignment or Amendment.
This Agreement may not be amended or the rights of OMC hereunder
sold, transferred, pledged or otherwise in any manner encumbered without
the affirmative vote or written consent of the holders of a "majority" of
the outstanding voting securities of the Fund. This Agreement shall
automatically and immediately terminate in the event of its "assignment,"
as defined in the Investment Company Act.
11. Definitions.
The terms and provisions of this Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions
contained in the Investment Company Act.
FIRST TRUST TAX-FREE BOND FUND
Attest:
By: /s/ Robert G. Galli
-----------------------------
Robert G. Galli, Vice President
OPPENHEIMER MANAGEMENT CORPORATION
Attest:
By: Katherine P. Feld
-------------------------
Katherine P. Feld
Vice President & Secretary
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER TAX-EXEMPT BOND FUND
AND
OPPENHEIMER FUND MANAGEMENT, INC.
Date: October 13, 1992
OPPENHEIMER FUND MANAGEMENT, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER TAX-EXEMPT BOND FUND, a Massachusetts business
trust (the "Trust") is registered as an investment company under
the Investment Company Act of 1940 (the "1940 Act"), and an
indefinite number of one or more classes of its shares of
beneficial interest ("Shares") of Oppenheimer Intermediate Tax-
Exempt Bond Fund and Oppenheimer Insured Tax-Exempt Bond Fund, each
of which is a series of the Trust and each of which is individually
herein referred to as a "Fund", have been registered under the
Securities Act of 1933 (the "1933 Act") to be offered for sale to
the public in a continuous public offering in accordance with the
terms and conditions set forth in the Prospectus and Statement of
Additional Information ("SAI") included in the Trust's Registration
Statement as it may be amended from time to time (the "current
Prospectus and/or SAI").
In this connection, the Trust desires that your firm (the
"General Distributor") act in a principal capacity as General
Distributor for the sale and distribution of Shares which have been
registered as described above and of any additional Shares which
may become registered during the term of this Agreement. You have
advised the Trust that you are willing to act as such General
Distributor, and it is accordingly agreed by and between us as
follows:
1. Appointment of the Distributor. The Trust hereby
appoints you as the sole General Distributor, pursuant to the
aforesaid continuous public offering of its Shares, and the Trust
further agrees from and after the date of this Agreement, that it
will not, without your consent, sell or agree to sell any Shares
otherwise than through you, except (a) the Trust may itself sell
shares without sales charge as an investment to the officers,
trustees or directors and bona fide present and former full-time
employees of the Trust, the Trust's Investment Adviser and
affiliates thereof, and to other investors who are identified in
the current Prospectus and/or SAI as having the privilege to buy
Shares at net asset value; (b) the Trust may issue shares in
connection with a merger, consolidation or acquisition of assets on
such basis as may be authorized or permitted under the 1940 Act;
(c) the Trust may issue shares for the reinvestment of dividends
and other distributions of the Trust if permitted by the current
Prospectus and/or SAI; and (d) the Trust may issue shares as
underlying securities of a unit investment trust if such unit
investment trust has elected to use Shares as an underlying
investment; provided that in no event as to any of the foregoing
exceptions shall Shares be issued and sold at less than the then-
existing net asset value.
2. Sale of Shares. You hereby accept such appointment and
agree to use your best efforts to sell Shares, provided, however,
that when requested by the Trust at any time because of market or
other economic considerations or abnormal circumstances of any
kind, you will suspend such efforts. The Trust may also withdraw
the offering of Shares at any time when required by the provisions
of any statute, order, rule or regulation of any governmental body
having jurisdiction. It is understood that you do not undertake to
sell all or any specific number of Shares.
3. Sales Charge. Shares shall be sold by you at net asset
value plus a front-end sales charge not in excess of 8.5% of the
offering price but which front-end sales charge shall be
proportionately reduced or eliminated for larger sales and under
other circumstances, in each case on the basis set forth in a
Fund's current Prospectus and/or SAI. The redemption proceeds of
shares offered and sold at net asset value with or without a front-
end sales charge may be subject to a contingent deferred sales
charge ("CDSC") under the circumstances described in the current
Prospectus and/or SAI. You may reallow such portion of the front-
end sales charge to dealers or cause payment (which may exceed the
front-end sales charge, if any) of commissions to brokers through
which sales are made, as you may determine, and you may pay such
amounts to dealers and brokers on sales of shares from your own
resources (such dealers and brokers shall collectively include all
domestic or foreign institutions eligible to offer and sell the
Shares), and in the event a Fund has more than one class of Shares
outstanding, then you may impose a front-end sales charge and/or a
CDSC on Share of one class that is different from the charges
imposed on Shares of a Fund's other class(es), in each case as set
forth in the current Prospectus and/or SAI, provided the front-end
sales charge and CDSC to the ultimate purchaser do not exceed the
respective levels set forth for such category or purchaser in a
Fund's current Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall have the right to
accept or reject orders for the purchase of Shares
at your discretion. Any consideration which you
may receive in connection with a rejected purchase
order will be returned promptly.
(b) You agree promptly to issue or to cause the duly
appointed transfer or shareholder servicing agent
of the Trust to issue as your agent confirmations
of all accepted purchase orders and to transmit a
copy of such confirmations to the Trust. The net
asset value of all Shares which are the subject of
such confirmations, computed in accordance with the
applicable rules under the 1940 Act, shall be a
liability of the General Distributor to the Trust
to be paid promptly after receipt of payment from
the originating dealer or broker (or investor, in
the case of direct purchases) and not later than
eleven business days after such confirmation even
if you have not actually received payment from the
originating dealer or broker or investor. In no
event shall the General Distributor make payment to
the Trust later than permitted by applicable rules
of the National Association of Securities Dealers,
Inc.
(c) If the originating dealer or broker shall fail to
make timely settlement of its purchase order in
accordance with applicable rules of the National
Association of Securities Dealers, Inc., or if a
direct purchaser shall fail to make good payment
for shares in a timely manner, you shall have the
right to cancel such purchase order and, at your
account and risk, to hold responsible the
originating dealer or broker, or investor. You
agree promptly to reimburse a Fund for losses
suffered by it that are attributable to any such
cancellation, or to errors on your part in relation
to the effective date of accepted purchase orders,
limited to the amount that such losses exceed
contemporaneous gains realized by a Fund for either
of such reasons with respect to other purchase
orders.
(d) In the case of a canceled purchase for the account
of a directly purchasing shareholder, the Trust
agrees that if such investor fails to make you
whole for any loss you pay to a Fund on such
canceled purchase order, a Fund will reimburse you
for such loss to the extent of the aggregate
redemption proceeds of any other shares of a Fund
owned by such investor, on your demand that a Fund
exercises its right to claim such redemption
proceeds. The Trust shall register or cause to be
registered all Shares sold to you pursuant to the
provisions hereof in such names and amounts as you
may request from time to time and the Trust shall
issue or cause to be issued certificates evidencing
such Shares for delivery to you or pursuant to your
direction if and to the extent that the shareholder
account in question contemplates the issuance of
such certificates. All Shares when so issued and
paid for, shall be fully paid and non-assessable by
the Trust (which shall not prevent the imposition
of any CDSC that may apply) to the extent set forth
in the current Prospectus and/or SAI.
5. Repurchase of Shares
(a) In connection with the repurchase of Shares, you
are appointed and shall act as Agent of the Trust.
You are authorized, for so long as you act as
General Distributor of the Trust, to repurchase,
from authorized dealers, certificated or
uncertificated shares of the Fund ("Shares") on the
basis of orders received from each dealer
("authorized dealer") with which you have a dealer
agreement for the sale of Shares and permitting
resales of Shares to you, provided that such
authorized dealer, at the time of placing such
resale order, shall represent (i) if such Shares
are represented by certificate(s), that
certificate(s) for the Shares to be repurchased
have been delivered to it by the registered owner
with a request for the redemption of such Shares
executed in the manner and with the signature
guarantee required by the then-currently effective
prospectus of a Fund, or (ii) if such Shares are
uncertificated, that the registered owner(s) has
delivered to the dealer a request for the
redemption of such Shares executed in the manner
and with the signature guarantee required by the
then-currently effective prospectus of a Fund.
(b) You shall (a) have the right in your discretion to
accept or reject orders for the repurchase of
Shares; (b) promptly transmit confirmations of all
accepted repurchase orders; and (c) transmit a copy
of such confirmation to the Trust, or, if so
directed, to any duly appointed transfer or
shareholder servicing agent of the Trust. In your
discretion, you may accept repurchase requests made
by a financially responsible dealer which provides
you with indemnification in form satisfactory to
you in consideration of your acceptance of such
dealer's request in lieu of the written redemption
request of the owner of the account; you agree that
the Trust shall be a third party beneficiary of
such indemnification.
(c) Upon receipt by the Trust or its duly appointed
transfer or shareholder servicing agent of any
certificate(s) (if any has been issued) for
repurchased Shares and a written redemption request
of the registered owner(s) of such Shares executed
in the manner and bearing the signature guarantee
required by the then-currently effective Prospectus
or SAI of a Fund, a Fund will pay or cause its duly
appointed transfer or shareholder servicing agent
promptly to pay to the originating authorized
dealer the redemption price of the repurchased
Shares (other than repurchased Shares subject to
the provisions of part (d) of Section 5 of this
Agreement) next determined after your receipt of
the dealer's repurchase order.
(d) Notwithstanding the provisions of part (c) of
Section 5 of this Agreement, repurchase orders
received from an authorized dealer after the
determination of a Fund's redemption price on a
regular business day will receive that day's
redemption price if the request to the dealer by
its customer to arrange such repurchase prior to
the determination of a Fund's redemption price that
day complies with the requirements governing such
requests as stated in the current Prospectus and/or
SAI.
(e) You will make every reasonable effort and take all
reasonably available measures to assure the
accurate performance of all services to be
performed by you hereunder within the requirements
of any statute, rule or regulation pertaining to
the redemption of shares of a regulated investment
company and any requirements set forth in the then-
current Prospectus and/or SAI of a Fund. You shall
correct any error or omission made by you in the
performance of your duties hereunder of which you
shall have received notice in writing and any
necessary substantiating data; and you shall hold
the Trust harmless from the effect of any errors or
omissions which might cause an over-or under-
redemption of a Fund's Shares and/or an excess of
non-payment of dividends, capital gains
distributions, or other distributions.
(f) In the event an authorized dealer initiating a
repurchase order shall fail to make delivery or
otherwise settle such order in accordance with the
rules of the National Association of Securities
Dealers, Inc., you shall have the right to cancel
such repurchase order and, at your account and
risk, to hold responsible the originating dealer.
In the event that any cancellation of a Share
repurchase order or any error in the timing of the
acceptance of a Share repurchase order shall result
in a gain or loss to a Fund, you agree promptly to
reimburse a Fund for any amount by which any loss
shall exceed then-existing gains so arising.
6. 1933 Act Registration. The Trust has delivered to you a
copy of its current Prospectus and SAI. The Trust agrees that it
will use its best efforts to continue the effectiveness of the
Registration Statement under the 1933 Act. The Trust further
agrees to prepare and file any amendments to its Registration
Statement as may be necessary and any supplemental data in order to
comply with the 1933 Act. The Trust will furnish you at your
expense with a reasonable number of copies of the prospectus and
SAI and any amendments thereto for us in connection with the sale
of Shares.
7. 1940 Act Registration. The Trust has already registered
under the 1940 Act as an investment company, and it will use its
best efforts to maintain such registration and to comply with the
requirements of the 1940 Act.
8. State Blue Sky Qualification. At your request and
expense, the Trust will take such steps as may be necessary and
feasible to qualify Shares for sale in states, territories or
dependencies of the United States, the District of Columbia, the
Commonwealth of Puerto Rico and in foreign countries, in accordance
with the laws thereof, and at the Trust's expense to renew or
extend any such qualification; provided, however, that the Trust
shall not be required to qualify shares or to maintain the
qualification of shares in any jurisdiction where it shall deem
such qualification disadvantageous to the Trust.
9. Duties of Distributor. You agree that.
(a) Neither you nor any of your officers will take any
long or short position in the Shares, but this
provision shall not prevent you or your officers
from acquiring Shares for investment purposes only;
and
(b) You shall furnish to the Trust any pertinent
information required to be inserted with respect to
you as General Distributor within the purview of
the Securities Act of 1933 in any reports or
registration required to be filed with any
governmental authority; and
(c) You will not make any representations inconsistent
with the information contained in the current
Prospectus and/or SAI; and
(d) You shall maintain such records as may be
reasonably required for the Trust or its transfer
or shareholder servicing agent to respond to
shareholder requests or complaints, and to permit
the Trust to maintain proper accounting records,
and you shall make such records available to the
Trust and its transfer agent or shareholder
servicing agent upon request; and
(e) In performing under this Agreement, you shall
comply with all requirements of a Fund's current
prospectus and/or SAI and all applicable laws,
rules and regulations with respect to the purchase,
sale and distribution of Shares.
10. Allocation of Costs. The Trust shall pay the cost of
printing and mailing of sufficient copies of its Prospectus and SAI
as shall be required for annual distribution to its shareholders,
and the fees for registering Shares for sale under federal
securities laws. The Trust shall also pay the cost of preparing
and using Share certificates, all expenses of any Federal or state
original issue tax or transfer tax payable upon the issuance,
transfer or delivery of Shares by the Fund to the Distributor, the
costs and expenses in connection with the composition, printing and
mailing of notices, proxies and proxy statements and other
communications to shareholders in connection with meetings of
shareholders, and of annual, semi-annual or other reports of
communications sent to shareholders. Other than as set forth in
this paragraph 10, you shall pay the expenses normally attributable
to the sale of Shares, other than as paid under the Trust's
Distribution Plan under Rule 12b-1 of the 1940 Act, including the
cost of printing and mailing of the Prospectus (other than those
furnished to existing shareholders) and any sales literature used
by you in the public sale of the Shares and for initially
registering shares under state blue sky laws pursuant to
paragraph 8.
11. Duration. This Agreement shall take effect on the date
first written above, and shall supersede any an all prior General
Distributor's Agreements by and among the Trust and you. Unless
earlier terminated pursuant to paragraph 12 hereof, this Agreement
shall remain in effect until September 30, 1993. This Agreement
shall continue in effect from year to year thereafter, provided
that such continuance shall be specifically approved at least
annually: (a) by the Trust's Board of Trustees or by vote of a
majority of the voting securities of a Fund; and (b) by the vote of
a majority of the Trustees, who are not parties to this Agreement
of "interested persons" (as defined the 1940 Act) of any such
person, cast in person at a meeting called for the purpose of
voting on such approval.
12. Termination. This Agreement may be terminated (a) by the
General Distributor at any time without penalty by giving sixty
days' written notice (which notice may be waived by the Trust); (b)
by the Trust at any time without penalty upon sixty days' written
notice to the General Distributor (which notice may be waived by
the General Distributor); or (c) by mutual consent of the Trust and
the General Distributor, provided that such termination by the
Trust shall be directed or approved by the by the Board of Trustees
of the Trust or by the vote of the holders of a "majority" of the
outstanding voting securities of the Trust. In the event this
Agreement is terminated by the Trust, the General Distributor shall
be entitled to be paid the CDSC under paragraph 3 hereof on the
redemption proceeds of Shares sold prior to the effective date of
such termination.
13. Assignment. This Agreement may not be amended or changed
except in writing and shall be binding upon and shall enure to the
benefit of the parties hereto and their respective successors;
however, this Agreement shall not be assigned by either party and
shall automatically terminate upon assignment.
14. Disclaimer of Shareholder Liability. The General
Distributor understands and agrees that the obligations of the
Trust under this Agreement are not binding upon any Trustee or
shareholder of the Trust personally, but bind only the Trust and
the Trust's property; the General Distributor represents that it
has notice of the provisions of the Declaration of Trust of the
Trust disclaiming Trustee and shareholder liability for acts or
obligations of the Trust.
15. Section Headings. The heading of each section is for
descriptive purposes only, and such headings are not be to
construed or interpreted as part of this Agreement.
If the foregoing is in accordance with your understanding, so
indicate by signing in the space provided below.
OPPENHEIMER TAX-EXEMPT BOND FUND
By: /s/ James C. Swain
------------------------
James C. Swain, Chairman
Accepted:
OPPENHEIMER FUND MANAGEMENT, INC.
By: /s/ George C. Bowen
-------------------------------
George C. Bowen, Vice President
CUSTODIAN AGREEMENT
I. DESIGNATION OF CUSTODIAN
FIRST TRUST TAX-FREE BOND FUND (the "Fund"), an open-end series
management investment company organized as a Massachusetts business trust
having an office at 3410 South Galena Street, Denver, Colorado 80231,
hereby designates Citibank, N.A. (the "Bank"), a National Banking
Corporation incorporated under the laws of the United States of America
and having an office at 399 Park Avenue, New York, NY 10043, as Custodian
of the Property (as defined in Section III) of the Fund. By its
acceptance, the Bank agrees to serve as such Custodian upon the terms and
conditions set forth in this Agreement.
II. DELIVERY OF DOCUMENTS
(a) Documents delivered. The Fund delivers to the Bank herewith the
following documents:
(i) Resolutions authorizing the appointment of the Bank as the
custodian of the Fund and the execution by the Fund of
this Agreement;
(ii) copies, certified by the appropriate officer or officers,
of the charter and the by-laws of the Fund; and
(iii) incumbency and signature certificates identifying and
containing the signatures of the officers of the Fund
and/or other signatories authorized to sign
Instructions (as defined below) on behalf of the
Fund, specifying the number of signatures required
for Instructions and identifying the trustees and the
other officers, if any, of the Fund.
(b) Changes. In case of any change or changes affecting any of the
documents described in this Section II, the Fund shall deliver new
documents to the Bank, to the extent necessary to reflect such change or
changes. Unless and until such new documents are delivered and an
authorized signatory of the Bank has issued a receipt for the delivery
thereof, the Bank shall be under no obligation to act (or omit to act),
in accordance with any such change, nor shall the Bank be liable for
failure so to act (or omit to act), but the Bank shall act in accordance
with the documents which such new documents are to replace.
(c) Additional information. The Fund shall furnish to the Bank any
additional information and documentation relating to the Fund and the
Fund's management company (if any) which the Bank may reasonably request.
(d) "Resolutions" defined. The term "Resolutions," as used in this
Agreement, means (i) if the trustees of the Fund are authorized to
transact business of the Fund by signing an instrument setting forth such
business, resolutions signed by the number of trustees of the Fund so
authorized and (ii) in all other cases, copies of resolutions of the
trustees of the Fund, certified by the appropriate officer or officers of
the Fund.
(e) "Depository" defined. The term "Depository" as used in this
Agreement means any "system" or "person" contemplated by Section 17 (f)
of the Investment Company Act of 1940 in which the Banks may, under that
Section and any rules, regulations or orders thereunder, deposit all or
part of the Fund's securities with the consent of the Fund, and to which
the Fund has consented.
(f) "Receipt" of payment defined. Whenever this Agreement
contemplates receipt of payment by the Bank, such receipt shall mean
receipt by the Bank of (i) cash or check of a national securities exchange
certified or issued by a bank (which term, as used in this Agreement,
shall include a trust company and a Federal Reserve Bank), or a
Depository; or (ii) written or telegraphic advice from a bank, registered
clearing agency or a Depository that funds have or will be credited to the
account of the Fund or the Bank at one or more of the foregoing; or (iii)
a bank wire from a correspondent bank of the Bank; or (iv) payment other
than the foregoing, if specified in Instructions relating to the
transaction in question.
III. THE PROPERTY
(a) Property delivered. The Fund shall deliver the Property, or
cause the Property to be delivered, to the Bank or a Depository, subject
to the provisions of this Agreement. Upon delivery, the securities at the
time included in the Property, unless held by a Depository, shall be in
bearer form or shall be registered in the name of a nominee of the Bank
(with or without indication of fiduciary status) or shall be properly
endorsed and in form for transfer satisfactory to the Bank.
(b) "Property" defined. The term "Property," as used in the
Agreement, means:
(i) any and all securities and other property which the Fund
may from time to time deposit, or cause to be deposited,
with the Bank or a Depository,
(ii) all income, including option premiums, in respect of any
of such securities or other property,
(iii) all proceeds of the sale of any such securities or
other property,
(iv) all proceeds, of the sale of securities issued by the
Fund, which are received by the Bank from time to time
from the Fund or its transfer agent, and
(v) any stocks, shares, bonds, financial futures contracts,
indexes, debentures, notes, mortgages and other
obligations, and any certificates, receipts, warrants or
other financial instruments representing absolute or
conditional rights or options to receive, purchase,
subscribe for or sell the same or evidencing or
representing any other rights or interests therein, or any
other property or assets, irrespective of their form, the
name by which they may be described, whether considered as
securities or commodities, or the character or form of the
entities by which they are issued or created.
(c) Holding of Securities. The Bank shall hold in a separate
account, and physically segregate at all times from those of any other
persons, firms or corporations, pursuant to the provisions hereof, all
securities which are part of the Property, other than those held by a
Depository. All such securities are to be held or disposed of by the
Bank, or by a Depository, subject at all times to Instructions pursuant
to the terms of this Agreement. The Bank shall have no power or authority
to (or to cause a Depository to) assign, hypothecate, pledge, or otherwise
dispose of any such securities except pursuant to Instructions and only
for the account of the Fund, as set forth in Section VI of this Agreement.
The Bank will, upon receipt of proper Instructions, segregate
cash and/or securities of the Fund into escrow accounts in the name of a
designated broker or exchange clearing organization which is a party with
the Fund to an agreement relating to the financial futures contracts
described in paragraph (b) of this Section III. The Bank will confirm the
terms of such escrow to the broker or clearing organization and provide
a copy of such confirmation to the Fund. The Bank will not, however, make
any payment or transfer from any such escrow account except to the named
broker or clearing organization upon receipt of written notice by such
broker or clearing organization representing that the Fund is in default
of a specified obligation for which the escrow was established and setting
forth the amount represented to be due by the Fund to such broker or
clearing organization.
IV. REGISTRATION OF SECURITIES:
COMMERCIAL ACCOUNTS; OVERDRAFTS; RECEIPT OF SECURITIES
(a) Registration of securities. The securities included in the
Property shall, unless held by a Depository, be held in bearer form or in
the name of one or more nominees of the Bank.
(b) Commercial accounts. The Bank shall open and maintain a
commercial account or accounts in the name of the Fund, subject only to
the Bank's draft or order after receipt of Instructions, and the Bank
shall deposit in such account or accounts all cash constituting, or which
is to become, part of the Property. The Bank shall make payments of cash
to or for the account, of the Fund from such cash accounts only pursuant
to Section VI of this Agreement or as otherwise specifically provided in
this Agreement.
(c) Overdrafts. At the sole discretion of the Bank, the Bank will
permit the incurrence of cash overdrafts in any account of the Fund with
the Bank (i) in aid of the timely and orderly clearance of securities
transactions in the course of the Fund's normal business, trading and
investment operations or (ii) in connection with payments to Shareholders
all or a portion of whose shares in the Fund have been or are being
Redeemed, but only upon receipt by the Bank of Instructions to do so. The
Bank shall not be obligated to incur or permit the incurrence of any such
overdraft and the Bank shall not be liable to the Fund or any third party
for any refusal, failure or neglect on the part of the Bank to incur or
permit the incurrence of any such overdraft. As used in this Agreement,
the terms "Redeem" and "Redemption" refer to redemptions, purchases and
other acquisitions by the Fund of shares in the Fund from Shareholders,
and the term "Shareholder" means a shareholder or former shareholder of
the Fund.
(d) Payment of overdrafts; interest. The Fund shall pay to the
Bank, and the Bank may deduct from the Property, the amount of each
overdraft referred to in Section IV (c), together with interest thereon
at such rate as the Bank may from time to time notify to the Fund (such
rate not to exceed the rate at such time charged by the Bank to its prime
commercial borrowers by more than 1-1/2 percentage points), upon the
Bank's demand therefore.
(e) "Receipt" of securities defined. Whenever this Agreement
contemplates receipt of securities by the Bank, such receipt shall mean
receipt by the Bank of (i) securities in bearer form or in form of
transfer satisfactory to the Bank; or (ii) written or telegraphic advice
from a Depository that securities have been credited to the account of the
Fund or the Bank at the Depository; or (iii) written or telegraphic advice
from any bank or responsible commercial agent doing business in the United
States or any foreign country and designated by the Bank as its agent for
this purpose that such securities have been deposited with it.
V. INSTRUCTIONS
(a) "Instructions" defined. As used in this Agreement, the term
"Instructions" means instructions, with respect to any specified
transaction (except as otherwise indicated in this Agreement), in writing
or by telecopier, tested telegram, cable or Telex or by facsimile sending
device, signed in the name of the Fund by the requisite number of Fund
officers or authorized signatories of the Fund as the Board of Trustees
or executive committee of the Fund has authorized to give the particular
class of Instructions in question. Different persons may be authorized
to give Instructions for different purposes. Instructions may be general
or specific in terms.
(b) Instructions consistent with charter, etc. Although the Bank
may take cognizance of the provisions of the charter and by-laws of the
Fund as from time to time amended, the Bank may assume that any
Instructions received hereunder are not in any way inconsistent with any
provision of such charter or by-laws or any vote, resolution or proceeding
of the shareholders or the trustees, or of any committee of either
thereof, of the Fund.
(c) Authority of Fund's signatories. The incumbency and signature
certificates most recently delivered to the Bank pursuant to Section II
(a) (iii) shall constitute evidence of the authority of the signatories
designated therein to act on behalf of the Fund.
VI. TRANSACTIONS REQUIRING INSTRUCTIONS
(a) Payments of cash. The Bank shall make payments of cash to or
for the account of the Fund only as follows or as otherwise specifically
provided in this Agreement:
(i) upon receipt of Instructions to do so, the Bank shall make
payment for and receive all securities purchased for the
account of the Fund (insofar as cash is available, or
insofar as the Bank is willing to permit an overdraft or
overdrafts in the Fund's account or accounts with the
Bank, for such purpose), payment to be made only upon
receipt of the securities, provided that, if any such
securities (or any securities to be received free for the
Fund's account) are not received by the Bank on or before
the thirtieth day following the date of the Bank's receipt
of the Instructions to receive such securities, the Bank
may, but need not, consider such Instructions cancelled
unless and until the Bank received further Instructions
reinstating such original Instructions;
(ii) upon receipt of Instructions to do so, the Bank shall make
payment to a bank of principal of or interest on bank
loans made to the Fund;
(iii) upon receipt of Instructions to do so, the Bank shall
make payments for the Redemption of shares of the
Fund (subject to the provisions of Section VIII (a)
of this Agreement);
(iv) upon receipt of Instructions to do so, the Bank shall make
payments for the payment of dividends, taxes, management
or supervisory fees or operating expenses (including,
without limitation thereto, fees for legal, accounting and
auditing services);
(v) upon receipt of Instructions to do so, the Bank shall make
payments in connection with conversion, exchange or
surrender of securities owned or subscribed to by the Fund
held by or to be received by the Bank;
(vi) upon receipt of Instructions to do so, the Bank will make
payments pursuant to a specified agreement for loaning the
Fund's securities (which Instructions shall identify the
loan agreement under which the payment is to be made, the
date of payment, the name of the borrower and the
securities to be received, if any in exchange for the
payment); and
(vii) upon receipt of Instructions to do so, the Bank shall
make payment for other proper corporate purposes, but
only on receipt of a Resolution certified as set
forth in the definition of that term and
countersigned by another officer of the Fund
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
such payment is to be made.
(b) Transfer, Exchange or Delivery of Securities. The bank shall
transfer, exchange or deliver securities which are part of the Property
only as follows: upon receipt of Instructions to do so, the Bank shall
deliver (or cause a Depository to deliver) securities against such payment
or other consideration or written receipt therefor as shall be specified
in such Instructions, in the following cases: (i) upon sales of such
securities for the account of the Fund and receipt by the Bank of payment
therefor; (ii) for examination by a broker selling for the account of the
Fund in accordance with street delivery custom; (iii) for payment when
such Property has been called, redeemed or retired, or has otherwise
become payable at the option of the holder thereof; (iv) in exchange for,
or for conversion into, other securities and/or cash pursuant to any plan
of merger, consolidation or reorganization, recapitalization, readjustment
or other rearrangement of the issuer; (v) for deposit with a
reorganization committee or protective committee pursuant to a deposit
agreement; (vi) for conversion into or exchange for other securities, or
into or for other securities and cash, in accordance with any conversion
or exchange right or option relating thereto; (vii) in the case of
warrants, rights or other similar securities, upon the exercise thereof;
(viii) in the case of interim receipts or temporary securities, upon the
surrender thereof for definitive securities; (ix) upon the exercise of
a call written by the Fund for which the Bank (or a Depository) has
written an escrow receipt (which term, as used in this Agreement, shall
include an option guarantee letter), subject to the provisions of Section
VI(e); (x) for the deposit of securities in a Depository; (xi) for the
purpose of Redemption in kind of shares of the Fund (subject to Section
VIII(a) of this Agreement); (xii) for the purpose of loaning securities
against receipt by the Bank of collateral therefor (the Instructions as
to which shall specify the securities to be delivered, the loan agreement
under which the delivery is to be made, the date of delivery, the name of
the borrower and the amount of collateral to be received in connection
therewith); and (xiii) for other proper corporate purposes. The Bank
shall make a delivery described in Section VI(c)(xiii) only on receipt of
a Resolution certified as set forth in the definition of that term and
countersigned by another officer of the Fund specifying the securities,
setting forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose and naming the person or
persons to whom said delivery is to be made.
(c) Exercise of rights, etc. The Bank shall deal with rights,
warrants and similar securities received by it hereunder only in the
manner and to the extent ordered by Instructions received by the Bank.
(d) Voting. Neither the Bank nor its nominees shall vote any of the
securities included in the Property or authorize the voting of any such
securities or give any consent, approval or waiver with respect thereto,
except as directed by Instructions received by the Bank. The Bank shall
promptly deliver, or cause to be executed and delivered, to the Fund all
notices, proxies and proxy soliciting materials with relation to such
securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund) but
without indicating the manner in which such proxies are to be voted.
(e) Escrow receipts. In accordance with mutually agreed-upon
arrangements and upon receipt of Instructions to do so, the Bank will
execute, or cause a Depository to execute, an escrow receipt relating to
a call written by the Fund upon receipt of payment for the premium
therefor. Such Instructions shall contain all information necessary for
the issuance of such receipts and will authorize the deposit of the
securities named in such Instructions into an escrow account of the Fund.
Securities so deposited into an escrow account will be held by the Bank
or Depository subject to the terms of such escrow receipt. However, the
Bank agrees that it will not deliver, or cause a Depository to deliver,
any securities deposited in an escrow account pursuant to an exercise
notice unless the Bank has received Instructions to do so or (i) the Bank
has duly requested the issuance of such Instructions, (ii)
at least two business days have elapsed since the receipt of such request
by the Fund, and (iii) the Fund has not advised the Bank by Instructions
that it has purchased securities that are to be delivered by the Bank or
a Depository pursuant to the exercise notice. The Fund agrees that it
will not issue any Instructions to the Bank with respect to the Property
which shall conflict with the terms of any escrow receipt executed by the
Bank or any Depository in relation to the Fund and which is then in
effect. The parties understand that the Fund may write calls on
securities ("underlying securities") which are not part of the Property
and issue Instructions to the Bank to execute, or cause a Depository to
execute, an escrow receipt on securities ("convertible securities") which
are, or are to be, part of the Property and are convertible into the
underlying securities. In such event, the Fund agrees that (i) any
Instructions by it as to the execution of the escrow receipt will relate
only to such convertible securities, and (ii) any Instructions by it as
to the delivery of securities relating to such call will relate only to
such convertible securities without responsibility on the part of the Bank
to effect any conversion thereof.
VII. TRANSACTIONS NOT REQUIRING INSTRUCTIONS
(a) Collection of income and other payments. In the absence of
contrary instructions, the Bank shall:
(i) collect and receive, for the account of the Fund, all
income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and
similar items, included or to be included in the Property,
and promptly advise the Fund of such receipt;
(ii) take any action which may be necessary and proper in
connection with the collection and receipt of such income
and other payments and distributions, including (without
limitation) the execution of ownership and exemption
certificates, the presentation of coupons and other
interest items, the presentation for payment of securities
which have become payable as a result of their being
called, redeemed or retired, or otherwise becoming
payable, otherwise than at the option of the holder
thereof, and the endorsement for collection of checks,
drafts and other negotiable instruments; and
(iii) receive and hold for the account of the Fund all
securities received as a distribution on securities
held by the Fund as a result of a stock dividend,
share split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution
of rights or similar securities issued with respect
to any securities of the Fund held by the Bank
hereunder, provided that the Bank shall not be
required to transact any item of business referred to
in this Section VII(a) with respect to a security
which is not covered by a published securities manual
reasonably available to the Custodian Services
Department of the Bank (or the successor to such
Department in the event of any administrative
rearrangement of the Bank) unless and until such
Custodian Services Department (or its successor) has
received a notice specifying (x) the item of business
in question and (y) such additional information as
will permit the Bank to transact such item of
business properly and without unreasonable
inconvenience to such Custodian Services Department
(or its successor).
(b) Cash disbursements. In the absence of contrary Instructions,
the Bank may make cash disbursements for minor expenses in handling
securities and for similar items in connection with the Bank's duties
under this Agreement. The Bank shall promptly advise the Fund of
disbursements so made.
(c) Delivery of information and documents. The Bank shall promptly
deliver to the Fund all information and documents received by the Bank and
relating to the Property including (without limitation) pendency of calls
and maturities of securities and expiration of rights in connection
therewith received by the Bank from issuers of securities being held for
the Fund. With respect to tender or exchange offers, the Bank shall
transmit promptly to the Fund all written information received from
issuers of the securities whose tender or exchange is being sought and
from the party (or his agents) making the tender or exchange offer.
VIII TRANSACTIONS REQUIRING SPECIAL INSTRUCTIONS
(a) Redemptions. Upon receipt of Instructions to do so, the Bank
shall deliver Property in connection with Redemptions (insofar as monies
or, in a case referred to in clause (iii) below, other Property is
available, or insofar as the Bank is willing to permit an overdraft or
overdrafts in the Fund's account or accounts with the Bank for such
purpose), provided that the Instructions covering each Redemption shall
contain (i) the number of shares Redeemed, (ii) the net asset value
(determined pursuant to the regulations of the Fund, as from time to time
amended, which govern determination of net asset value) of such shares on
the effective date of such Redemption and (iii) specification of any
Property other than cash which the Bank is to deliver pursuant thereto.
(b) Extraordinary transactions. In the case of any of the following
transactions, not in the ordinary course of the business of the Fund:
(i) the merger or consolidation of the Fund and another
investment company,
(ii) the sale by the Fund of all or substantially all of its
assets, or
(iii) liquidation of the Fund or dissolution of the Fund
and distribution of its assets,
the Bank shall deliver Property only upon receipt of Instructions and
advice of counsel satisfactory to the Bank (who may be counsel for the
Fund, at the option of the Bank) to the effect that all necessary
corporate action therefor has been taken, or will be taken concurrently
with the Bank's action.
IX. RIGHT TO RECEIVE ADVICE
(a) Advice of Fund. If the Bank shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the
Fund directions or advice, including Instructions where appropriate.
(b) Advice of counsel. If the Bank shall be in doubt as to any
questions of law involved in any action to be taken or omitted by the
Bank, it may request advice from counsel of its own choosing (who may be
counsel for the Fund, at the option of the Bank).
(c) Conflicting advice. In case of conflict between directions,
advice or Instructions received by the Bank pursuant to Section IX(a) and
advice received by the Bank pursuant to Section IX(b), the Bank shall be
entitled to rely on and follow the advice received pursuant to Section
IX(b) alone.
(d) Absolute protection to Bank. The Bank shall be absolutely
protected in any action or inaction which it takes in reliance on any
directions, advice or Instructions received pursuant to Section IX(a) or
(b) or which the Bank, after receipt of any such directions, advice or
Instructions, in good faith believes to be consistent with such
directions, advice or Instructions, as the case may be. However, nothing
in this Section IX shall be construed as imposing upon the Bank any
obligation (i) to seek such directions, advice or Instructions, or (ii)
to act in accordance with such directions or advice when received, unless,
under the terms of another provision of this Agreement, the same is a
condition to the Bank's properly taking or omitting to take such action.
X. STATEMENTS
The Bank shall render to the Fund statements of the transactions in
the accounts of the Fund at the following times: the Bank shall furnish
the Fund both on a daily and a monthly basis with a statement summarizing
all transactions and entries for the account of the Fund. The Bank shall
furnish the Fund at the end of every month with a list of the portfolio
securities held by it or a Depository as custodian for the Fund, adjusted
for all commitments confirmed by the Fund as of such time, certified by
a duly authorized officer of the Bank. The books and records of the Bank
pertaining to its actions under this Agreement shall be open to inspection
and audit at all times by officers of the Fund, its auditors and officers
of its investment adviser.
XI. COMPENSATION
(a) Ordinary services. The Fund shall pay to the Bank, and the Bank
may deduct from the Property, for its services under this Agreement (other
than the services referred to in Section XI(c)) compensation based on a
schedule of charges to be agreed from time to time.
(b) Expenses. The Fund shall reimburse the Bank for all expenses,
taxes and other charges (including, without limitation, interest and other
items charged by brokers in respect of debit balances and delayed
deliveries) paid by the Bank with respect to the property of the Fund, or
incurred by the Bank on behalf of the Fund in the performance of the
Bank's duties hereunder, provided that the Bank shall be entitled to
reimbursement with respect to the fees and disbursements of counsel only
(i) as set forth in Sections XI(c) and XII or (ii) when the Fund breaches
or threatens to breach, or the Fund's management company (if any)
threatens to cause a breach, of this Agreement or when it would reasonably
appear to a man untrained in the law that such a breach exists or is
threatened, to the extent that the fees and disbursements of such counsel
relate to such actual or apparent breach or threatened breach. If the
Bank submits to the Fund a bill for such reimbursement and the Fund does
not, within 15 days after such submission, notify the Bank that the bill
is disapproved and make a reasonable counter-offer in writing, the bill
shall be deemed approved and the Bank may deduct such reimbursement from
the Property.
(c) Extraordinary services. The Fund shall pay to the Bank, and the
Bank may deduct from the Property, for its services as the Fund's agent
in paying a Shareholder consideration, consisting wholly or partially of
property other than cash, in connection with the Redemption of all or any
part of such Shareholder's shares in the Fund compensation equal to 1/10
of 1% of the amount computed by subtracting from the aggregate Redemption
price of such shares the cash, if any, paid to such Shareholder in respect
of such Redemption. Without limiting the generality of the provisions of
Section XI(b),
the Fund shall reimburse to the Bank, and the Bank may deduct from the
Property reimbursement for, the fees and disbursements of the Bank's
counsel attributable to such counsel's services in respect of each such
Redemption.
XII. INDEMNIFICATION
The Fund, as sole owner of the Property, will indemnify the Bank and
each of the Bank's nominees, and hold the Bank and such nominees harmless,
and the Bank may deduct from the Property indemnification, against all
costs, liabilities (including, without limitation, liabilities under the
Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940 and any state and foreign securities and
blue sky laws, all as from time to time amended) and expenses, including
(without limitation) attorney's fees and disbursements, arising directly
or indirectly (i) from the fact that securities included in the Property
are registered in the name of any such nominee, or (ii) without limiting
the generality of the foregoing clause (i), from any action or thing which
the Bank takes or does or omits to take or do, (A) at the request or on
the directions or in reliance on the advice of the Fund, or of the Fund's
management company (if any), or (B) upon Instructions, provided that
neither the Bank nor any of its nominees shall be indemnified against any
liability to the Fund or to its Shareholders (or any expense incident to
such liability) arising out of (x) the Bank's or such nominee's own
willful misfeasance, bad faith, negligence or reckless disregard of its
duties under this Agreement or (y) the Bank's own negligent failure to
perform its duties under Section VII(a)(ii).
XIII. RESPONSIBILITY: COLLECTIONS
(a) Responsibility of Bank. The Bank shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein
or as may be specifically agreed to by the Bank in writing. In the
performance of the Bank's duties hereunder, the Bank shall be obligated
to exercise care and diligence, but the Bank shall not be liable for any
act or omission which does not constitute gross negligence, willful
misfeasance or bad faith on the part of the Bank or reckless disregard by
the Bank of its duties under this Agreement, provided that the Bank shall
be responsible for its own negligent failure to perform any of its duties
under this Agreement. Without limiting the generality of the foregoing
or of any other provisions of this Agreement, the Bank shall not be under
any duty or obligation to inquire into and shall not be liable for or in
respect of (i) the validity or invalidity or authority or lack thereof of
any Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, if any, and which the Bank
reasonably believes to be genuine, or (ii) the validity or invalidity of
the issuance of any securities included or to be included in the Property,
the legality or illegality of the purchase of such securities, or the
propriety or impropriety of the amount paid therefor, or (iii) the
legality or illegality of the sale (or exchange) of any Property or the
propriety or impropriety of the amount for which such Property is sold (or
exchanged), nor shall the Bank be under any duty or obligation to
ascertain whether any property at any time delivered to or held by the
Bank may properly be held by or for the Fund.
(b) Collections. All collections of monies or other property in
respect, or which are to become part, of the Property shall be at the sole
risk of the Fund.
(c) Depositories. In using the facilities of a Depository, the Bank
undertakes to comply with the requirements of Rule 17f-4(d) insofar as the
same apply to a custodian, and shall be responsible for the prompt and
effective enforcement of its rights against the Depository in respect of
the property including the proper replacement of any certificated security
which has been lost, destroyed, wrongfully taken, mislaid or erroneously
delivered while in the custody of the Depository.
XIV. ADVERTISING
No printed or other matter in any language which mentions the Bank's
name other than in the context of the Bank's rights, powers or duties as
the custodian of the Fund shall be issued by the Fund or on the Fund's
behalf unless the Bank shall first have been given notice thereof.
XV. EFFECTIVE DATE; TERMINATION; SUCCESSOR; DISSOLUTION
(a) Effective date. This Agreement shall become effective as of the
date entered in the final paragraph of this Agreement and shall continue
in effect until terminated in the manner set forth below.
(b) Termination. Either party to this Agreement may terminate this
Agreement, without penalty, upon at least two weeks' prior written notice
to the other. The effective date of such notice shall be specified in
such notice, except that, at the option of the party receiving the notice
of termination, the effective date of termination may be postponed, by
notice (given prior to the effective date specified in the termination
notice) to the other party, to a date not more than sixty days from the
date of the notice of termination, provided that the Fund shall have no
right so to postpone the effective date of termination if the Fund is at
the time in default under the provisions of Section XIV.
(c) Successor custodian. The Bank shall, in the event of such
termination, deliver the Property, or cause it to be delivered, to any new
custodian which may be designated in Instructions received by the Bank.
(d) Successor custodian not available. In the event that no new
custodian can be found by the Fund at the time of termination of this
Agreement, the Fund shall, before authorizing the delivery of the Property
to anyone other than a successor custodian, submit to its shareholders the
question of whether the Fund shall be liquidated or shall function without
a custodian. The Bank shall, pending the finding of such a new custodian,
the dissolution of the Fund or the decision of the Fund's shareholders
that the Fund shall function without a custodian, continue to hold the
Property in safekeeping subject to the terms of this Agreement, but the
Bank will not carry out any transaction requiring Instructions, the
Instructions with respect to which are received by the Bank subsequent to
the effective date of the termination of this Agreement, or issue any
advice provided for by Section VII or any statement provided for by
Section X, provided that, upon its receipt of Instructions to do so, the
Bank will deliver the Property to a new custodian (which shall be a
person, firm or corporation having aggregate capital, surplus and
undivided profits of at least $2,000,000 as shown by its last published
report, and meeting such other requirements as may be imposed by
applicable law), distribute the Property (after liquidating any part of
the Property which does not consist of cash, if such Instructions so
order) upon dissolution of the Fund or deliver the Property to any other
person if the Fund's shareholders have decided that the Fund shall
function without a custodian. The Bank shall not be liable to the Fund
or any third party on account of any incidents or omissions occurring
during such period of safekeeping except those arising through the Bank's
own willful misconduct or negligence.
(e) Dissolution; no successor custodian. Upon its receipt of
Instructions to do so, the Bank shall distribute the Property (after
liquidating any part of the Property which does not consist of cash, if
such Instructions so order) upon dissolution of the Fund or deliver the
Property to any person who is to take the place of the Fund's custodian
if the Fund's shareholders have decided that the Fund shall function
without a custodian, provided, in either case, that such Instructions
shall be accompanied by a certified copy of the minutes of the meeting of
the Fund's shareholders at which the same was approved.
XVI. NOTICES
All notices and other communications, including Instructions
(collectively referred to as "Notices" in this Section XVI), hereunder
shall be in writing or by tested telegram, cable or Telex. Notices shall
be addressed (i) if to the Bank, at the Bank's address set forth at the
head of this Agreement, marked for the attention of the Custodian Services
Department (or its successor, referred to in Section VII(a)), (ii) if to
the Fund, at the address of the Fund set forth at the head of this
Agreement, or (iii) if to either of the foregoing, at such other address
as shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice and the address
of the addressee thereof are, at the time of sending, more than 100 miles
apart, the Notice shall be sent by airmail, in which case it shall be
deemed given three days after it is sent, or by tested telegram, cable or
Telex, in which case it shall be deemed given immediately, and, if the
location of the sender of a Notice and the address of the addressee
thereof are, at time of sending, not more than 100 miles apart, the Notice
may be sent by first-class mail, in which case it shall be deemed given
two days after it is sent, or by messenger, in which case it shall be
deemed given on the day it is delivered, or by tested telegram or Telex,
in which case it shall be deemed given immediately, provided that the Bank
shall in no event be liable in respect of any delay in its actual receipt
of any Notice. All postage, cable, telegraph and Telex charges arising
from the Sending of a Notice hereunder shall be paid by the sender.
XVII. DEPOSITORIES; ASTRA
The Fund authorizes the Bank, for any securities held hereunder, to
use the services of any United States central securities depository
permitted to perform such services for registered investment companies and
their custodians under Rule 17f-4 under the Act ("System"), the use of
which is subject to the terms and conditions of this Section XVII.
The terms of the use of any System under this Agreement shall be
governed by the terms and conditions of Rule 17f-4 under the Investment
Company Act of 1940, to which terms and conditions the parties hereto
agree as if set forth in full in this Agreement. The parties also agree
that such terms and conditions shall supersede any conflicting provisions
of this Agreement. Nothing herein shall be deemed to require that the
Custodian ascertain, as a condition to the use of any System, that any
required action has been taken by the Board of Trustees of the Fund.
If and to the extent that a System permits the withdrawal of a
security from that System in certificate form and the Fund requires a
certificate for making a loan or otherwise, the Bank shall take all
necessary and appropriate action to obtain such certificate upon receipt
of an officer's certificate requesting the same.
The liability of the Bank to the Fund in connection with the use of
any System shall be subject to the provisions of Section XIII of this
Agreement.
The Bank agrees that it will effectively enforce such rights as it
may have against any System and will use its best efforts, and will
enforce any such rights as it may have against any System, to require that
such System shall take all appropriate and necessary steps to obtain
replacement of any certificated security in such System which has been
lost, apparently destroyed, wrongfully taken, mislaid or erroneously
delivered while in the custody of the System.
The Fund can have dial-up access to its own custodian account in the
Bank's computerized accounting system (the "ASTRA System") in order to:
(i) accept or reject executed securities transactions (other than in
foreign securities) as submitted for confirmation by brokers and dealers
through the Institutional Delivery ("ID") System of Depository Trust
Company ("DTC") in which the Bank is a participant; and (ii) issue
instructions for the settlement of accepted transactions by the Bank
(through the ID System of DTC or otherwise) pursuant to the terms of this
Agreement.
1. The Bank will provide such current instructions and password as
may be necessary for the Fund to have dial-up access to its own custody
account in the ASTRA System, which instructions and password, including
any changed instructions or password, will be delivered personally or by
certified mail, return receipt requested, to such officer(s) of the Fund
as may, from time to time, be designated in a written instruction given
by the Fund in accordance with Article V of this Agreement and signed by
the Secretary, Assistant Secretary or Treasurer of the Fund.
2. The Bank will change such instructions or password as frequently
as may reasonably be requested by the Fund for security reasons.
3. The Bank is obligated and authorized to act and rely upon any
instructions received by it through the ASTRA System, as fully as in the
case of instructions given pursuant to Article V of this Agreement,
regardless of whether such instructions have been authorized by the Fund,
provided that such instructions are accompanied by the code password and
account identification information furnished, from time to time, by the
Bank to the Fund as hereinabove provided. Any such instructions received
by the Bank through the ASTRA System will be considered "Instructions" for
all purposes under this Agreement, including without limitation the
indemnification provisions of Article XII hereof.
4. Both the Fund and the Bank will keep for at least five years and
produce on request, in machine readable form, copies of any instructions
sent or received pursuant to the provisions hereof.
XVIII. MISCELLANEOUS
(a) Amendments, etc. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the party
against which enforcement of such change or waiver is sought. The
headings in this Agreement are for convenience of reference only, are not
a part of this Agreement and shall be disregarded in connection with any
interpretation of all or any part of this Agreement.
(b) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto, and supersedes all prior
agreements and understandings, relating to the subject matter hereof,
provided that the parties hereto may embody in one or more separate
documents their agreement, if any, with respect to delegated and/or oral
Instructions.
(c) Successors and assigns; assignment. All terms of this Agreement
shall be binding upon the respective successors and assigns of the parties
hereto, the Fund's management company (if any) and the Fund's shareholders
and shall inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns, provided that this Agreement
shall not be assignable in whole or in part by either party hereto without
the written consent of the other party hereto.
(d) Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which shall be deemed an original but all
of which, taken together, shall constitute one and the same Agreement.
(e) Disclaimer of Shareholder Liability. The Bank understands that
the obligations of the Fund under this Agreement are not binding upon any
trustee or shareholder of the Fund personally, but bind only the Fund and
the Fund's property. The Bank represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
(f) Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by the hands of their signatories thereunto duly authorized
as of the 1st day of June, 1990.
CITIBANK, N.A.
By: _________________________
-----------------------------
(Name and Title)
FIRST TRUST TAX-FREE BOND FUND
By: /s/ Robert G. Galli
---------------------------
Robert G. Galli, Vice President
MUTUAL FUND AGREEMENT
This Agreement is made this 21st day of October, 1986 by and between
First Trust Tax-Free Bond Fund, a Massachusetts business trust with
principal offices at 300 West Washington Street, Chicago, Illinois 60606
(the "Trust") and FINANCIAL GUARANTY INSURANCE COMPANY, a New York stock
insurance company, with principal offices at 175 Water Street, New York,
New York 10038 ("Financial Guaranty"), with reference to the following
facts:
A. The Trust is a diversified, open-end investment company (mutual
fund), organized as a Massachusetts business trust. The Trust currently
consists of two series, the First Trust Tax-Free Bond Fund-Insured Series,
and may be increased to include other insured series (collectively the
"Funds"). Each of the Funds issues a separate series of the Trust's
shares and will maintain a totally separate investment portfolio.
B. The Funds will invest, under normal circumstances, primarily in
securities of states, territories, and possessions of the United States
and the District of Columbia and their political subdivisions, agencies,
and instrumentalities, the interest on which is exempt from federal income
taxes (referred to herein as "municipal securities" or "bonds"). The
Trust desires to have certain of the Funds' investments in municipal
securities insured by portfolio insurance guaranteeing their scheduled
payment of interest and of principal while held by the Funds.
C. Financial Guaranty is in the business of providing insurance and
financial guaranties for a variety of investment instruments. Financial
Guaranty desires to provide to the Trust the portfolio insurance described
in the preceding paragraph. (B)
In consideration of the mutual covenants and conditions set forth
below, the Trust and Financial Guaranty agree as follows:
1. Agreement to Insure.
1.1 Financial Guaranty agrees to insure the municipal securities
purchased in accordance with the terms of this Agreement from time to time
by the Trust for the Funds, which municipal securities Financial Guaranty
has approved in advance of such purchase as eligible for insurance.
1.2 The Trust may, but shall not be required to, purchase insurance
from Financial Guaranty for nay municipal securities covered by insurance
obtained other than by the Trust and applicable to the securities
purchased by the Trust, regardless of the insurance company providing such
insurance.
1.3 The Trust may, but shall not be required to, purchase insurance
from Financial Guaranty on any municipal securities where the payment of
interest and principal is guaranteed by an agency or instrumentality of
the U.S. Government.
2. Issuance of Master Policies
2.1 Financial Guaranty agrees to issue a master insurance policy
(the "Master Policy") for each Fund on the date the Trust informs
Financial Guaranty it desires to have Financial Guaranty issue a Master
Policy for a given Fund. (The form of the Master Policy is attached
hereto as Exhibit "1.") A schedule will be issued by Financial Guaranty
and attached to and made a part of each Master Policy which lists all
bonds insured in a given Fund ("Schedule A"). Each Schedule A will list
the following information for each insured bond in the given Fund: item
number, par value, full name of issuer, full name of bond, interest rate,
dated date of bond, stated maturity date of bond, CUSIP number, secondary
market premium rate, annual premium rate, annual premium amount, date bond
first insured, and date bond sold ( including, for all purposes of the
Agreement, municipal securities not delivered or paid prior to maturity).
As bonds are added to and/or sold from the Funds, Financial Guaranty
agrees to issue updated addendums to Schedule A reflecting such deletions
and/or additions. Financial Guaranty agrees to deliver to the custodian
of the Fund updated Schedule A's on a monthly basis for each Fund. In
addition, Financial Guaranty agrees to provide to the Trust for each Fund
on a monthly basis a summary which contains the same information specified
above for inclusion in Schedule A but on a cumulative basis for all
insured bonds which have been sold by such Fund.
2.2. Financial Guaranty's obligation to insure any particular bond
which it has agreed to insure is subject only to the Trust (or its nominee
or the nominee of its custodian) becoming the owner thereof (i) on or
before the 100th day following the date on which the Trust purchases such
bond (the "Purchase Date") or (ii) on or before the 150th day following
the Purchase Date in the case of "when, as and if issued" bonds which the
issuer thereof has failed timely to deliver in definitive form to the
original purchasers thereof. So long as the Trust becomes the owner on
or before the 100th or 150th day following the Purchase Date, as the case
may be, such municipal security shall be insured as of the Purchase Date.
3. Bond Purchase Allocations.
3.1 Financial Guaranty agrees to provide the Trust, by a method
capable of producing a written record, with an allocation of bonds which
the Trust may purchase and have insured by Financial Guaranty during any
calendar quarter. Once Financial Guaranty makes the allocation, it agrees
not to reduce an allocation for any bond during the course of that quarter
for which the allocation is made; provided, however, that Financial
Guaranty reserves the right to remove from the allocation lists of all its
clients, any bond the credit quality of which has, in the sole judgment
of Financial Guaranty, materially deteriorated after it made the quarterly
allocations.
4. Premium Payment.
4.1 Financial Guaranty agrees to provide the Trust on the fifth
business day of each month with a premium payment statement for each Fund
containing an accounting of the premium due for that month, including
adjustments for (i) any premium refund due the Trust because of the sale
of bond(s) by a Fund during the previous month (including bonds for which
Secondary Market Insurance has been purchased), (ii) any additional
premium due Financial Guaranty because of a purchase of bond(s) by a Fund
during the previous month, and (iii) any single premium due for Secondary
Market Insurance acquired during the prior month.
4.2 The Trust agrees to pay Financial Guaranty in immediately
available funds on behalf of each Fund within five business days of the
Trust's receipt of the premium statement provided for in Section 4.1 the
amount shown as due on such premium statement.
4.3 If Financial Guaranty does not receive the premium payment
within five business days of the Trust's receipt of the premium statement,
then Financial Guaranty agrees to notify the Trust that it has not
received said premium payment by the end of the sixth business day
following the Trust's receipt of the premium statement. All premium
payments due Financial Guaranty which are received by Financial Guaranty
on or before the close of business on the fifth business day following the
Trust's receipt of the premium statement shall not be considered late.
However, if a premium payment is received after the fifth business day
following the Trust's receipt of the premium Statement, the Trust agrees
to pay Financial Guaranty in addition to the premium due, interest at a
rate equal to that rate of interest publicly announced as its base rate
from time to time by Citibank, N.A. in New York, New York plus one percent
per annum for each 24-hour period or portion thereof payment of the
premium is delayed after the fifth business day following the Trust's
receipt of the premium statement.
4.4 Financial Guaranty agrees that once a Fund purchases a bond and
begins paying a premium for that bond based upon a stated annual premium
rate, neither the annual premium rate nor the secondary market premium
rate for that bond can be changed by Financial Guaranty so long as the
bond is owned by the Trust and insured by Financial Guaranty under one of
the Master Policies of the Funds.
4.5 With each premium payment, the Trust shall, to the extent it has
notice thereof, notify Financial Guaranty as to any bond which has been
paid prior to maturity, deceased (whether legally or economically), sold
by a Fund or never deposited into such Fund during the preceding thirty
days. Such notification must specify the amount of bonds affected and
identify such bonds by their numbers in Schedule A to the applicable
Master Policy. Such notification shall be deemed sufficient for purposes
of entitling the Trust to any premium refunds pursuant to the Master
Policies. No such notice need be given as to bonds with respect to which
Financial Guaranty has previously been notified to the same effect.
5. Cancellation of Master Policies.
5.1 Each Master Policy is non-cancellable by Financial Guaranty
except for non-payment of premium. If Financial Guaranty has not received
a premium payment for any bond by the 15th business day following the date
on which it was due, it agrees to notify the Trust again of the Trust's
nonpayment. If Financial Guaranty has not received any such overdue
premium payment on or before the next succeeding premium due date, then
the Master Policy(ies) of the Fund(s) with respect only to the bond or
bonds for which the premium payment has not been received shall be
cancelled. The effective date of such cancellation shall be as of the
date on which the premium payment was originally due and all such bonds
previously insured thereunder shall cease to be insured as of that date.
5.2 The Trust reserves the right to cancel any Master Policy upon
sixty (60) days' prior written notice to Financial Guaranty.
5.3 The Trust reserves the right upon thirty (30) days' prior
written notice to Financial Guaranty to discontinue insuring bonds under
any or all of the Master Policies which the Trust purchases after the
effective date of the notice. If the Trust discontinues insuring bonds
with Financial Guaranty, it shall have the right to continue to pay
premiums to Financial Guaranty and thereby keep any and/or all of the
Master Policies in force for the bonds which it had purchased and
previously insured under this situation, a Master Policy will terminate
(i) on the date on which the last principal payment of the last bonds,
together with accrued interest, are received by the Trust or (ii) on the
date the last bond insured under a Master Policy is sold by the Trust,
whichever occurs later. During a period of time in which the Trust keeps
the Master Policies in force, it shall also retain the right to purchase
a Secondary Market Policy for any bonds insured under such Master Policy.
6. Secondary Market Insurance Conversion Option.
6.1 Financial Guaranty hereby grants the Trust the right to
purchase, on a bond-by-bond basis for each and every bond owned by the
Trust which is insured under one of the Master Policies, Financial
Guaranty's Municipal Bond Secondary Market Insurance Policy ("Secondary
Market Policy") in substantially the form attached to this Agreement as
Exhibit "2." Financial Guaranty agrees to issue a Secondary Market Policy
with respect to a bond on any business day upon a request of the Trust
therefor made prior to 2:00 p.m., New York time on such business day. If
such request is made on or after 2:00 p.m., New York time, on a business
day, then Financial Guaranty agrees to issue the Secondary Market Policy
requested on the next succeeding business day. The premium with respect
to any Secondary Market Policy for any bond is payable with the premium
payment due in the next succeeding month following the month in which the
bond was sold.
6.2 The Trust's right to purchase the Secondary Market Policy shall
apply to each and every bond held by the Trust under one or more of the
Master Policies, regardless of whether the Trust intends to hold or sell
such bonds and regardless of the then existing credit status or rating of
the issuer of said bond.
6.3 Contemporaneously with the issuance of a Secondary Market Policy
for any bond, the coverage of such bond under one or more Master Policies
shall cease and such bond shall be treated as sold for purposes of the
accounting therefor in Section 4.1 herein and no further premium with
respect to such bond shall be due under such Master Policy or Policies.
7. Confidentiality.
7.1 Financial Guaranty hereby agrees that neither it nor its agents
or employees will reveal to any other Financial Guaranty clients, directly
or indirectly, the amount and/or types of municipal bonds purchased by the
Trust. In addition, Financial Guaranty agrees that neither it nor its
agents or employees will reveal to other Financial Guaranty clients any
information received from the Trust as a result of the relationship
between Financial Guaranty and the Trust created under this Agreement
regarding the Trust's business, trading strategy and/or business
practices.
7.2 The Trust hereby agrees that neither it nor its agents or
employees will reveal to any individuals and/or entities outside the
Trust, directly or indirectly, any information concerning the names of the
bonds, the issuers eligible for insurance by Financial Guaranty or the
premiums payable for such insurance obtained as a result of the
relationship between Financial Guaranty and the Trust created under this
Agreement.
8. Information Notification.
Upon the written request of the Trust, Financial Guaranty agrees
promptly to provide the Trust with copies of the most recent quarterly
statement of the condition and affairs of Financial Guaranty filed with
the Superintendent of Insurance of the State of New York. Financial
Guaranty furthermore agrees promptly to notify the Trust of any material
adverse change in the financial condition of Financial Guaranty since the
date of the most recent quarterly statement of its condition and affairs
furnished to the Trust.
9. General Provisions.
9.1 Headings. Headings and subheadings are provided in this
Agreement for convenience only and are not to be taken to modify in any
way the provisions with which they are associated or nay other provisions.
9.2 Severability of Provisions. If any provision of this Agreement
is held to be unenforceable or in conflict with the law of any state or
of the United States, the remainder of this Agreement is to be considered
valid and enforceable according to its terms, and the Agreement is to be
construed as if such unenforceable provision(s) had never been contained
in it.
9.3 Waiver. A waiver of any breach of any provision of this
Agreement is not to be construed as a continuing waiver of other breaches
of the same or other provisions of this Agreement. Furthermore,
performance of any obligation required of a party under this Agreement may
be waived only by written waiver signed by the other party. Such a waiver
is to be effective only with respect to the specific obligations described
in the waiver.
9.4 Remedies Not Exclusive. Unless specifically provided in this
Agreement, no remedy available to either party under this Agreement is
intended to be exclusive of any other remedy. Furthermore, each and every
remedy is to be cumulative and is to be in addition to every other remedy
provided under this Agreement or available at law or in equity.
9.5 Amendments. All amendments or modifications of this Agreement
are to be binding upon the parties so long as such amendments are in
writing and executed by both parties.
9.6 Successor and Assigns. This Agreement is to be binding upon and
inure to the benefit of each of the parties, and, except as otherwise
provided in this Agreement, to their respective legal successors and
assigns.
9.7 General Assurances. The parties agree to execute, acknowledge,
and deliver all such further instruments and do all such other acts as may
be appropriate in order to carry out the intent and purposes of this
Agreement.
9.8 Notices. Any notice, request, or communication required under
this Agreement is to be in writing and is for all purposes deemed to be
fully given if sent by any form of telecommunication capable of producing
a written record, if delivered personally, or if mailed, postage prepaid,
return receipt requested by certified or registered mail, to the
respective parties at the addresses set forth at the beginning of this
Agreement. Either party may change its address for the purposes of this
Agreement by giving the other party written notice of its new address.
A communication, if received after the date on which it is due, will
nevertheless be considered timely if it was mailed at least seven (7) days
prior to the date on which it was due.
9.9 Business Day. For purposes of this Agreement "business day"
shall mean any day other than a Saturday, Sunday or day on which banks are
authorized to remain closed in New York, New York.
9.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which is to be deemed an original, but all such
counterparts together constitute one and the same instrument.
9.11 Governing Law. This Agreement is to be interpreted and
construed, and the legal relations created by it are to be determined, in
accordance with the laws of the State of New York.
9.12 Entire Agreement. With the exception of the Master Policies and
any Secondary Market Policy, this Agreement constitutes the sole and only
Agreement of the parties with respect to the subject matter hereof. It
supersedes any and all prior or contemporaneous oral or written
agreements, proposals, understandings, promises, negotiations,
representations, or communications between the parties relating to this
Agreement and all past course of dealing or industry custom, all of which
are merged herein.
9.13 Limitation of Liability. This Agreement is executed and
delivered by the Trust by its duly authorized officer and Financial
Guaranty is expressly put on notice of the limitation of shareholder
liability set forth in the Agreement and Declaration of Trust and
Financial Guaranty agrees that all obligations assumed by the Trust shall
be limited in all cases to the assets of the Fund and no one shall seek
satisfaction of any such obligations from any shareholders of the Trust
or any trustee or officers of the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FIRST TRUST TAX-FREE BOND FUND
By: /s/ Gerald Pelzer
--------------------------
Gerald Pelzer
Title:
FINANCIAL GUARANTY INSURANCE COMPANY
By: /s/ Linda [illegible]
----------------------
Linda [illegible]
Title: First Vice President
October 29, 1986
First Trust Tax-Free Bond Fund
300 West Washington Street
Chicago, IL 60606
RE: First Trust Tax-Free Bond Fund
Gentlemen:
We have served as counsel for the First Trust Tax-Free Bond
Fund, (the "Fund") which proposes to offer and sell shares of its
Income Series and its Insured Series (the "Shares") in the manner
and on the terms set forth in its Registration Statement filed with
the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as
amended.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions hereinafter
set forth.
Based upon the foregoing, we are of the opinion that:
1. The Fund is a duly organized and validly existing Trust
pursuant to its Agreement and Declaration of Trust dated August 5,
1986.
2. The shares of the Fund which are currently being
registered by the Registration Statement referred to above may be
legally and validly issued from time to time in accordance with the
Agreement and Declaration of Trust and subject to compliance with
the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and applicable state laws regulating the sale
of securities and the receipt by the Fund of a purchase price of
not less than the net asset value per share and such shares, when
so sold, will be legally issued and outstanding, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement (File No. 33-08054) relating to the
Shares referred to above, to the use of our name and to the
reference to our firm and said Registration Statement and in the
related Prospectus.
Respectfully submitted,
/s/ Chapman and Cutler
----------------------
CHAPMAN AND CUTLER
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND OPPENHEIMER TAX-EXEMPT BOND FUND
FOR CLASS B SHARES OF
OPPENHEIMER INSURED TAX-EXEMPT BOND FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 23rd
day of February, 1994 by and between OPPENHEIMER TAX-EXEMPT BOND FUND (the
"Trust") for OPPENHEIMER INSURED TAX-EXEMPT BOND FUND and OPPENHEIMER
FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Trust on behalf of the Fund will compensate
the Distributor for a portion of its costs incurred in connection with the
distribution of Shares, and the personal service and maintenance of
shareholder accounts that hold Shares ("Accounts"). The Trust may act as
distributor of securities of which it is the issuer, pursuant to the Rule,
according to the terms of this Plan. The Distributor is authorized under
the Plan to pay "Recipients," as hereinafter defined, for rendering (1)
distribution assistance in connection with the sale of Shares and/or (2)
administrative support services with respect to Accounts. Such Recipients
are intended to have certain rights as third-party beneficiaries under
this Plan. The terms and provisions of this Plan shall be interpreted and
defined in a manner consistent with the provisions and definitions
contained in (i) the 1940 Act, (ii) the Rule, (iii) Article III, Section
26, of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., or its successor (the "NASD Rules of Fair
Practice") and (iv) any conditions pertaining either to distribution-
related expenses or to a plan of distribution, to which the Fund is
subject under any order on which the Fund relies, issued at any time by
the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Trust) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Trust's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the 1940
Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan
(the "Independent Trustees") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights as
a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Trust on behalf of the Fund will make payments to the
Distributor, (i) within forty-five (45) days of the end of each
calendar quarter, in the aggregate amount of 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the
aggregate net asset value of the Shares computed as of the close of
each business day (the "Service Fee"), plus (ii) within ten (10) days
of the end of each month, in the aggregate amount of 0.0625% (0.75%
on an annual basis) of the average during the month of the aggregate
net asset value of Shares computed as of the close of each business
day (the "Asset-Based Sales Charge") outstanding for six years or
less (the "Maximum Holding Period"). Such Service Fee payments
received from the Trust will compensate the Distributor and
Recipients for providing administrative support services of the type
approved by the Board with respect to Accounts. Such Asset-Based
Sales Charge payments received from the Trust will compensate the
Distributor and Recipients for providing distribution assistance in
connection with the sales of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not be
limited to, the following: answering routine inquiries concerning
the Fund, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund and processing Share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services
in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may
reasonably request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may include,
but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such
other information and services in connection with the distribution
of Shares as the Distributor or the Trust on behalf of the Fund may
reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it
to payments under the Plan. In the event that either the Distributor
or the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-party
beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis)
of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by
the Recipient or by its Customers for a period of more than the
minimum period (the "Minimum Holding Period"), if any, to be set from
time to time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make service
fee payments ("Advance Service Fee Payments") to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed (i) 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares, computed
as of the close of business on the day such Shares are sold,
constituting Qualified Holdings sold by the Recipient during that
quarter and owned beneficially or of record by the Recipient or by
its Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value
of Shares computed as of the close of each business day, constituting
Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year, subject
to reduction or chargeback so that the Advance Service Fee Payments
do not exceed the limits on payments to Recipients that are, or may
be, imposed by Article III, Section 26, of the NASD Rules of Fair
Practice. In the event Shares are redeemed less than one year after
the date such Shares were sold, the Recipient is obligated and will
repay to the Distributor on demand a pro rata portion of such Advance
Service Fee Payments, based on the ratio of the time such shares were
held to one (1) year. The Advance Service Fee Payments described in
part (i) of the preceding sentence may, at the Distributor's sole
option, be made more often than quarterly, and sooner than the end
of the calendar quarter. However, no such payments shall be made to
any Recipient for any such quarter in which its Qualified Holdings
do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time decrease
and thereafter adjust the rate of fees to be paid to the Distributor
or to any Recipient, but not to exceed the rate set forth above,
and/or direct the Distributor to increase or decrease the Maximum
Holding Period, the Minimum Holding Period or the Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the Minimum
Qualified Holdings, Maximum Holding Period and Minimum Holding
Period, if any, and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a
revised current prospectus shall constitute sufficient notice. The
Distributor may make Plan payments to any "affiliated person" (as
defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient.
(c) The Distributor is entitled to retain from the payments
described in Section 3(a) the aggregate amount of (i) the Service Fee
on Shares outstanding for less than the Minimum Holding Period plus
(ii) the Asset-Based Sales Charge on Shares outstanding for not more
than the Maximum Holding Period, in each case computed as of the
close of each business day during that period and subject to
reduction or elimination of such amounts under the limits to which
the Distributor is, or may become, subject under Article III, Section
26, of the NASD Rules of Fair Practice. Such amount is collectively
referred to as the "Quarterly Limitation." The distribution
assistance and administrative support services in connection with the
sale of Shares to be rendered by the Distributor may include, but
shall not be limited to, the following: (i) paying sales commissions
to any broker, dealer, bank or other institution that sells Shares,
and\or paying such persons Advance Service Fee Payments in advance
of, and\or greater than, the amount provided for in Section 3(a) of
this Agreement; (ii) paying compensation to and expenses of personnel
of the Distributor who support distribution of Shares by Recipients;
(iii) paying of or reimbursing the Distributor for interest and
other borrowing costs on unreimbursed Carry Forward Expenses (as
hereafter defined) at the rate paid by the Distributor or, if such
amounts are financed by the Distributor from its own resources or by
an affiliate, at the rate of 1% per annum above the prime rate (which
shall mean the most preferential interest rate on corporate loans at
large U.S. money center commercial banks) then being reported in the
Eastern edition of the Wall Street Journal (or if such prime rate is
no longer so reported, such other rate as may be designated from time
to time by the Distributor with the approval of the Independent
Trustees); (iv) other direct distribution costs of the type approved
by the Board, including without limitation the costs of sales
literature, advertising and prospectuses (other than those furnished
to current Shareholders) and state "blue sky" registration expenses;
and (v) any service rendered by the Distributor that a Recipient may
render pursuant to part (a) of this Section 3. The Distributor's
costs of providing the above-mentioned services are hereinafter
collectively referred to as "Distribution and Service Costs." "Carry
Forward Expenses" are Distribution and Service Costs that are not
paid in the fiscal quarter in which they arise because they exceed
the Quarterly Limitation. In the event that the Board should have
reason to believe that the Distributor may not be rendering
appropriate distribution assistance or administrative support
services in connection with the sale of Shares, then the Distributor,
at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is
providing appropriate services in this regard.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first, to interest on
unreimbursed Carry Forward Expenses, second, to reduce any
unreimbursed Carry Forward Expenses, third, to reduce Distribution
and Service Costs during that quarter, and fourth, to reduce the
Asset-Based Sales Charge payments by the Fund to the Distributor in
that quarter. Carry Forward Expenses shall be carried forward by the
Fund until payment can be made under the Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Trust on behalf of the Fund), or (ii) by the Distributor (a
subsidiary of OMC), from its own resources, from Asset-Based Sales
Charge payments or from its borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Trust
who are not "interested persons" of the Trust ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested Trustees from soliciting
the views or the involvement of others in such selection or nomination if
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing distribution expenditures properly attributable to
the Shares, including the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, the amount paid
to the Distributor and the Distribution and Service Costs and Carry
Forward Expenses for that period. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years
and not previously recovered with respect to the distribution of Shares
in conjunction with the Board's annual review of the continuation of the
Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Trustees cast
in person at a meeting called on February 23, 1994 for the purpose of
voting on this Plan, and replaces the Fund's Distribution and Service Plan
and Agreement dated June 22, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until October 31, 1994 and from year
to year thereafter or as the Board may otherwise determine only so long
as such continuance is specifically approved at least annually by a vote
of the Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance. This Plan may not
be amended to increase materially the amount of payments to be made
without approval of the Class B Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board
and of the Independent Trustees. This Plan may be terminated at any time
by vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of any
Carry Forward Expenses and related costs properly incurred in respect of
Shares sold prior to the effective date of such termination, and whether
the Fund shall continue to make payment to the Distributor in the amount
the Distributor is entitled to retain under part (c) of Section 3 hereof,
until such time as the Distributor has been reimbursed for all or part of
such amounts by the Fund and by retaining CDSC payments.
8. Disclaimer of Shareholder Liability. The Distributor understands
that the obligations of the Trust and the Fund under this Plan are not
binding upon any Trustee or shareholder of the Trust or the Fund
personally, but bind only the Fund and the Fund's property. The
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Trust disclaiming shareholder and Trustee
liability for acts or obligations of the Trust and the Fund.
OPPENHEIMER TAX-EXEMPT BOND FUND
on behalf of OPPENHEIMER INSURED
TAX-EXEMPT BOND FUND
By: /s/ Andrew J. Donohue
----------------------------
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
--------------------------------
Katherine P. Feld, Vice President &
Secretary
Oppenheimer Insured Tax-Exempt Bond Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions,
for the past 10 years which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
11/28/86 0.0501779 0.0000 16.080
12/31/86 0.0893333 0.0000 15.890
01/30/87 0.0920672 0.0000 16.060
02/27/87 0.0905788 0.0000 16.160
03/31/87 0.0846170 0.0000 15.670
04/30/87 0.0872447 0.0000 14.620
05/29/87 0.0849428 0.0000 14.050
06/30/87 0.0845500 0.0000 14.430
07/31/87 0.0875104 0.0000 14.540
08/31/87 0.0835667 0.0000 14.550
09/30/87 0.0887026 0.0000 13.790
10/30/87 0.0890745 0.0000 14.170
11/30/87 0.0851601 0.0000 14.270
12/31/87 0.0984613 0.0000 14.430
01/29/88 0.0794686 0.0000 14.920
02/29/88 0.0895963 0.0000 14.880
03/31/88 0.0959605 0.0000 14.630
04/29/88 0.0822646 0.0000 14.640
05/31/88 0.0870887 0.0000 14.550
06/30/88 0.0895523 0.0000 14.670
07/29/88 0.0901535 0.0000 14.780
08/31/88 0.0897021 0.0000 14.730
09/30/88 0.0909456 0.0000 14.960
10/31/88 0.0890588 0.0000 15.180
11/30/88 0.0908232 0.0000 14.940
12/30/88 0.0972995 0.0000 15.110
01/31/89 0.0865811 0.0000 15.420
02/28/89 0.0914532 0.0000 15.160
03/31/89 0.0923004 0.0000 15.040
04/28/89 0.0793234 0.0000 15.330
05/31/89 0.0877918 0.0000 15.570
06/30/89 0.0896521 0.0000 15.660
07/31/89 0.0815859 0.0000 15.720
08/31/89 0.0861091 0.0000 15.460
09/29/89 0.0876520 0.0000 15.270
10/31/89 0.0871074 0.0000 15.490
11/30/89 0.0868449 0.0000 15.640
12/29/89 0.0868436 0.0000 15.670
01/31/90 0.0862856 0.0000 15.340
02/28/90 0.0610532 0.0000 15.470
03/31/90 0.0788984 0.0000 15.360
04/30/90 0.0817808 0.0000 15.150
05/31/90 0.0845063 0.0000 15.440
06/29/90 0.0845062 0.0000 15.520
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
07/31/90 0.0817800 0.0000 15.670
08/31/90 0.0926840 0.0000 15.200
09/28/90 0.0736020 0.0000 15.160
10/31/90 0.0845060 0.0000 15.310
11/30/90 0.0872325 0.0000 15.600
12/31/90 0.0790544 0.0000 15.620
01/31/91 0.0845068 0.0000 15.740
02/28/91 0.0671335 0.0000 15.780
03/28/91 0.0700821 0.0000 15.690
04/30/91 0.0702619 0.0000 15.850
05/31/91 0.0812968 0.0000 15.940
06/28/91 0.0701301 0.0000 15.780
07/31/91 0.0756962 0.0000 15.940
08/30/91 0.0800203 0.0000 16.030
09/30/91 0.0735267 0.0000 16.170
10/31/91 0.0806884 0.0000 16.220
11/29/91 0.0751556 0.0000 16.170
12/31/91 0.0533056 0.0280998 16.440
01/31/92 0.0815100 0.0000 16.380
02/28/92 0.0705000 0.0000 16.260
03/31/92 0.0755370 0.0000 16.190
04/30/92 0.0740000 0.0000 16.310
05/29/92 0.0764770 0.0000 16.420
06/30/92 0.0740100 0.0000 16.630
07/31/92 0.0878430 0.0000 17.310
08/31/92 0.0793150 0.0000 16.970
09/30/92 0.0820500 0.0000 16.920
10/30/92 0.0875200 0.0000 16.590
11/30/92 0.0793150 0.0000 16.870
12/31/92 0.0847850 0.179615 16.830
01/29/93 0.0847850 0.0000 16.950
02/26/93 0.0765800 0.0000 17.410
03/31/93 0.0847850 0.0000 17.250
04/30/93 0.0875200 0.0000 17.320
05/28/93 0.0793150 0.0000 17.350
07/09/93 0.0814000 0.0000 17.670
08/10/93 0.0814000 0.0000 17.670
09/10/93 0.0814010 0.0000 18.120
10/08/93 0.0814000 0.0000 18.120
11/10/93 0.0783267 0.0000 17.780
12/10/93 0.0758000 0.0762789 17.900
01/10/94 0.0758000 0.0000 17.940
02/10/94 0.0758000 0.0000 17.900
03/10/94 0.0719000 0.0000 17.020
04/08/94 0.0719000 0.0000 16.390
05/10/94 0.0719000 0.0000 16.300
06/10/94 0.0719000 0.0000 16.840
07/08/94 0.0719000 0.0000 16.240
08/10/94 0.0719000 0.0000 16.410
09/09/94 0.0719000 0.0000 16.400
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares
05/28/93 0.0606743 0.0000 17.360
07/09/93 0.0579357 0.0000 17.690
08/10/93 0.0687847 0.0000 17.680
09/10/93 0.0677318 0.0000 18.130
10/08/93 0.0690309 0.0000 18.130
11/10/93 0.0663926 0.0000 17.790
12/10/93 0.0624779 0.0762789 17.910
01/10/94 0.0646291 0.0000 17.950
02/10/94 0.0635708 0.0000 17.910
03/10/94 0.0610797 0.0000 17.030
04/08/94 0.0607941 0.0000 16.400
05/10/94 0.0612682 0.0000 16.320
06/10/94 0.0604760 0.0000 16.850
07/08/94 0.0623304 0.0000 16.250
08/10/94 0.0613031 0.0000 16.420
09/09/94 0.0609783 0.0000 16.410
1. Average Annual Total Returns for the Periods Ended 09/30/94:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$ 900.48 1 $1,360.35 .2
(---------) - 1 = -9.95% (---------) - 1 = 6.35%
$1,000 $1,000
Inception
$1,590.69 .1268
(---------) - 1 = 6.06%
$1,000
Oppenheimer Insured Tax-Exempt Bond Fund
Page 4
January 30, 1995
1. Average Annual Total Returns for the Periods Ended 09/30/94 (Continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 4.00% for the second year:
One Year Inception
$ 893.31 1 $ 957.36 .7098
(---------) - 1 = -10.67% (---------) - 1 = -3.05%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$ 945.38 1 $1,428.19 .2
(---------) - 1 = -5.46% (---------) - 1 = 7.39%
$1,000 $1,000
Inception
$1,670.01 .1268
(---------) - 1 = 6.72%
$1,000
Class B Shares
One Year Inception
$ 938.00 1 $ 994.63 .7098
(---------) - 1 = -6.20% (---------) - 1 = -0.38%
$1,000 $1,000
2. Cumulative Total Returns for the Periods Ended 9/30/94:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$ 900.48 - $1,000 $1,360.35 - $1,000
------------------ = -9.95% ------------------ = 36.04%
$1,000 $1,000
Inception
$1,590.69 - $1,000
------------------ = 59.07%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 4.00% for the second year:
One Year Inception
$ 893.31 - $1,000 $ 957.36 - $1,000
------------------ = -10.67% ------------------ = -4.26%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$ 945.38 - $1,000 $1,428.19 - $1,000
------------------ = -5.46% ------------------ = 42.82%
$1,000 $1,000
Inception
$1,670.01 - $1,000
------------------ = 67.00%
$1,000
Class B Shares
One Year Inception
$ 938.00 - $1,000 $ 994.63 - $1,000
------------------ = -6.20% ------------------ = -0.54%
$1,000 $1,000
Oppenheimer Insured Tax-Exempt Bond Fund
Page 6
January 30, 1995
3. Standardized Yield for the 30-Day Period Ended 09/30/94:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$ 348,210.30 - $ 58,082.00 6
2{(--------------------------- + 1) - 1} = 5.00%
4,151,830 x $16.94
Class B Shares
Example at NAV:
$ 59,587.51 - $ 17,224.00 6
2{(--------------------------- + 1) - 1} = 4.47%
710,145 x $16.15
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 9/30/94:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share
on the last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0718218/30 x 365
------------------ = 5.16%
$16.94
Dividend Yield
at Net Asset Value $.0718218/30 x 365
------------------ = 5.41%
$16.14
Class B Shares
Dividend Yield
at Net Asset Value $.0659125/30 x 365
------------------ = 4.64%
$16.15
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 9/30/93:
The Fund's tax-equivalent yields are calculated using the
following formula:
a
----- + b = Tax-Equivalent Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Stated tax rate (e.g., federal income tax rate for an individual
in the 39.6% federal tax bracket filing singly).
Examples:
Class A Shares
.0500
----------- + 0 = 8.28%
1 - .3960
Class B Shares
.0447
----------- + 0 = 7.40%
1 - .3960
Oppenheimer Intermediate Tax-Exempt Bond Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions,
for the past 10 years which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
11/28/86 0.0477718 0.0000 14.090
12/31/86 0.0848125 0.0000 14.000
01/30/87 0.0875634 0.0000 14.170
02/27/87 0.0871370 0.0000 14.230
03/31/87 0.0813719 0.0000 13.960
04/30/87 0.0838937 0.0000 13.380
05/29/87 0.0821252 0.0000 12.880
06/30/87 0.0831725 0.0000 13.080
07/31/87 0.0888137 0.0000 13.150
08/31/87 0.0832474 0.0000 13.160
09/30/87 0.0891186 0.0000 12.560
10/30/87 0.0877205 0.0000 12.770
11/30/87 0.0840883 0.0000 12.770
12/31/87 0.0967821 0.0000 12.880
01/29/88 0.0768880 0.0000 13.340
02/29/88 0.0859219 0.0000 13.300
03/31/88 0.0941727 0.0000 13.060
04/29/88 0.0818233 0.0000 13.050
05/31/88 0.0818146 0.0000 13.000
06/30/88 0.0864247 0.0000 13.120
07/29/88 0.0857280 0.0000 13.210
08/31/88 0.0871987 0.0000 13.150
09/30/88 0.1000966 0.0000 13.330
10/31/88 0.0876617 0.0000 13.510
11/30/88 0.0853195 0.0000 13.300
12/30/88 0.0904141 0.0000 13.420
01/31/89 0.0809321 0.0000 13.680
02/28/89 0.0803032 0.0000 13.500
03/31/89 0.0860533 0.0000 13.370
04/28/89 0.0746998 0.0000 13.640
05/31/89 0.0816935 0.0000 13.850
06/30/89 0.0805122 0.0000 13.940
07/31/89 0.0730053 0.0000 14.010
08/31/89 0.0776785 0.0000 13.760
09/29/89 0.0767703 0.0000 13.570
10/31/89 0.0745039 0.0000 13.780
11/30/89 0.0724353 0.0000 13.920
12/29/89 0.0739429 0.0000 13.950
01/31/90 0.0750859 0.0000 13.660
02/28/90 0.0682592 0.0000 13.750
03/31/90 0.0699771 0.0000 13.650
04/30/90 0.0731500 0.0000 13.470
05/31/90 0.0755904 0.0000 13.710
06/29/90 0.0755874 0.0000 13.780
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
07/31/90 0.0731521 0.0000 13.930
08/31/90 0.0829053 0.0000 13.540
09/28/90 0.0658341 0.0000 13.510
10/31/90 0.0755904 0.0000 13.620
11/30/90 0.0780256 0.0000 13.860
12/31/90 0.0707138 0.0000 13.880
01/31/91 0.0755900 0.0000 13.980
02/28/91 0.0620454 0.0000 14.010
03/28/91 0.0670133 0.0000 13.970
04/30/91 0.0673804 0.0000 14.090
05/31/91 0.0736814 0.0000 14.160
06/28/91 0.0642742 0.0000 14.050
07/31/91 0.0716946 0.0000 14.200
08/30/91 0.0743986 0.0000 14.290
09/30/91 0.0662680 0.0000 14.400
10/31/91 0.0721937 0.0000 14.450
11/29/91 0.0668236 0.0000 14.400
12/31/91 0.0674256 0.0000 14.650
01/31/92 0.0769551 0.0000 14.620
02/28/92 0.0653549 0.0000 14.530
03/31/92 0.0716370 0.0000 14.490
04/30/92 0.0710713 0.0000 14.580
05/29/92 0.0748489 0.0000 14.680
06/30/92 0.0712580 0.0000 14.860
07/31/92 0.0808936 0.0000 15.330
08/31/92 0.0710621 0.0000 15.110
09/30/92 0.0734076 0.0000 15.090
10/30/92 0.0738315 0.0000 14.880
11/30/92 0.0649002 0.0000 15.070
12/31/92 0.0689335 0.4734765 14.640
01/29/93 0.0675928 0.0000 14.730
02/26/93 0.0599682 0.0000 15.040
03/31/93 0.0605374 0.0000 14.900
04/30/93 0.0666637 0.0000 14.950
05/28/93 0.0602311 0.0000 14.950
07/09/93 0.0625000 0.0000 15.090
08/10/93 0.0625000 0.0000 15.080
09/10/93 0.0625000 0.0000 15.380
10/08/93 0.0625000 0.0000 15.380
11/10/93 0.0645833 0.0000 15.200
12/10/93 0.0625000 0.0697833 15.220
01/10/94 0.0625010 0.0000 15.260
02/10/94 0.0625000 0.0000 15.210
03/10/94 0.0625000 0.0000 14.690
04/08/94 0.0625000 0.0000 14.270
05/10/94 0.0625000 0.0000 14.260
06/10/94 0.0625000 0.0000 14.600
07/08/94 0.0625000 0.0000 14.280
08/10/94 0.0625000 0.0000 14.340
09/09/94 0.0625000 0.0000 14.350
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class C Shares
12/10/93 0.0160429 0.0697833 15.210
01/10/94 0.0480055 0.0000 15.260
02/10/94 0.0478758 0.0000 15.210
03/10/94 0.0496070 0.0000 14.680
04/08/94 0.0512856 0.0000 14.260
05/10/94 0.0530997 0.0000 14.240
06/10/94 0.0519079 0.0000 14.560
07/08/94 0.0534324 0.0000 14.240
08/10/94 0.0526951 0.0000 14.290
09/09/94 0.0527472 0.0000 14.300
1. Average Annual Total Returns for the Periods Ended 09/30/94:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 3.50%:
One Year Five Year
$ 946.48 1 $1,393.51 .2
(---------) - 1 = -5.35% (---------) - 1 = 6.86%
$1,000 $1,000
Inception
$1,682.64 .12685
(---------) - 1 = 6.82%
$1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of .00%
for the first year:
Inception
$ 965.20 1.2041
(---------) - 1 = -4.18%
$1,000
Oppenheimer Intermediate Tax-Exempt Bond Fund
Page 4
January 30, 1995
1. Average Annual Total Returns for the Periods Ended 09/30/94 (Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$ 980.80 1 $1,444.05 .2
(---------) - 1 = -1.92% (---------) - 1 = 7.63%
$1,000 $1,000
Inception
$1,743.67 .12685
(---------) - 1 = 7.31%
$1,000
Class C Shares
Inception
$ 974.57 1.2041
(---------) - 1 = -3.05%
$1,000
2. Cumulative Total Returns for the Periods Ended 9/30/94:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 3.50%:
One Year Five Year
$ 946.48 - $1,000 $1,393.51 - $1,000
------------------ = -5.35% ------------------ = 39.35%
$1,000 $1,000
Inception
$1,682.64 - $1,000
------------------ = 68.26%
$1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00%
for the first year:
Inception
$ 965.20 - $1,000
------------------ = -3.48%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$ 980.80 - $1,000 $1,444.05 - $1,000
------------------ = -1.92% ------------------ = 44.41%
$1,000 $1,000
Inception
$1,743.67 - $1,000
------------------ = 74.37%
$1,000
Class C Shares
Inception
$ 974.57 - $1,000
------------------ = -2.54%
$1,000
3. Standardized Yield for the 30-Day Period Ended 09/30/94:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 3.50%:
$ 386,853.58 - $ 61,881.00 6
2{(--------------------------- + 1) - 1} = 4.58%
5,830,352 x $14.75
Class C Shares
Example at NAV:
$ 38,035.29 - $ 13,200.00 6
2{(--------------------------- + 1) - 1} = 3.68%
575,057 x $14.18
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 9/30/94:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share
on the last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0624337/30 x 365
------------------ = 5.15%
$14.75
Dividend Yield
at Net Asset Value $.0624337/30 x 365
------------------ = 5.34%
$14.23
Class C Shares
Dividend Yield
at Net Asset Value $.0532322/30 x 365
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 9/30/93:
The Fund's tax-equivalent yields are calculated using the
following formula:
a
----- + b = Tax-Equivalent Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Stated tax rate (e.g., federal income tax rate for an individual
in the 39.6% federal tax bracket filing singly).
Examples:
Class A Shares
.0458
----------- + 0 = 7.58%
1 - .3960
Class C Shares
.0368
----------- + 0 = 6.09%
1 - .3960
[ARTICLE] 6
[CIK] 0000799102
[NAME] OPPENHEIMER INSURED TAX-EXEMPT BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] SEP-30-1994
[PERIOD-START] OCT-01-1993
[PERIOD-END] SEP-30-1994
[INVESTMENTS-AT-COST] 80017715
[INVESTMENTS-AT-VALUE] 77734323
[RECEIVABLES] 2117323
[ASSETS-OTHER] 6071
[OTHER-ITEMS-ASSETS] 16208
[TOTAL-ASSETS] 79873925
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 510458
[TOTAL-LIABILITIES] 510458
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 82436070
[SHARES-COMMON-STOCK] 4201168
[SHARES-COMMON-PRIOR] 3441758
[ACCUMULATED-NII-CURRENT] 20250
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (809461)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (2283392)
[NET-ASSETS] 67792867
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4780017
[OTHER-INCOME] 0
[EXPENSES-NET] 873673
[NET-INVESTMENT-INCOME] 3906344
[REALIZED-GAINS-CURRENT] (811863)
[APPREC-INCREASE-CURRENT] (7639229)
[NET-CHANGE-FROM-OPS] (4544748)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 3348993
[DISTRIBUTIONS-OF-GAINS] 279752
[DISTRIBUTIONS-OTHER] 109723
[NUMBER-OF-SHARES-SOLD] 1358474
[NUMBER-OF-SHARES-REDEEMED] 763948
[SHARES-REINVESTED] 164884
[NET-CHANGE-IN-ASSETS] 12101224
[ACCUMULATED-NII-PRIOR] 64446
[ACCUMULATED-GAINS-PRIOR] 218314
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 342465
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 873673
[AVERAGE-NET-ASSETS] 66953000
[PER-SHARE-NAV-BEGIN] 18.06
[PER-SHARE-NII] .89
[PER-SHARE-GAIN-APPREC] (1.84)
[PER-SHARE-DIVIDEND] .8620
[PER-SHARE-DISTRIBUTIONS] .0763
[RETURNS-OF-CAPITAL] .0282
[PER-SHARE-NAV-END] 16.14
[EXPENSE-RATIO] 1.05
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000799102
[NAME] OPPENHEIMER INSURED TAX-EXEMPT BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] SEP-30-1994
[PERIOD-START] OCT-01-1993
[PERIOD-END] SEP-30-1994
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 0
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 716638
[SHARES-COMMON-PRIOR] 282420
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 11570600
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 388291
[DISTRIBUTIONS-OF-GAINS] 27180
[DISTRIBUTIONS-OTHER] 12722
[NUMBER-OF-SHARES-SOLD] 503586
[NUMBER-OF-SHARES-REDEEMED] 85174
[SHARES-REINVESTED] 15806
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 9209000
[PER-SHARE-NAV-BEGIN] 18.07
[PER-SHARE-NII] .77
[PER-SHARE-GAIN-APPREC] (1.86)
[PER-SHARE-DIVIDEND] .7310
[PER-SHARE-DISTRIBUTIONS] .0763
[RETURNS-OF-CAPITAL] .0240
[PER-SHARE-NAV-END] 16.15
[EXPENSE-RATIO] 1.82
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000799102
[NAME] OPPENHEIMER INTERMEDIATE TAX-EXEMPT BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] SEP-30-1994
[PERIOD-START] OCT-01-1993
[PERIOD-END] SEP-30-1994
[INVESTMENTS-AT-COST] 91219540
[INVESTMENTS-AT-VALUE] 89389076
[RECEIVABLES] 3244648
[ASSETS-OTHER] 1651
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 92635375
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 668593
[TOTAL-LIABILITIES] 668593
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 94769631
[SHARES-COMMON-STOCK] 5865458
[SHARES-COMMON-PRIOR] 4571295
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (142634)
[ACCUMULATED-NET-GAINS] (829751)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1830464)
[NET-ASSETS] 83456110
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 5014430
[OTHER-INCOME] 0
[EXPENSES-NET] 875181
[NET-INVESTMENT-INCOME] 4139249
[REALIZED-GAINS-CURRENT] (1005299)
[APPREC-INCREASE-CURRENT] (4866867)
[NET-CHANGE-FROM-OPS] (1732917)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 3542656
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 827102
[NUMBER-OF-SHARES-SOLD] 2161013
[NUMBER-OF-SHARES-REDEEMED] 1067987
[SHARES-REINVESTED] 201137
[NET-CHANGE-IN-ASSETS] 21831271
[ACCUMULATED-NII-PRIOR] 102188
[ACCUMULATED-GAINS-PRIOR] 326204
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 413576
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 875181
[AVERAGE-NET-ASSETS] 79076000
[PER-SHARE-NAV-BEGIN] 15.34
[PER-SHARE-NII] .72
[PER-SHARE-GAIN-APPREC] (1.00)
[PER-SHARE-DIVIDEND] .6658
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] .1612
[PER-SHARE-NAV-END] 14.23
[EXPENSE-RATIO] 1
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000275857
[NAME] OPPENHEIMER INTERMEDIATE TAX-EXEMPT BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] SEP-30-1994
[PERIOD-START] DEC-01-1994
[PERIOD-END] SEP-30-1994
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 0
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 600180
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 8510672
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 144854
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 20148
[NUMBER-OF-SHARES-SOLD] 664985
[NUMBER-OF-SHARES-REDEEMED] 73341
[SHARES-REINVESTED] 8536
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 4686000
[PER-SHARE-NAV-BEGIN] 15.14
[PER-SHARE-NII] .46
[PER-SHARE-GAIN-APPREC] (.83)
[PER-SHARE-DIVIDEND] .45
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] .1320
[PER-SHARE-NAV-END] 14.18
[EXPENSE-RATIO] 2.24
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
