<PAGE>
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. 14 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 16 / X /
OPPENHEIMER TAX-EXEMPT FUND
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(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
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(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
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(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 August 29, 1995, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On ____________ pursuant to paragraph (a)(1)
/ / 75 days upon filing pursuant to paragraph (a)(2)
/ / On _______, pursuant to paragraph (a)(2)
of Rule 485
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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 Intermediate Tax-Exempt 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 and Service Plans; 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 Insured Tax-Exempt 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
lan and Distribution and Service Plans; 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
Intermediate Tax-Exempt Fund
Prospectus dated August 29, 1995
Oppenheimer Intermediate Tax-Exempt Fund (the "Fund") is a series of
Oppenheimer Tax-Exempt Fund. The Fund has the investment objective of
seeking a high level of current income exempt from Federal income tax.
The Fund will, under normal market conditions, invest at least 80% of its
total assets in investment-grade Municipal Securities. See "Investment
Objective and Policies."
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the August 29, 1995 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
OppenheimerFunds logo
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B 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>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and account transaction charges. The following tables are provided
to help you understand your direct expenses of investing in the Fund and
your share of the Fund's business operating expenses that you will expect
to bear indirectly.
Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages 22 through 32, for an explanation of how and when these charges
apply.
Class A Class B Class C
Shares Shares Shares
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Maximum Sales Charge 3.50% None None
on Purchases (as a % of
offering price)
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Sales Charge on None None None
Reinvested Dividends
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Deferred Sales Charge None(1) 5% in the first 1% if shares are
(as a % of the lower of year, declining redeemed within
the original purchase to 1% in the 12 months of
price or redemption sixth year and purchase(2)
proceeds) eliminated
thereafter(2)
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Redemption Fee None(3) None(3) None(3)
-------------------------------------------------------------------------
Exchange Fee None None None
1. If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares," below.
2. See "How to Buy Shares - Class B Shares" and "How to Buy Shares -
Class C Shares," below for more information on the contingent deferred
sales charge.
3. There is a $10 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check or by Automated Clearing House
("ACH") transfer through AccountLink, or for which check writing
privileges are used (see "How To Sell Shares").
Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the
Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds the Fund's portfolio securities, audit fees and legal and other
expenses. Those expenses are detailed in the Fund's Financial Statements
in the Statement of Additional Information.
The numbers in the chart below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The "12b-1 Distribution Plan Fees" for
Class A shares are Service Plan Fees (the maximum fee is 0.25% of average
annual net assets of that class), and for Class B and Class C shares are
the Distribution and Service Plan Fee (the maximum service fee is 0.25%
of average annual net assets of that class) and the asset-based sales
charge of 0.75%. The actual expenses for each class of shares may be more
or less, depending on a number of factors, including the actual amount of
the assets represented by each class of shares. These plans are described
in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be
more or less, depending on a number of factors, including the actual
amount of the assets represented by each class of shares. Class B shares
were not publicly offered prior to August 29, 1995. Therefore, "Other
Expenses" shown for Class B shares are estimates based on amounts that
would have been payable if Class B shares had been outstanding for the
fiscal year ended September 30, 1994.
Class A Class B Class C
Shares Shares Shares
--------------------------------------------------------------------------
Management Fees 0.50% 0.50% 0.50%
--------------------------------------------------------------------------
12b-1 Distribution 0.25% 1.00% 1.00%
Plan Fees
--------------------------------------------------------------------------
Other Expenses 0.25% 0.74% 0.74%
--------------------------------------------------------------------------
Total Fund Operating 1.00% 2.24% 2.24%
Expenses
Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the chart above.
If you were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of each
period shown:
1 year 3 years 5 years 10 years(1)
--------------------------------------------------------------------------
Class A Shares $45 $66 $88 $153
--------------------------------------------------------------------------
Class B Shares $73 $100 $140 $197
--------------------------------------------------------------------------
Class C Shares $33 $70 $120 $257
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $45 $66 $88 $153
--------------------------------------------------------------------------
Class B Shares $23 $70 $120 $197
--------------------------------------------------------------------------
Class C Shares $23 $70 $120 $257
1. The Class B expenses in years 7 through 10 are based on the Class
A expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after six years. Because of the asset-based
sales charge and the contingent deferred sales charge imposed on Class B
and Class C shares of the Fund, long-term Class B and Class C shareholders
could bear expenses that would be the economic equivalent of more than the
maximum front-end sales charge permitted under applicable regulatory
requirements. For Class B shareholders, the automatic conversion of Class
B shares to Class A shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares - Class B Shares" for
more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
What Is The Fund's Investment Objective? The Fund's investment
objective is to seek a high level of current income exempt from Federal
income tax.
What Does the Fund Invest In? To seek its objective, the Fund will,
under normal market conditions, invest at least 80% of its assets in
investment-grade Municipal Securities. The Fund may also use hedging
instruments and some derivative investments to try to manage investment
risks. These investments are more fully explained in "Investment
Objective and Policies," starting on page 10.
Who Manages the Fund? The Fund's investment advisor is Oppenheimer
Management Corporation, which (including a subsidiary) manages investment
company portfolios having over $35 billion in assets at June 30, 1995.
The Manager is paid an advisory fee by the Fund, based on its assets. The
Fund's portfolio manager, who is employed by the Manager and who is
primarily responsible for the selection of the Fund's securities, is
Robert E. Patterson. The Fund's Board of Trustees, elected by
shareholders, oversees the investment advisor and the portfolio manager.
Please refer to "How the Fund is Managed," starting on page 17 for more
information about the Manager and its fees.
How Risky is the Fund? All investments carry risks to some degree.
The Fund's investments in municipal bonds are subject to changes in their
value from a number of factors such as changes in general bond market
movements, the change in value of particular bonds because of an event
affecting the issuer, or changes in interest rates. These changes affect
the value of the Fund's investments and its price per share. In the
OppenheimerFunds spectrum, the Fund is generally more conservative than
high yield bond funds, but more aggressive than money market funds. While
the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased for the
portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objectives and your shares
may be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page 10
for a more complete discussion.
How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page 22 for more details.
Will I Pay a Sales Charge to Buy Shares? The Fund has three classes
of shares. All classes have the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge,
starting at 3.50%, and reduced for larger purchases. Class B and Class C
shares are offered without a front-end sales charge, but may be subject
to a contingent deferred sales charge if redeemed within 6 years or 12
months of purchase, respectively. There is also an annual asset-based
sales charge on Class B and Class C shares. Please review "How To Buy
Shares" starting on page 22 for more details, including a discussion about
factors you and your financial advisor should consider in determining
which class may be appropriate for you.
How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer, or by writing checks. Please refer to "How To Sell Shares" on
page 34. The Fund also offers exchange privileges to other
OppenheimerFunds, described in "How to Exchange Shares" on page 36.
How Has the Fund Performed? The Fund measures its performance by
quoting its total return and yield, which measure historical performance.
Those returns and yields can be compared to the returns and yields (over
similar periods) of other funds. Of course, other funds may have
different objectives, investments, and levels of risk. The Fund's
performance can also be compared to a broad market index, which we have
done on page 21. Please remember that past performance does not guarantee
future results.
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data, expense ratios and other data based
on the Fund's average net assets. With the exception of the financial
information for the six months ended March 31, 1995 (which is unaudited),
this information has been audited by Deloitte & Touche LLP, the Fund's
independent auditors, whose report on the Fund's financial statements for
the fiscal year ended September 30, 1994, is included in the Statement of
Additional Information. The information in the table below (except for
total return) for the fiscal periods ended September 30, 1987 (from the
commencement of operations on November 11, 1986), 1988, and 1989 was
audited by the Fund's prior independent auditors. The Fund's Class B
shares were not publicly offered during the fiscal year ended September
30, 1994, and thus no information is given below as to Class B shares.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1994 1993 1992 1991 1990(3)
==========================================================
=================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.34 $15.09 $14.40 $13.51 $13.57
-----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .72 .77 .86 .83 .90
Net realized and unrealized
gain (loss) on investments (1.00) .70 .69 .91 (.08)
-------- -------- -------- -------- --------
Total income (loss) from
investment operations (.28) 1.47 1.55 1.74 .82
-----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.67) (.75) (.86) (.85) (.88)
Dividends in excess of net
investment income (.09) -- -- -- --
Distributions from net realized
gain on investments -- (.47) -- -- --
Distributions in excess of net
realized gain on investments (.07) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and
distributions to shareholders (.83) (1.22) (.86) (.85) (.88)
-----------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.23 $15.34 $15.09 $14.40 $13.51
======== ======== ======== ========
========
==========================================================
=================================================
TOTAL RETURN, AT NET ASSET VALUE(4) (1.92)% 10.31% 11.10% 13.20% 6.14%
==========================================================
=================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $83,456 $70,136 $29,724 $23,675 $20,287
-----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $79,076 $48,915 $25,153 $22,071 $20,576
-----------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 5,865 4,571 1,970 1,644 1,502
-----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.05% 5.08% 5.87% 5.93% 6.56%
Expenses, before voluntary
assumption by the Manager 1.00% 1.07% 1.25% 1.35% 1.41%
Expenses, net of voluntary
assumption by the Manager N/A 1.05% 1.16% 1.16% .66%
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 51% 21% 93% 75% 102%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C
---------------------------------- -------------
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1989 1988 1987(2) 1994(1)
==========================================================
========================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.33 $12.56 $14.00 $15.14
--------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .98 1.05 .90 .46
Net realized and unrealized
gain (loss) on investments .24 .77 (1.44) (.83)
-------- -------- -------- --------
Total income (loss) from
investment operations 1.22 1.82 (.54) (.37)
--------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.98) (1.05) (.90) (.46)
Dividends in excess of net
investment income -- -- -- (.06)
Distributions from net realized
gain on investments -- -- -- --
Distributions in excess of net
realized gain on investments -- -- -- (.07)
-------- -------- -------- --------
Total dividends and
distributions to shareholders (.98) (1.05) (.90) (.59)
--------------------------------------------------------------------------------------------------
Net asset value, end of period $13.57 $13.33 $12.56 $14.18
======== ======== ======== ========
==========================================================
========================================
TOTAL RETURN, AT NET ASSET VALUE(4) 9.54% 14.96% (4.11)% (2.54)%
==========================================================
========================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $19,350 $13,480 $10,228 $8,511
--------------------------------------------------------------------------------------------------
Average net assets (in thousands) $17,188 $12,220 $11,152 $4,686
--------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 1,426 1,011 814 600
--------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.09% 8.01% 7.39%(5) 3.77%(5)
Expenses, before voluntary
assumption by the Manager 1.56% 1.75% 1.95%(5) 2.24%(5)
Expenses, net of voluntary
assumption by the Manager .23% N/A .40%(5) N/A
--------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 180% 148% 98% 51%
</TABLE>
(1) For the period from December 1, 1993 (inception of offering) to September
30, 1994.
(2) For the period from November 11, 1986 (commencement of operations) to
September 30, 1987.
(3) On April 7, 1990, Oppenheimer Management Corporation became the investment
advisor to the Fund.
(4) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
(5) Annualized.
(6) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the year ended September 30, 1994 were $68,359,263 and $41,537,773,
respectively.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
-----------------------------------------------------------------------------------------------------------
Class A Class C
------------------------------------------------------------------ ----------------------------
Six Months Period
Six Months Ended Ended Ended
March 31, 1995 Year Ended September 30, Mar. 31, 1995 Sept. 30,
(Unaudited) 1994 1993 1992 1991 1990(2) (Unaudited) 1994(1)
==========================================================
==========================================================
================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value,
beginning of period $ 14.23 $15.34 $15.09 $14.40 $13.51 $13.57 $ 14.18 $15.14
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .39 .72 .77 .86 .83 .90 .36 .46
Net realized and unrealized
gain (loss) on investments .10 (1.00) .70 .69 .91 (.08) .10 (.83)
-------- ------- ------- ------- ------- ------- -------- ------
Total income (loss) from
investment operations .49 (.28) 1.47 1.55 1.74 .82 .46 (.37)
------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.38) (.67) (.75) (.86) (.85) (.88) (.32) (.46)
Dividends in excess of net
investment income -- (.09) -- -- -- -- -- (.06)
Distributions from
net realized
gain on investments -- -- (.47) -- -- -- -- --
Distributions in
excess of net
realized gain on
investments -- (.07) -- -- -- -- -- (.07)
-------- ------- ------- ------- ------- ------- -------- ------
Total dividends and
distributions to
shareholders (.38) (.83) (1.22) (.86) (.85) (.88) (.32) (.59)
==========================================================
==========================================================
================
Net asset value,
end of period $ 14.34 $14.23 $15.34 $15.09 $14.40 $13.51 $ 14.32 $14.18
======== ======= ======= ======= =======
======= ======== ======
==========================================================
==========================================================
================
Total Return, at
Net Asset Value(3) 3.50% (1.92)% 10.31% 11.10% 13.20% 6.14% 3.32% (2.54)%
------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net assets,
end of period
(in thousands) $ 81,512 $83,456 $70,136 $29,724 $23,675 $20,287 $ 7,616 $8,511
------------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $ 78,758 $79,076 $48,915 $25,153 $22,071 $20,576 $ 7,858 $4,686
------------------------------------------------------------------------------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 5,685 5,865 4,571 1,970 1,644 1,502 532 600
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average
net assets:
Net investment income 5.65%(4) 5.05% 5.08% 5.87% 5.93% 6.56% 4.73%(4)
3.77%(4)
Expenses, before
voluntary assumption
by the Manager .94%(4) 1.00% 1.07% 1.25% 1.35% 1.41% 1.86%(4) 2.24%(4)
Expenses, net of
voluntary assumption
by the Manager N/A N/A 1.05% 1.16% 1.16% .66% N/A N/A
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate(5) 32% 51% 21% 93% 75% 102% 32% 51%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to
September 30, 1994.
2. On April 7, 1990, Oppenheimer Management Corporation became the
investment advisor to the Fund.
3. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for
periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity
or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities) for the
six months ended March 31, 1995 were $27,328,472 and $31,507,699,
respectively.
See accompanying Notes to Financial Statements.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to provide a high level
of current income exempt from Federal income tax.
Investment Policies and Strategies. The Fund will seek to attain its
investment objective by investing, under normal market conditions, at
least 80% of its total assets in a portfolio of "investment-grade"
(defined below) Municipal Securities. "Investment-grade" are those
rated - or are determined by the Manager to be of comparable quality to
those rated - within the four highest rating categories of Moody's
Investors Service, Inc., Standard & Poor's Corporation, Fitch Investors
Service, Inc. or another rating organization. Municipal Securities in the
fourth highest rating category (for example, municipal bonds rated "Baa"
and municipal notes rated "MIG 2" by Moody's, and municipal bonds rated
"BBB" and municipal notes rated "SP-2" by Standard & Poor's), although of
investment grade, may be subject to greater market fluctuations and risks
of loss of income and principal than higher-rated Municipal Securities,
and may be considered to have speculative characteristics. Although
unrated securities are not necessarily of lower quality, the market for
them may not be as broad as for rated securities. A reduction in the
rating of a security after it is purchased by the Fund will not require
its disposition. To the extent that the Fund holds securities that have
fallen below investment grade, there is a greater risk that the Fund's
receipt of interest income will be impaired and that its net asset value
will be affected if the issuers of such securities fail to meet their
obligations. See Appendix A to the Statement of Additional Information for
a description of the various rating categories.
Under normal market conditions, no more than 20% of the Fund's total
assets will be invested in taxable investments. However, for temporary
defensive purposes, the Fund may invest up to 100% of its assets in
taxable certificates of deposit and commercial paper and taxable or tax-
exempt money market instruments. The Fund may not invest more than 20%
of its total assets in private activity municipal securities issued to
benefit a private user, the interest on which may be subject to the
Federal alternative minimum tax. The Fund may purchase Municipal
Securities on a "when-issued" basis and may purchase or sell Municipal
Securities on a "delayed delivery" basis. Under normal market conditions,
the Fund will maintain a dollar-weighted average portfolio maturity of
more than three years but not more than ten years. In calculating
maturity, the Fund will consider various factors, including anticipated
payments of principal. The Fund may hold securities with maturities of
more than ten years provided that under normal circumstances it maintains
a dollar-weighted average portfolio maturity as stated above.
Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
Municipal Securities. "Municipal Securities" are municipal bonds,
municipal notes, tax anticipation notes, bond anticipation notes, revenue
anticipation notes, construction loan notes and other short-term loans,
tax-exempt commercial paper and other debt obligations issued by or on
behalf of states, the District of Columbia, any commonwealths, territories
or possessions of the United States, or their respective political
subdivisions, agencies, instrumentalities or authorities, the interest
from which is not subject to Federal individual income tax in the opinion
of bond counsel to the respective issuer at the time of issue. No
independent investigation has been made by the Manager as to the users of
proceeds of bond offerings or the application of such proceeds.
The two principal classifications of Municipal Securities are
"general obligations" (secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest) and
"revenue obligations" (payable only from the revenues derived from a
particular facility or class of facilities, or a specific excise tax or
other revenue source). The Fund may invest in Municipal Securities of
both classifications, subject to particular restrictions described below.
Yields on Municipal Securities vary depending on a variety of
factors, including the general condition of the financial markets and of
the Municipal Securities market in particular, the size of a particular
offering, the maturity of the security and the credit rating of the
issuer. Generally, Municipal Securities of longer maturities produce
higher current yields but are subject to greater price fluctuation due to
changes in interest rates (discussed below), tax laws and other general
market factors than are Municipal Securities with shorter maturities.
Similarly, lower-rated Municipal Securities generally produce a greater
yield than higher-rated Municipal Securities due to the perception of a
greater degree of risk as to the ability of the issuer to meet principal
and interest obligations. "Investment Objective and Policies" in the
Statement of Additional Information contains more information about
Municipal Securities.
Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjusted at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
See "Floating Rate/Variable Rate Obligations" in the Statement of
Additional Information for more details.
Inverse Floaters and Derivative Investments. The Fund may invest
in variable rate bonds known as "inverse floaters." These bonds pay
interest at a rate that varies as the yields generally available on short-
term tax-exempt bonds change. However, the yields on inverse floaters
move in the opposite direction of yields on short-term bonds in response
to market changes. When the yields on short-term tax-exempt bonds go up,
the interest rate on the inverse floater goes down. When the yields on
short-term tax-exempt bonds go down, the interest rate on the inverse
floater goes up. As interest rates rise, inverse floaters produce less
current income. Inverse floaters are a type of "derivative security,"
which is a specially designed investment whose performance is linked to
the performance of another security or investment. Some inverse floaters
have a "cap" whereby if interest rates rise above the "cap," the security
pays additional interest income. If rates do not rise above the "cap,"
the Fund will have paid an additional amount for a feature that proves
worthless. The Fund may also invest in municipal derivative securities
that pay interest that depends on an external pricing mechanism. Examples
are interest rate swaps or caps and municipal bond or swap indices. The
Fund anticipates that it would invest no more than 10% of its total assets
in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due
on the maturity of the investment, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. That can mean that the Fund will realize less income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
Municipal Lease Obligations. The Fund may invest in certificates
of participation, which are tax-exempt obligations that evidence the
holder's right to share in lease, installment loan or other financing
payments by a public entity. Projects financed with certificates of
participation generally are not subject to state constitutional debt
limitations or other statutory requirements that may be applicable to
Municipal Securities. Payments by the public entity on the obligation
underlying the certificates are derived from available revenue sources;
such revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to the
certificates are not guaranteed. While some municipal lease securities
may be deemed to be "illiquid" securities (the purchase of which would be
limited as described below in "Illiquid and Restricted Securities"), from
time to time the Fund may invest more than 5% of its net assets in
municipal lease obligations that the Manager has determined to be liquid
under guidelines set by the Fund's Board of Trustees. See "Municipal
Lease Obligations" in the Statement of Additional Information for more
details.
Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under normal market conditions, the Fund may invest up to 20%
of its assets in taxable investments, including (i) certain "Temporary
Investments" (described in the next paragraph); (ii) hedging instruments
(described in "Hedging" below); (iii) repurchase agreements (explained
below); and (iv) Municipal Securities issued to benefit a private user
("Private Activity Municipal Securities"), the interest from which may be
subject to Federal alternative minimum tax (see "Taxes," below, and
"Private Activity Municipal Securities" in the Statement of Additional
Information).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary
"defensive" position by investing some or all of its assets (there is no
limit on the amount) in short-term money market instruments. These
include the taxable obligations described above, U.S. government
securities, bank obligations, commercial paper, corporate obligations and
other instruments approved by the Fund's Board of Trustees. This strategy
would be implemented to attempt to reduce fluctuations in the value of the
Fund's assets. The Fund may hold temporary investments pending the
investment of proceeds from the sale of Fund shares or portfolio
securities, pending settlement of purchases of Municipal Securities, or
to meet anticipated redemptions. To the extent the Fund assumes a
temporary defensive position, a portion of the Fund's distributions may
be subject to Federal and state income taxes and the Fund may not achieve
its objective.
Interest Rate Risk. The values of Municipal Securities will vary
as a result of changing evaluations by rating services and investors of
the ability of the issuers of such securities to meet their principal and
interest payments. Such values will also change in response to changes
in interest rates: should interest rates rise, the values of outstanding
Municipal Securities will probably decline and (if purchased at principal
amount) would sell at a discount; should interest rates fall, the values
of outstanding Municipal Securities will probably increase and (if
purchased at principal amount) would sell at a premium. Changes in the
value of Municipal Securities held in the Fund's portfolio arising from
these or other factors will not affect interest income derived from those
securities but will affect the Fund's net asset value per share.
Generally, securities of longer maturities are subject to greater
price fluctuations due to changes in interest rates. There are no
restrictions on the maturities of the Municipal Securities in which the
Fund may invest. The Fund will seek to invest in Municipal Securities
that, in the judgment of the Manager, will provide a high level of current
income consistent with the Fund's liquidity requirements and conditions
affecting the Municipal Securities market.
Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund ordinarily does not engage in the
trading of securities for the purpose of realizing short-term gains, but
the Fund may sell securities as the Manager deems advisable to take
advantage of differentials in yield to accomplish the Fund's investment
objective. The "Financial Highlights" above, show the Fund's portfolio
turnover rate during the past fiscal years. While short-term trading
increases portfolio turnover, the Fund incurs little or no brokerage
costs. Portfolio turnover affects the Fund's ability to qualify as a
"regulated investment company" under the Internal Revenue Code for tax
deductions for dividends and capital gains distributions the Fund pays
to shareholders. The Fund qualified in its last fiscal year and intends
to do so in the coming year, although it reserves the right not to
qualify.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
information about these practices, including limitations designed to
reduce some of the risks.
Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and
options on futures and municipal bond indices, or enter into interest rate
swap agreements. These are referred to as "hedging instruments." The
Fund may invest in financial futures contracts and related options on
those contracts only as a hedge against anticipated interest rate changes,
and the Fund does not intend to use hedging instruments for speculative
purposes. The hedging instruments the Fund may use are described below
and in greater detail in "Other Investment Techniques and Strategies" in
the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. The Fund may sell a futures contract or a call option on a
futures contract or purchase a put option on such futures contract if the
Manager anticipates that interest rates will rise, as a hedge against a
decrease in the value of the Fund's portfolio securities. If the Manager
anticipates that interest rates will decline, the Fund may purchase a
futures contract or a call option on a futures contract, or sell a put
option on a futures contract, to protect against an increase in the price
of securities the Fund intends to buy.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Writing
covered call options may also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
- Futures. The Fund may buy and sell financial futures contracts
that relate to (1) interest rates (these are referred to as Interest Rate
Futures); and (2) municipal bond indices (these are referred to as
Municipal Bond Index Futures). These types of Futures are described in
"Hedging With Options and Futures Contracts" in the Statement of
Additional Information. The Fund may concurrently buy and sell Futures
contracts in an attempt to benefit from any outperformance of the Future
purchased relative to the performance of the Future sold. The Fund may
not enter into futures contracts or purchase related options on futures
contracts if immediately after doing so the amount the Fund committed to
initial margin plus the amount paid for unexpired options on futures
contracts exceeds 5% of the Fund's total assets.
- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls).
The Fund may buy calls only on debt securities, municipal bond
indices, Municipal Bond Index Futures and Interest Rate Futures, or to
terminate its obligation on a call the Fund previously wrote. The Fund
may write (that is, sell) covered call options. When the Fund writes a
call, it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from the Fund
at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on an investment
gives the Fund the right to sell the investment at a set price to a seller
of a put on that investment. The Fund can buy only those puts that relate
to (1) debt securities that the Fund owns, (2) Interest Rate Futures held
by it, and (3) Municipal Bond Index Futures held by it. The Fund may not
sell a put other than a put that it previously purchased.
The Fund may buy and sell puts and calls only if certain conditions
are met: (1) after the Fund writes a call, not more than 25% of the
Fund's total assets may be subject to calls; (2) calls the Fund buys or
sells must be listed on a securities or commodities exchange, or quoted
on the Automated Quotation System of the National Association of
Securities Dealers, Inc. (NASDAQ) or in the case of calls on debt
securities, traded in the over-the-counter market; (3) each call the Fund
writes must be "covered" while it is outstanding: that means the Fund
must own the investment on which the call was written or it must own other
securities that are acceptable for the escrow arrangements required for
calls; (4) the Fund may write calls on Futures contracts it owns, but
these calls must be covered by securities or other liquid assets the Fund
owns and segregates to enable it to satisfy its obligations if the call
is exercised; and (5) a call or put option may not be purchased if the
value of all of the Fund's put and call options would exceed 5% of the
Fund's total assets.
- Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest
on a security. For example, they may swap a right to receive floating
rate payments for fixed rate payments. The Fund enters into swaps only
on securities it owns. The Fund may not enter into swaps with respect to
more than 25% of its total assets. Also, the Fund will segregate liquid
assets (such as cash or U.S. Government securities) to cover any amounts
it could owe under swaps that exceed the amounts it is entitled to
receive, and it will adjust that amount daily, as needed. The credit risk
of an interest rate swap depends on the counterparty's ability to perform.
Hedging instruments can be volatile investments and may involve
special risks. If the Manager uses a hedging instrument at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
These risks and the hedging strategies the Fund may use are described in
greater detail in the Statement of Additional Information.
Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. The Fund must receive collateral for such loans.
These loans are limited to not more than 5% of the value of the Fund's
total assets and are subject to other conditions described in the
Statement of Additional Information. The income from such loans, when
distributed by the Fund, will be taxable as ordinary income.
Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active trading
market, making it difficult to value them or dispose of them promptly at
an acceptable price. A restricted security is one that has a contractual
restriction on its resale or which cannot be publicly sold until it is
registered under the Securities Act of 1933. The Fund will not invest
more than 10% of its net assets in illiquid or restricted securities (that
limit may increase to 15% if certain state laws are changed or the Fund's
shares are no longer sold in those states). Such securities include: (i)
repurchase agreements maturing in more than seven days; (ii) securities
for which market quotations are not readily-available; and (iii) certain
municipal lease obligations that are considered illiquid securities. The
Fund's percentage limitation on these investments does not apply to
certain restricted securities that are eligible for resale to qualified
institutional buyers.
"When-Issued" and "Delayed Delivery" Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis and may purchase
or sell Municipal Securities on a "delayed delivery" basis. When the
Fund engages in these transactions, it will do so for the purpose of
acquiring portfolio securities consistent with the Fund's investment
objective and policies and not for the purpose of investment leverage.
These terms refer to securities that have been created and for which a
market exists, but which are not available for immediate delivery. There
may be a risk of loss to the Fund if the value of the security declines
prior to the settlement date. Under the fundamental policy allowing these
transactions, when the Fund is the buyer, it will maintain (in a
segregated account with its custodian) cash or high-grade Municipal
Securities having a total value equal to the amount of the Fund's purchase
commitments until payment is made. The Fund will make commitments to buy
Municipal Securities on this basis, as a fundamental policy, only with the
intention of actually acquiring the securities, but the Fund may sell the
securities prior to the settlement date if the sale is considered to be
advisable.
Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into repurchase
transactions that will cause more than 25% of the Fund's total assets to
be subject to repurchase agreements and will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days.
Other Investment Restrictions. The Fund has other investment restrictions
which are fundamental policies. Under these fundamental policies, the Fund
cannot do any of the following: (1) borrow money, except from banks for
temporary purposes in amounts not in excess of 5% of the value of the
Fund's assets; no assets of the Fund may be pledged, mortgaged or
hypothecated other than to secure a borrowing, and then in amounts not
exceeding 10% of the Fund's total assets; borrowings may not be made for
leverage, but only for liquidity purposes to satisfy redemption requests
when liquidation of portfolio securities is considered inconvenient or
disadvantageous; however, the Fund may enter into when-issued and delayed
delivery transactions as described herein; (2) make loans, except that the
Fund may purchase or hold debt obligations, repurchase agreements and
other investments and securities it is permitted to own and may lend its
portfolio securities and other investments it owns; (3) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities), if with respect to 75% of its total
assets, more than 5% of the Fund's total assets would be invested in
securities of that issuer or the Fund would own more than 10% of that
issuer's voting securities; or (4) invest more than 25% of its total
assets in a single industry (although the Fund may invest more than 25%
of its assets in a particular segment of the municipal bond market, but
will not invest more than 25% of its total assets in industrial revenue
bonds in a single industry).
All of the percentage restrictions described above and elsewhere in
the Prospectus apply only at the time the Fund purchases a security and
the Fund need not dispose of a security merely because the size of the
Fund's assets has changed or the security has increased in value relative
to the size of the Fund. There are other fundamental policies discussed
in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of two diversified investment
portfolios or "series" of Oppenheimer Tax-Exempt Fund (the "Trust"), an
open-end, management investment company organized as a Massachusetts
business trust in 1986.
The Trust is governed by a Board of Trustees, which is responsible
for protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Trust" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Trust. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A
Class B and Class C. All classes invest in the same investment portfolio.
Each class has its own dividends and distributions and pays certain
expenses which may be different for the different classes. Each class may
have a different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. Only shares of
a particular class vote together on matters that affect that class alone.
Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
chooses the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $35 billion as
of June 30, 1995, and with more than 2.6 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
Portfolio Manager. The portfolio manager of the Fund is Robert E.
Patterson, a Senior Vice President of the Manager. He has been the person
principally responsible for the day-to-day management of the Fund's
portfolio since February, 1992. During the past five years, Mr. Patterson
has also served as an officer and portfolio manager for other
OppenheimerFunds.
Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional
assets as the Fund grows: 0.500% of the first $100 million of aggregate
net assets, 0.450% of the next $150 million, 0.425% of the next $250
million, and 0.400% of aggregate net assets over $500 million. The Fund's
management fee for its last fiscal year was 0.500% of average annual net
assets for both its Class A and Class C shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time, it may
use brokers when buying portfolio securities. When deciding which brokers
to use, the Manager is permitted by the investment advisory agreement to
consider whether brokers have sold shares of the Fund or any other funds
for which the Manager serves as investment adviser.
The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
account to the Transfer Agent at the address and toll-free number shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms
to illustrate its performance: "total return" and "yield." These terms
are used to show the performance of each class of shares separately,
because the performance of each class of shares will usually be different,
as a result of the different kinds of expenses each class bears. This
performance information may be useful to help you see how well your
investment has done and to compare it to other funds or a market index,
as we have done below.
It is important to understand that the fund's total returns and
yields represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to measure
and compare the Fund's performance. The Fund's investment performance will
vary, depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
Total Returns. There are different types of "total returns" used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally they
include the payment of the maximum initial sales charge. Total returns
may also be quoted "at net asset value," without including the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for a one-year period for Class C shares,
they include the effect of the contingent deferred sales charge. Total
returns may also be shown based on the change in net asset value, without
including the contingent deferred sales charge. Class B shares were not
offered during the fiscal year ended September 30, 1994 and thus no total
return information is shown for that class.
Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the
absence of income taxes. It is calculated by dividing that portion of the
yield that is tax-exempt by a factor equal to one minus the applicable tax
rate. The yield of each class will differ because of the different
expenses of each class of shares. The yield data represents a hypothetical
investment return on the portfolio, and does not measure an investment
return based on dividends actually paid to shareholders. To show that
return, a dividend yield may be calculated. Dividend yield is calculated
by dividing the dividends of a class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class C shares do not
reflect the deduction of the contingent deferred sales charge. Class B
shares were not publicly offered prior to August 29, 1995, and thus no
yield information is shown for that class.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
Management's Discussion of Performance. During the past fiscal
year, the Fund's performance was affected by aggressive increases in
short-term interest rates by the Federal Reserve Board, which caused a
decline in the overall price of municipal bonds. The Manager emphasized
essential service issues, diversified by market sector and by state, as
well as on bonds offering significant call protection, which prevents the
issuer of the bond from calling or redeeming it before maturity.
Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held until September 30, 1994; in the case of Class
A shares, from the commencement of operation on November 11, 1986, and in
the case of Class C shares, from the inception of the class on December
1, 1993, with all dividends and capital gains distributions reinvested in
additional shares. The graph reflects the deduction of the 3.50% maximum
initial sales charge on Class A shares and the maximum 1.0% contingent
deferred sales charge on Class C shares.
The Fund's performance is compared to the performance of the Lehman
Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond Index
is an unmanaged index of a broad range of investment grade municipal
bonds, widely regarded as a measure of the performance of the general
municipal bond market. Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction
costs, and none of the data below shows the effect of taxes. Also, the
Fund's performance reflects the effect of fund business and operating
expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the index data does not
take into account portfolio maturity, nor does it reflect any assessment
of the risk of the investments included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Intermediate Tax-Exempt Fund (Class A) and Lehman Bros. Muni
Bond Index
[graph]
Average Annual Total Returns of Class A Shares of the Fund at 9/30/941
1 Year 5 Years Life
----------------------------------------------------------------------
-5.32% 6.87% 6.83%
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Intermediate Tax-Exempt Fund (Class C) and Lehman Bros. Muni
Bond Index
[graph]
Cumulative Total Returns of Class C Shares of the Fund at 9/30/942
Life
------------------------------------------------------------------
-3.46%
1The inception date of the Fund (Class A shares) was 11/11/86. The
average annual total returns and the ending account value for Class A
shares in the graph reflect reinvestment of all dividends and capital
gains distributions and are shown net of the applicable 3.50% maximum
initial sales charge.
2Class C shares of the Fund were first publicly offered on 12/1/93. The
cumulative total returns and the ending account value for Class C shares
in the graph reflect reinvestment of all dividends and capital gains
distributions and are shown net of the applicable 1.0% contingent deferred
sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and may
likely have different share prices.
Class A Shares. When you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, you will not pay any initial sales charge, but
if you sell any of those shares within 18 months after your purchase, you
may pay a contingent deferred sales charge, which will vary depending on
the amount you invested.
Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you have owned your shares. As described below, the Fund
automatically converts Class B shares into Class A shares after six years.
It is described below. Long-term Class B shareholders could pay the
economic equivalent of more than the maximum front-end sales charge
allowed under applicable regulations, because of the effect of the asset-
based sales charge and contingent deferred sales charge. The automatic
conversion of Class B shares to Class A Shares is designed to minimize the
likelihood that this will occur.
Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 12 months of
buying them, you will normally pay a contingent deferred sales charge of
1.0%.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B or Class C shares). If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the annual asset-based sales charge on Class B and Class C expenses
(which, like all expenses, will affect your investment return). For the
sake of comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns and the operating expenses borne
by each class of shares, and which class you invest in. The discussion
below of he factors to consider in purchasing a particular class of shares
assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. The assumptions we have made in assessing the factors to
consider in purchasing a particular class of shares assume that you will
purchase only one class, and not a combination of different classes.
How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest.
For example, the reduced sales charges available for larger purchases of
Class A shares may, over time, offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on shares of Class B or
C for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short term investment
horizon (that is, you plan to hold your shares less than five years), you
should probably consider purchasing Class C shares rather than Class A or
Class B shares, because of the effect of the Class B contingent deferred
sales charge if you redeem in less than 7 years, as well as the effect of
the Class B asset-based sales charge on the investment return for that
class in the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000) because there is no
initial sales charge on Class C shares, and the contingent deferred sales
charge does not apply to amounts you sell after holding them one year.
However, if you plan to invest more than $1000,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge
on Class C shares will have a greater impact on your account over the
longer term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might not be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or more of Class B shares or
purchase orders of $1 million or more of Class B or C shares respectively
from a single investor. Of course, these examples are based on
approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, using the assumed annual performance
return stated above, and therefore should not be relied on as rigid
guidelines.
- Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B or Class C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
Are There Differences in Account Features That Matter to You?
Because some account features may not be available for Class B or Class
C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares is better for
you. For example, share certificates are not available for Class B or
Class C shares and if you are considering using your shares as collateral
for a loan, that may be a factor to consider. Also, Checkwriting
privileges are not available for class B or Class C shares. Additionally,
the dividends payable to Class B and Class C shareholders will be reduced
by the additional expenses borne solely by that class, such as the asset-
based sales charge, as described below and in the Statement of Additional
Information.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A,
Class B or Class C shares. If you do not choose, your investment will be
made in Class A shares.
Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares.
Payment by Federal Funds Wire. Shares may be purchased by Federal
Funds wire. The minimum investment is $2,500. You must first call the
Distributor's Wire Department at 1-800-525-7041 to notify the Distributor
of the wire, and to receive further instructions.
Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from days in ACH
transmissions. You must request AccountLink privileges on the application
or dealer settlement instructions used to establish your account. Please
refer to "AccountLink" below for more details.
Asset Builder Plans. You may purchase shares of the Fund (and up to
four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day The New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, where purchases are not subject to an initial
sales charge, the offering price may be net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer. The current sales charge rates
and commissions paid to dealers and brokers are as follows:
Front-End Front-End
Sales Charge Sales Charge Commission
as a as a as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
-----------------------------------------------------------------------
Less than $100,000 3.50% 3.63% 3.00%
-----------------------------------------------------------------------
$100,000 or more but less 3.00% 3.09% 2.50%
than $250,000
-----------------------------------------------------------------------
$250,000 or more but less 2.50% 2.56% 2.00%
than $500,000
-----------------------------------------------------------------------
$500,000 or more but less 2.00% 2.04% 1.50%
than $1 million
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more OppenheimerFunds
aggregating $1 million or more. However, the Distributor pays dealers of
record commissions on such purchases in an amount equal to the sum of 1.0%
of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25%
of share purchases over $5 million. That commission will be paid only on
the amount of those purchases in excess of $1 million that were not
previously subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or for trust or custodial accounts on behalf of your
children who are minors. A fiduciary can cumulate shares purchased for a
trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A
shares of the Fund and Class A and Class B shares of other
OppenheimerFunds to reduce the sale charge rate that applies to current
purchases of Class A shares. You can also count Class A and Class B
shares of other OppenheimerFunds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge
rate for current purchases of Class A shares, provided that you still hold
that investment in one of the OppenheimerFunds. The value of those shares
will be based on the greater of the amount you paid for the shares or
their current value (at offering price). The OppenheimerFunds are listed
in "Reduced Sales Charges" in the Statement of Additional Information, or
a list can be obtained from the Transfer Agent. The reduced sales charge
will apply only to current purchases and must be requested when you buy
your shares.
Letter of Intent. Under a Letter of Intent, if you purchase Class
A and Class B shares of the Fund and Class A and Class B shares of other
OppenheimerFunds during a 13-month period, you can reduce the sales charge
rate that applies to your purchases of Class A shares. The total amount
of your intended purchases of both Class A and Class B shares will
determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of
this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser must
certify to the Distributor at the time of purchase that the purchase is
for the purchaser's own account (or for the benefit of such employee's
spouse or minor children); and
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for
the use of shares of the Fund in particular investment products made
available to their clients.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other OppenheimerFunds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor
- shares purchased and paid for with the proceeds of shares redeemed
in the prior 12 months from a mutual fund (other than a fund managed by
the Manager or any of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver.
The Class A contingent deferred sales charge does not apply to
purchases of Class A shares at net asset value described above and is also
waived if shares are redeemed in the following cases: (1) for retirement
distributions or loans to participants or beneficiaries from qualified
retirement plans, deferred compensation plans or other employee benefit
plans ("Retirement Plans"), (2) to return excess contributions made to
Retirement Plans, (3) to make Automatic Withdrawal Plan payments that are
limited to no more than 12% of the original account value annually, (4)
involuntary redemptions of shares by operation of law or under the
procedures set forth in the Fund's Declaration of Trust or adopted by the
Board of Trustees, and (5) Class A shares that would otherwise be subject
to the Class A contingent deferred sales charge are redeemed, but at the
time the purchase order for your shares was placed, the dealer agreed to
accept the dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (and that no further
commission would be payable if the shares were redeemed within 18 months
of purchase).
Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 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:
Contingent Deferred
Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
-----------------------------------------------------------------------
0-1 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 any of the
following redemptions:
- to make distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an Automatic
Withdrawal Plan after the participant reaches age 59-1/2, as long as the
payments are no more than 10% of the account value annually (measured from
the date the Transfer Agent receives the request), or (b) following the
death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary which occurred after the account was opened;
- redemptions from accounts other than Retirement Plans following the
death or disability of the shareholder (the disability must have occurred
after the account was established and you must provide evidence of a
determination of disability by the Social Security Administration),
- to make returns of excess contributions to Retirement Plans, and
- to make distributions from IRAs (including SEP-IRAs and SAR/SEP
accounts) before the participant is age 59-1/2, and distributions from
403(b)(7) custodial plans or pension or profit sharing plans before the
participant is age 59-1/2 but only after the participant has separated
from service, if the distributions are made in substantially equal
periodic payments over the life (or life expectancy) of the participant
or the joint lives (or joint life and last survivor expectancy) of the
participant and the participant's designated beneficiary (and the
distributions must comply with other requirements for such distributions
under the Internal Revenue Code and may not exceed 10% of the account
value annually, measured from the date the Transfer Agent receives the
request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Fund pays the asset-based sales charge to the Distributor for its services
rendered in connection with the distribution of Class B shares. Those
payments are at a fixed rate which is not related to the Distributor's
expense. The services rendered by the Distributor include paying and
financing the payment of sales commissions, service fees and other costs
of distributing and selling Class B shares.
If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the service fee and/or the asset-
based sales charge to the Distributor as to shares sold before the Plan
was terminated.
Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of
1.0% will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
redemptions or circumstances described above under "Waivers of Class B
Sales Charge."
Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for distributing Class C shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class C shares. The Distributor also
receives a service fee of 0.25% per year. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close
of each regular business day. The asset-based sales charge allows
investors to buy Class C shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
total up-front commission paid by the Distributor to the dealer at the
time of sale is 1.00% of the purchase price.
The Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class C shares.
Those payments, retained by the Distributor, are at a fixed rate which is
not related to the Distributor's expenses. The services rendered by the
Distributor include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class C shares,
including compensating personnel of the Distributor who support
distribution of Class C shares.
The Distributor retains the asset-based sales charge during the first
year shares are outstanding. The Distributor plans to pay the asset-based
sales charge as an ongoing commission to the dealer on Class C shares that
have been outstanding for a year or more.
If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for certain expenses it incurred before the plan was
terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
Using AccountLink to Buy Shares. Purchases may be made by telephone
only after your account has been established. To purchase shares in
amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks
may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or
B shares of the Fund, you have up to 6 months to reinvest all or part of
the redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying a sales charge. This privilege applies to
Class A shares that you purchased subject to an initial sales charge and
to Class A or B shares on which you paid a contingent deferred sales
charge when you redeemed them. It does not apply to Class C shares. You
must be sure to ask the Distributor for this privilege when you send your
payment. A realized gain on the redemption is taxable, and the
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a loss on the redemption, some or all of the loss may
not be tax deductible, depending on the timing and amount reinvested in
the Fund. Please consult the Statement of Additional Information for more
details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, by using the Fund's
Checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, as described above.
If you have questions about any of these procedures, and especially if you
are redeeming shares in a special situation, such as due to the death of
the owner, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The check is not payable to all shareholders listed on the account
statement
- The check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270,
Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
Telephone Redemptions Through AccountLink or by Wire. Shareholders
may have the Transfer Agent send redemption proceeds of $2,500 or more by
Federal Funds wire to a designated commercial bank account. The bank must
be a member of the Federal Reserve wire system. There is a $10 fee for
each Federal Funds wire. To place a wire redemption request, call the
Transfer Agent at 1-800-852-8457. The wire will normally be transmitted
on the next bank business day after the shares are redeemed. There is a
possibility that the wire may be delayed up to seven days to enable the
Fund to sell securities to pay the redemption proceeds. No dividends are
accrued or paid on the proceeds of shares that have been redeemed and are
awaiting transmittal by wire. To establish wire redemption privileges on
an account that is already established, please contact the Transfer Agent
for instructions.
Selling Shares by Wire. You may request that redemption proceeds of
$2,500 or more be wired to a previously designated account at a commercial
bank that is a member of the Federal Reserve wire system. The wire will
normally be transmitted on the next bank business day after the redemption
of shares. To place a wire redemption request, call the Transfer Agent
at 1-800-525-7048. There is a $10 fee for each wire.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B or Class C shares, or Class A shares that are subject to a
contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 10 days.
- Don't use your checks if you changed your Fund account number.
The Fund will charge a $10 fee for any check that is not paid because
(1) the owners of the account told the Fund not to pay the check, or (2)
the check was for more than the account balance, or (3) the check did not
have the proper signatures or (4) the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A, Class B and/or Class C shares, and a list
can be obtained by calling the Distributor at 1-800-525-7048. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges, by calling 1-800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the
same name(s) and address. Shares held under certificates may not be
exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into if
it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a
result, those exchanges may be subject to notice requirements, delays and
other limitations that do not apply to shareholders who exchange their
shares directly by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
Net Asset Value Per Share is determined for each class of shares as
of the close of The New York Stock Exchange on each regular business day
The New York Stock Exchange is open by dividing the value of the Fund's
net assets attributable to a class by the number of shares of that class
that are outstanding. The Trust's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value.
In general, securities values are based on market value. There are
special procedures for valuing illiquid and restricted securities,
obligations for which market values cannot be readily obtained, and call
options and hedging instruments. These procedures are described more
completely in the Statement of Additional Information.
The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
Payment for redeemed shares is made ordinarily in cash and forwarded
by check or through AccountLink (as elected by the shareholder under the
redemption procedures described above) within 7 days after the Transfer
Agent receives redemption instructions in proper form, except under
unusual circumstances determined by the Securities and Exchange Commission
delaying or suspending such payments. For accounts registered in the name
of a broker-dealer, payment will be forwarded within 3 business days. The
Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase
payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase
shares by certified check or arrange with your bank to provide telephone
or written assurance to the Transfer Agent that your purchase payment has
cleared.
Involuntary redemptions may be made if the account value has fallen
below $1,000 for reasons other than the fact that the market value of
shares has dropped, and in some cases, involuntary redemptions may be made
to repay the Distributor for losses from the cancellation of share
purchase orders.
"Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class C shares.
To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same last name and address
on the Fund's records. However, each shareholder may call the Transfer
Agent at 1-800-525-7048 to ask that copies of those materials be sent
personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income each regular business day and
pays those dividends to shareholders monthly on a date selected by the
Board of Trustees. Dividends paid on Class A shares generally are expected
to be higher than for Class B or Class C shares because expenses allocable
to Class B and Class C shares will generally be higher.
During the Fund's fiscal year ended September 30, 1994, the Fund
sought to pay distributions to shareholders at a targeted level per Class
A share each month, to the extent that target was consistent with the
Fund's net investment income and other distributable income sources,
although the amount of distributions could vary from time to time,
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by that Class. The Board of Trustees could change that
targeted level at any time, and there is otherwise no fixed dividend rate.
The Fund was able to pay dividends at the targeted level from net
investment income and other distributable income, without any material
impact on the Manager's portfolio management practices or on the Fund's
net asset value per share. There can be no assurance as to the payment
of any dividends or the realization of any capital gains.
Capital Gains. Although the Fund does not seek capital gains, the Fund may
realize capital gains on the sale of portfolio securities. If it does,
it may make distributions annually in December out of any net short-term
or long-term capital gains. The Fund may also make supplemental
distributions of dividends and capital gains following the end of its
fiscal year. If net capital losses are realized in any year, they are
charged against the principal and not against net investment income, which
is distributed regardless of capital gains or losses. Long-term capital
gains will be separately identified in the tax information the Fund sends
you after the end of the year. Short-term capital gains are treated as
dividends for tax purposes.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. You have four
options:
Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
Reinvest Capital Gains Only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or sent to
your bank account on AccountLink.
Receive All Distributions in Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank on AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. Dividends paid from short-term capital
gains are taxable as ordinary income. Dividends paid from net investment
income earned by the Fund on Municipal Securities will be excludable from
your gross income for federal income tax purposes. A portion of the
dividends paid by the Fund may be an item of tax preference if you are
subject to alternative minimum tax. Distributions are subject to federal
income tax and may be subject to state or local taxes. Whether you
reinvest your distributions in additional shares or take them in cash, the
tax treatment is the same. Every year the Fund will send you and the IRS
a statement showing the amount of any taxable distribution you received
in the previous year as well as the amount of your tax-exempt income.
"Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a dividend or a taxable
capital gain.
Taxes on Transactions: Even though the Fund seeks tax-exempt income
for distribution to shareholders, you may have a capital gain or loss when
you sell or exchange your shares. A capital gain or loss is the
difference between the price you paid for the shares and the price you
received when you sold them. Any capital gain is subject to capital gains
tax.
Returns of Capital: In certain cases, distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders. A
non-taxable return of capital may reduce your tax basis in your Fund
shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer Intermediate
Tax-Exempt Fund: "Comparison of Total Return of Oppenheimer Intermediate
Tax-Exempt Fund and the Lehman Brothers Municipal Bond Index - Change in
Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Intermediate Tax-Exempt Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in the Fund. In the case of the Fund's class A shares, that graph will
cover the period from the commencement of the Fund's operations (11/11/86)
through 9/30/94 and in the case of the Fund's Class C shares will cover
the period from the inception of the class (December 1, 1993) through
September 30, 1994. The graph will compare such values with hypothetical
$10,000 investments over the same time periods in the Lehman Brothers
Municipal Bond Index. Set forth below are the relevant data points that
will appear on the linear graph. Additional information with respect to
the foregoing, including a description of the Lehman Brothers Municipal
Bond Index, is set forth in the Prospectus under "How Has the Fund
Performed - Management's Discussion of Performance."
Fiscal Year Oppenheimer Intermediate Lehman Brothers
(Period) Ended Tax-Exempt Fund A Municipal Bond Index
11/11/86 $9,650 $10,000
9/30/87 $9,253 $9,690
9/30/88 $10,638 $10,948
9/30/89 $11,652 $11,898
9/30/90 $12,368 $12,707
9/30/91 $14,000 $14,383
9/30/92 $15,553 $15,886
9/30/93 $17,111 $16,698
9/30/94 $16,831 $16,291
Fiscal Oppenheimer Intermediate Lehman Brothers
Period Ended Tax-Exempt Fund C Municipal Bond Index
12/1/93 $10,000 $10,000
9/30/94 $9,655 $9,824
<PAGE>
Oppenheimer Intermediate Tax-Exempt Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information
and, if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR0860.001.0895 Printed on Recycled Paper
<PAGE>
Oppenheimer Intermediate Tax-Exempt Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated August 29, 1995
Oppenheimer Intermediate Tax-Exempt Fund (the "Fund"), is a series
of Oppenheimer Tax-Exempt 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 August 29, 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. . . . . . . . . . . . .
Investment Policies and Strategies. . . . . . . . . .
Other Investment Techniques and Strategies. . . . . .
Other Investment Restrictions . . . . . . . . . . . .
How the Fund is Managed . . . . . . . . . . . . . . . . .
Organization and History. . . . . . . . . . . . . . .
Trustees and Officers of the Trust. . . . . . . . . .
The Manager and Its Affiliates. . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . .
About Your Account . . . . . . . . . . . . . . . . . . . .
How To Buy Shares. . . . . . . . . . . . . . . . . . . . .
How To Sell Shares . . . . . . . . . . . . . . . . . . . .
How To Exchange Shares . . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . . .
Additional Information About the Fund. . . . . . . . . . .
Financial Information About the Fund . . . . . . . . . . .
Independent Auditors' Report . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . .
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. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund may invest, as well as the strategies the Fund may use
to try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information 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 (other than in a closing purchase transaction), it pays a premium
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.
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.
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) invest in real estate, but this shall not prevent the Fund from
investing in Municipal instruments or other permissible securities or
instruments secured by real estate or interests thereon;
(2) invest in interests in oil, gas, or other mineral exploration or
development programs;
(3) purchase securities, or other instruments, on margin; however, the
Fund may invest in options, futures, options on futures and similar
instruments and may make margin deposits and payments in connection
therewith;
(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; or
(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.
As a matter of non-fundamental policy, the Fund shall not 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; or 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 4 in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix C to this
Statement of Additional Information. This is not a fundamental
policy.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund'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 64.*
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 65.
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 53.*
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.
Raymond J. Kalinowski, Trustee; Age 66.
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 80.
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 45.
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 52.
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 47.
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.
[FN]
-----------------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
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 (i) the Fund, during its fiscal year ended September 30, 1994,
and (ii) from all of the Denver-based OppenheimerFunds (including the
Fund) listed in the first paragraph of this section, for services in the
positions shown:
Total
Compensation
Aggregate From All
Compensation Denver-based
Name/Position From Fund OppenheimerFunds1
Robert G. Avis - Trustee $600.00$53,000.00
William A. Baker - Audit and Review $829.00 $73,257.01
Committee Chairman and Trustee
Charles Conrad, Jr. - Audit and Review $774.00$68,293.67
Committee Member and Trustee
Raymond J. Kalinowski - Trustee $600.00 $53,000.00
C. Howard Kast - Trustee $600.00$53,000.00
Robert M. Kirchner - Audit and Review $774.00$68,293.67
Committee Member and Trustee
Ned M. Steel - Trustee $600.00$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 Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced.
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, the
Distributor, 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 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 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 and 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. In
either case, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
transactions in the secondary market, and are otherwise paid only if it
appears likely that a better price or execution can be obtained. When the
Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. 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. The 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.
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 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 Board has also
permitted the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research where the broker has represented to
Manager that: (i) the trade is not from or for the broker's own inventory,
(ii) the trade was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal
transaction.
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. Class B shares were not
publicly offered during the fiscal year ended September 30, 1994, and thus
no performance information is given below for Class B shares.
-- 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:
1/n
(ERV)
(---) -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, Class B or Class
C shares by Lipper Analytical Services, Inc. ("Lipper"), a widely-
recognized independent mutual fund monitoring 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
intermediate municipal debt 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, Class B 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, Class B 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
Distribution and Service Plans for Class B and Class C shares under Rule
12b-1 of the Investment Company Act pursuant to which the Fund will
compensate the Distributor quarterly for its services in connection with
the distribution and/or servicing of the shares of that class, as
described in the Prospectus. Each Plan has been approved by a vote of (i)
the Board of Trustees of the Fund, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on
that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class, such votes having
been cast by the Manager as the then-sole initial shareholder. 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, at
no cost to the Fund. 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 Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Each Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act)
of the outstanding shares of that class. None of the Plans may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund is required by an
exemptive order issued by the Securities and Exchange Commission to obtain
the approval of Class B as well as Class A shareholders for a proposed
amendment to the Class A Plan that would materially increase the amount
to be paid by Class A shareholders under the Class A Plan. Such approval
must be by a "majority" of the Class A and Class B shares (as defined in
the Investment Company Act), voting separately by class. All material
amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any payment. Each report shall also include the
distribution costs for that quarter. 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 Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on 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 does 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 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
fiscal years. Payments received by the Distributor under the Plan for
Class A shares will not be used to pay any interest expense, carrying
charges, or other financial costs, or allocation of overhead by the
Distributor.
The Class B and the Class C Plans allow the service fee payments to
be paid by the Distributor to Recipients in advance for the first year
such 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 shares sold. An exchange of shares does not entitle
the Recipient to an advance service fee payment. In the event shares are
redeemed during the first year such shares are outstanding, the Recipient
will be obligated to repay a pro rata portion of the advance of the
service fee payment 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. Since no Class B shares were
outstanding during that fiscal year, no payments were made under the Class
B Plan.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fee on such
shares, or to pay Recipients the service fee on a quarterly basis without
payment in advance, the Distributor presently 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 and the Class
C Plan by the Board. Initially, the Board has set no minimum holding
period. All payments under the Class B Plan and 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.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without paying a front-end sales load and
at the same time permit the Distributor to compensate Recipients in
connection with the sale of Class B and Class C shares of the Fund. The
Distributor retains the asset-based sales charge on Class B shares. As
to Class C shares, the Distributor retains the asset-based sales charge
during the first year shares are outstanding, and pays the asset-based
sales charge as an ongoing commission to the dealer on Class C shares
outstanding for a year or more. Under the Class B and Class C Plans, the
asset-based sales charge is paid to compensate the Distributor for its
services, described below, to the Fund. The Distributor's actual
distribution expenses for any given year may exceed the aggregate of
payments received pursuant to the Class B or Class C Plan and from
contingent deferred sales charges.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution
expenses are more or less than the amounts paid by the Fund during that
period. Such payments are made in recognition that the Distributor (i)
pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described in the Prospectus, (ii) may
finance such commissions and/or the advance of the service fee payment to
Recipients under those Plans, or may provide such financing from its own
resources, or from an affiliate, (iii) employs personnel to support
distribution of shares, and (iv) may bear the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders), state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three 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 and 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 another. The Distributor normally will not
accept (i) any order for $500,000 or more of Class B shares or (ii) 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 three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by incremental expenses borne solely by each class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares 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, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to a 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 unaffiliated 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 and
Service 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, Class B 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, Class B 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) long-term
debt securities having a remaining 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 Fund's Board of Trustees or
obtained from active market makers in the security on the basis of
reasonable inquiry; (ii) debt instruments having a maturity of more than
one year when issued, and non-money market type instruments having a
maturity of one year or less when issued, which have a remaining maturity
of 60 days or less are valued at the mean between the "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained from active market makers in the security on the
basis of reasonable inquiry; (iii) money market-type debt securities
having a maturity of less than one year when issued that having a
remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (iv) 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, 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). 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.
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:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt 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 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 Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government 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 Income & Growth Fund
Oppenheimer International Bond 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 (referred to as "Letter")
is the investor's statement in writing to the Distributor of the intention
to purchase Class A shares of the Fund or Class A and Class B shares of
other OppenheimerFunds during a 13-month period (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 of shares
which, when added to the investor's holdings of shares of those funds,
will equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to
count the Class A and Class B shares to be purchased under the Letter to
obtain the reduced sales charge rate on purchases of Class A shares of the
Fund (and other OppenheimerFunds) that applies under the Right of
Accumulation to current purchases of Class A shares. Each purchase of
Class A shares under the Letter will be made at the public offering price
applicable to a single lump-sum purchase in the amount intended to be
purchased under the Letter.
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 a Letter) include (a) Class
A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge, (b) Class B shares acquired subject to
a contingent deferred sales charge, and (c) Class A or B shares acquired
in exchange for either (i) Class A shares of one of the other
OppenheimerFunds that were acquired subject to a Class A initial or
contingent sales charge or (ii) Class B shares of one of the other
OppenheimerFunds that were acquired subject to a contingent deferred 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.
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.
-- 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.
-- 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 B shares that were purchased by reinvesting dividends or
distributions or 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. This privilege is not available
to Class C shareholders. 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 closed (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.). Ordinarily, for accounts redeemed by a broker-
dealer under this procedure, payment will be made within three business
days after the shares have been redeemed upon the Distributor's receipt
of the required redemption documents in proper form, with the signature(s)
of the registered owners guaranteed on the redemption documents as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check 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
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, but only the following other OppenheimerFunds currently
offer Class B shares:
Oppenheimer Asset Allocation Fund
Oppenheimer International Bond 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 Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Cash Reserves (Class B shares are available only by
exchange)
Oppenheimer Growth Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Oppenheimer U.S. Government Trust
Only the following other OppenheimerFunds offer Class C shares:
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Target Fund
Oppenheimer Cash Reserves (Class C shares are available only by
exchange)
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Tax-Free Bond Fund
Oppenheimer Strategic Income Fund
Oppenheimer Main Street Income & Growth 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). However,
shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months
prior to that purchase may subsequently be exchanged for shares of other
OppenheimerFunds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for that
privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if requested, must
supply proof of entitlement to this privilege. 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 any 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. The
Class B contingent deferred sales charge is imposed on Class B shares
acquired by exchange if they are redeemed within 6 years of the initial
purchase of the exchanged Class B shares. The Class C contingent deferred
sales charge is imposed on Class C shares acquired by exchange if they are
redeemed within 12 months of the initial purchase of the exchanged Class
C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or 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 more than one class must specify
whether they intend to exchange Class A, Class B 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, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different 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
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value.
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 third 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 three 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.
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.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and
Class C," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B and Class C shares are expected to be lower than dividends on
Class A shares as a result of the asset-based sales charges on Class B and
Class C shares, and will also differ in amount as a consequence of any
difference in net asset value between the classes.
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.
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 B and Class C
shareholders should be aware that as of the date of this Statement of
Additional Information, not all of the OppenheimerFunds offer Class B or
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.
/s/ Deloitte & Touche LLP
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--97.2%
--------------------------------------------------------------------------------------------------------------------------------
<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>
<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>
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>
<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.
See accompanying Notes to Financial Statements.
<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.
<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.
<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
<TABLE>
<S> <C>
==========================================================
==========================================================
===============
1. SIGNIFICANT Oppenheimer Intermediate Tax-Exempt Bond Fund (the Fund) is a separate series of Oppenheimer
ACCOUNTING POLICIES 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.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<S> <C>
==========================================================
==========================================================
====
2. SHARES OF The Fund has authorized an unlimited number of no par value shares of beneficial interest
BENEFICIAL INTEREST of each class. Transactions in shares of beneficial interest were as follows:
</TABLE>
<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.
<TABLE>
<S> <C>
==========================================================
==========================================================
=====
3. UNREALIZED GAINS AND At September 30, 1994, net unrealized depreciation on investments of $1,830,464 was
LOSSES ON INVESTMENTS composed of gross appreciation of $497,536, and gross depreciation of $2,328,000.
==========================================================
==========================================================
=====
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance with the investment advisory
AND OTHER TRANSACTIONS agreement with the Fund which provides for an annual fee of .50% on the first $100
million
WITH AFFILIATES 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments March 31, 1995 (Unaudited)
-----------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
<S> <C> <C> <C> <C>
S&P's/Fitch's Amount See Note 1
------------------------------------------------------------------------------------------------------------------------------------
Municipal Bonds and Notes--96.3%
------------------------------------------------------------------------------------------------------------------------------------
Alaska--1.3% North Slope Boro, Alaska General Obligation Bonds,
Series B, CGIC Insured, 7.50%, 6/30/01 Aaa/AAA $1,000,000 $ 1,115,029
------------------------------------------------------------------------------------------------------------------------------------
California--4.4% California Statewide Communities Development Authority
Hospital Revenue Certificates of Participation, Cedars-Sinai
Medical Center, MBIA-IBC Insured, 6.50%, 8/1/12 Aaa/AAA 1,000,000 1,058,875
-----------------------------------------------------------------------------------------------------------
Corona, California Certificates of Participation,
Prerefunded, Series B, 10%, 11/1/20 Aaa/AAA 1,000,000 1,310,381
-----------------------------------------------------------------------------------------------------------
Palomar Pomerado, California Health System
Revenue Bonds, MBIA Insured, Zero Coupon, 11/1/04 Aaa/AAA 1,000,000
579,134
-----------------------------------------------------------------------------------------------------------
San Bernardino County, California Certificates of
Participation, Medical Center Financing Project, 6%, 8/1/09 Baa1/A-- 1,000,000 961,825
-----------
3,910,215
------------------------------------------------------------------------------------------------------------------------------------
Colorado--1.7% Denver, Colorado City & County Airport Revenue
Bonds, Series A, 7%, 11/15/99 Baa/BB/BBB-- 1,000,000 1,005,357
-----------------------------------------------------------------------------------------------------------
Meridian Metropolitan District, Colorado General
Obligation Refunding Bonds, 7.50%, 12/1/11 A3/NR 500,000 549,426
-----------
1,554,783
------------------------------------------------------------------------------------------------------------------------------------
Connecticut--2.5% Connecticut State Special Tax Revenue Bonds,
Transportation Infrastructure Project, Prerefunded,
Series A, 7.125%, 6/1/07 NR/AAA 2,000,000 2,224,816
------------------------------------------------------------------------------------------------------------------------------------
District of
Columbia--1.5% District of Columbia General Obligation Refunding
Bonds, Series A-1, MBIA Insured, 4.85%, 6/1/04 Aaa/AAA/BB 1,500,000
1,376,620
------------------------------------------------------------------------------------------------------------------------------------
Florida--3.1% 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 1,614,277
-----------------------------------------------------------------------------------------------------------
Polk County, Florida Industrial Development Authority
Revenue Bonds, Purex Corp. Project, 6.75%, 6/1/03 NR/NR 1,115,000 1,115,153
-----------
2,729,430
------------------------------------------------------------------------------------------------------------------------------------
Georgia--2.5% Georgia State Residential Finance Authority Home
Ownership Mtg. Revenue Bonds, Series A-1,
FHA Insured, 7.50%, 6/1/17 Aa/AA+ 245,000 259,179
-----------------------------------------------------------------------------------------------------------
Savannah, Georgia Hospital Authority Revenue Bonds,
Refunding & Improvement--Chandler Hospital, 7%, 1/1/11 Baa/BBB+ 2,000,000
2,005,382
-----------
2,264,561
------------------------------------------------------------------------------------------------------------------------------------
Illinois--5.7% Chicago, Illinois General Obligation Refunding Bonds,
Prerefunded, Series B, 9.25%, 1/1/13 A/A 500,000 556,297
-----------------------------------------------------------------------------------------------------------
Du Page County, Illinois First Preservation District
General Obligation Bonds, Prerefunded, 7.70%, 11/1/00 NR/AAA 1,000,000 1,088,327
-----------------------------------------------------------------------------------------------------------
Du Page Water Commission Illinois Water Revenue
Bonds, Prerefunded, 6.875%, 5/1/14 NR/AAA 1,000,000 1,059,459
-----------------------------------------------------------------------------------------------------------
Illinois Development Finance Authority Pollution
Control Revenue Refunding Bonds, Central Illinois
Public Service Co., Series A, 7.60%, 3/1/14 Aa2/AA 250,000 269,426
-----------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Revenue
Refunding Bonds, Lutheran Health Systems,
Prerefunded, Series C, MBIA Insured, 7.50%, 4/1/18 A/A+ 400,000 443,648
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Statement of Investments March 31, 1995 (Unaudited)(Continued)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
------------------------------------------------------------------------------------------------------------------------------------
Illinois Southwestern Illinois Development Authority Hospital
(continued) Revenue Bonds, Saint Elizabeth Medical Center, 8%, 6/1/10 NR/A-- $ 500,000 $
535,490
-----------------------------------------------------------------------------------------------------------
Waukegan, Illinois General Obligation Bonds,
MBIA Insured, 7.50%, 12/30/03 Aaa/AAA 1,000,000 1,130,724
-----------
5,083,371
------------------------------------------------------------------------------------------------------------------------------------
Indiana--1.6% Indiana Bond Bank Revenue Guarantee Bonds, State
Revolving Fund Program, Series A, 6.875%, 2/1/12 NR/A 1,135,000 1,175,803
-----------------------------------------------------------------------------------------------------------
Indiana University Revenue Bonds, Hospital
Facilities Project, 7%, 1/1/09 A1/A+ 215,000 221,824
-----------
1,397,627
------------------------------------------------------------------------------------------------------------------------------------
Iowa--0.2% Des Moines, Iowa Hospital Revenue Bonds, Iowa
Methodist Medical Center, 7.875%, 8/15/15 A1/A+ 150,000 163,873
------------------------------------------------------------------------------------------------------------------------------------
Kentucky--1.2% Kentucky State Turnpike Authority Economic
Development Road Revenue Bonds, Revitalization
Projects, Prerefunded, 7.375%, 5/15/07 Aaa/AAA/A+ 1,000,000 1,114,622
------------------------------------------------------------------------------------------------------------------------------------
Louisiana--1.2% Louisiana State General Obligation Bonds,
Series A, AMBAC Insured, 8%, 5/1/99 Aaa/AAA/AAA 1,000,000
1,112,624
------------------------------------------------------------------------------------------------------------------------------------
Maine--1.4% Maine Educational Loan Marketing Corp. Student
Loan Revenue Refunding Bonds, Series A, 6.05%, 11/1/04 Aaa/NR 750,000 760,840
-----------------------------------------------------------------------------------------------------------
Maine State Housing Authority Revenue Bonds,
Mtg. Purchase Project, Series A, 7.50%, 11/15/22 A1/AA 500,000 524,051
-----------
1,284,891
------------------------------------------------------------------------------------------------------------------------------------
Maryland--3.9% Howard County, Maryland Certificates of
Participation, Series A, 8.05%, 2/15/21 NR/AA+ 350,000 433,935
-----------------------------------------------------------------------------------------------------------
Maryland Water Quality Financing Administration
Revenue Bonds, Revolving Loan Fund, Series A:
Zero Coupon, 9/1/04 Aa/AA/AA- 900,000 545,920
Zero Coupon, 9/1/05 Aa/AA/AA- 1,575,000 896,822
Zero Coupon, 9/1/06 Aa/AA/AA- 1,575,000 840,239
Zero Coupon, 9/1/07 Aa/AA/AA- 1,575,000 789,502
-----------
3,506,418
------------------------------------------------------------------------------------------------------------------------------------
Massachusetts--3.7% Massachusetts Bay Transportation Authority Revenue
Bonds, General Transportation Systems Project,
Series A, 6.25%, 3/1/12 A1/A+/A+ 2,000,000 2,049,158
-----------------------------------------------------------------------------------------------------------
Massachusetts State Dedicated Income Tax Bonds,
Series A, 7.875%, 6/1/97 A1/A+/A+ 665,000 708,163
-----------------------------------------------------------------------------------------------------------
Massachusetts State General Obligation Bonds,
FGIC Insured, 7.875%, 6/1/97 Aaa/AAA/AAA 500,000 530,652
-----------
3,287,973
------------------------------------------------------------------------------------------------------------------------------------
Michigan--0.6% Michigan State Hospital Finance Authority Revenue
Bonds, McLaren Obligated Group, Prerefunded,
Series A, 7.50%, 9/15/21 Aaa/NR 435,000 497,826
------------------------------------------------------------------------------------------------------------------------------------
Nevada--2.5% Clark County, Nevada School District General
Obligation Bonds, Series A, MBIA Insured, 9.75%, 6/1/01 Aaa/AAA 1,800,000
2,223,922
------------------------------------------------------------------------------------------------------------------------------------
New Jersey--1.8% Ocean County, New Jersey General Obligation
Bonds, 7.40%, 10/15/00 Aa/AA-/AA 1,400,000 1,560,774
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $ 546,846
------------------------------------------------------------------------------------------------------------------------------------
New York--14.9% City of New York General Obligation Bonds, Series F,
8.40%, 11/15/07 Baa1/A- 4,500,000 5,091,304
-----------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency Revenue
Bonds, Terminal One Group Assn. Project, 6%, 1/1/08 A/A/A- 2,000,000 2,003,311
-----------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Special Facility Revenue Bonds, Terminal One
Group Assn. Project, 6.10%, 1/1/09 A/A/A- 2,000,000 2,010,732
-----------------------------------------------------------------------------------------------------------
New York State General Obligation Refunding Bonds,
7.80%, 11/15/99 A/A- 1,000,000 1,118,571
-----------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance
Agency Revenue Refunding Bonds, Mental Health
Services Facilities, Series F, 6%, 2/15/03 Baa1/BBB+ 1,000,000 1,023,191
-----------------------------------------------------------------------------------------------------------
New York State Urban Development Corp. Revenue
Refunding Bonds, Correctional Facilities Project,
5.25%, 1/1/02 Baa1/BBB/A 2,035,000 1,994,117
-----------
13,241,226
------------------------------------------------------------------------------------------------------------------------------------
Oklahoma--1.3% Oklahoma County, Oklahoma Home Finance
Authority Revenue Bonds, GNMA Collateral Mtg
Program, 7.65%, 1/1/23 NR/AA- 125,000 131,928
-----------------------------------------------------------------------------------------------------------
Oklahoma State Industrial Authority Revenue Bonds,
Health Systems--Baptist Center, Series C, AMBAC
Insured, 7%, 8/15/05 Aaa/AAA/AAA 955,000 1,059,029
-----------
1,190,957
------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--8.6% Pennsylvania State Industrial Development Authority
Revenue Bonds, Economic Development Project,
AMBAC Insured, 6%, 1/1/99 Aaa/AAA/AAA 2,000,000 2,068,128
-----------------------------------------------------------------------------------------------------------
Pennsylvania State Industrial Development Authority
Revenue Bonds, Economic Development Project,
Series A, 6.80%, 7/1/01 NR/A-/AAA 3,000,000 3,239,751
-----------------------------------------------------------------------------------------------------------
Schuylkill County, Pennsylvania Industrial
Development Authority Resource Recovery Revenue
Refunding Bonds, Schuylkill Energy Resources, Inc.,
6.50%, 1/1/10 NR/NR/BBB- 2,500,000 2,337,907
-----------
7,645,786
------------------------------------------------------------------------------------------------------------------------------------
South Carolina--4.3% Richland County, South Carolina Hospital Facilities
Revenue Bonds, Community Provider Pooled Loan
Program, CGIC Insured, Series A, 7.125%, 7/1/17 Aaa/AAA 250,000 267,141
-----------------------------------------------------------------------------------------------------------
South Carolina State Education Assistance Authority
Revenue Bonds, Insured Student Loan, 6.30%, 9/1/01 NR/AA 1,400,000 1,447,568
-----------------------------------------------------------------------------------------------------------
South Carolina State Public Service Authority Revenue
Refunding Bonds, Prerefunded, 8%, 7/1/04 Aaa/AA-/A+ 2,000,000 2,139,168
-----------
3,853,877
------------------------------------------------------------------------------------------------------------------------------------
South Dakota--1.7% South Dakota Student Loan Finance Revenue
Bonds, Series A, 5.95%, 8/1/01 NR/A+ 1,500,000 1,505,343
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Statement of Investments March 31, 1995 (Unaudited)
-----------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas--7.8% Harris County, Texas Flood Control Bonds, Series A,
7.125%, 10/1/98 Aa/AA+ $1,315,000 $ 1,410,474
-----------------------------------------------------------------------------------------------------------
Harris County, Texas Health Facilities Development
Corp. Hospital Revenue Bonds, Hermann Trust,
Prerefunded, 9%, 10/1/17 Aaa/AAA 2,500,000 2,791,535
-----------------------------------------------------------------------------------------------------------
Harris County, Texas Revenue Bonds, Toll Road
Project, Prerefunded, 10.375%, 8/1/14 Aaa/NR 1,500,000 1,716,118
-----------------------------------------------------------------------------------------------------------
Texas National Research Laboratory Commission
Financing Corp. Lease Revenue Bonds,
Superconducting Super Collider, 6.25%, 12/1/00 NR/A-/A 1,000,000 1,005,567
-----------
6,923,694
------------------------------------------------------------------------------------------------------------------------------------
Vermont--1.1% Vermont State Student Assistance Corp. Educational
Loan Revenue Bonds, Finance Program, Series A-3,
FSA Insured, 6.25%, 6/15/03 Aaa/AAA 900,000 947,038
------------------------------------------------------------------------------------------------------------------------------------
Virginia--2.6% Chesapeake, Virginia Public Improvement General
Obligation Bonds, 7%, 5/1/99 Aa/AA 2,155,000 2,327,965
------------------------------------------------------------------------------------------------------------------------------------
Washington--1.2% Port of Seattle, Washington Revenue Bonds,
Series B, 6.30%, 11/1/02 A1/AA-/AA- 1,000,000 1,050,901
------------------------------------------------------------------------------------------------------------------------------------
West Virginia--0.9% West Virginia School Building Authority Revenue
Bonds, Prerefunded, MBIA Insured, 7.25%, 7/1/15 Aaa/AAA 750,000 836,358
------------------------------------------------------------------------------------------------------------------------------------
U.S. Possessions--10.5% Puerto Rico Commonwealth Highway & Transportation
Authority Revenue Bonds, Series X, 5.30%, 7/1/04 Baa1/A 3,000,000 2,933,319
-----------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue
Bonds, Series P, 6.75%, 7/1/03 Baa1/A- 2,000,000 2,146,886
-----------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue
Refunding Bonds, Series S, 7%, 7/1/07 Baa1/A- 2,000,000 2,209,992
-----------------------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue
Bonds, AMBAC Insured, Inverse Floater, 3.91%, 1/1/03(1) Aaa/AAA/AAA 2,400,000
2,041,125
-----------
9,331,322
-----------
Total Municipal Bonds and Notes (Cost $85,473,531) 85,810,688
==========================================================
==========================================================
================
Short-Term Tax-Exempt Obligations--1.8%
------------------------------------------------------------------------------------------------------------------------------------
Apache County, Arizona Industrial Development
Authority Pollution Control Revenue Bonds, Tucson
Electric Power Co. Project, Series A, 4.25%
(Cost $1,600,000)(2) 1,600,000 1,600,000
------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $87,073,531) 98.1% 87,410,688
------------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.9 1,717,723
---------- -----------
Net Assets 100.0% $89,128,411
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. The multiplier for this inverse floater is 2. Inverse floaters amount to
$2,041,125 or 2.3% of the Fund's net assets, at March 31, 1995.
2. Floating or variable rate obligation maturing in more than one year. The interest rate, which is based
on specific, or an index of, current market interest rates, is subject to change periodically and is the
effective rate on March 31, 1995. This instrument may also have a demand feature which allows the recovery
of principal at any time, or at specified intervals not exceeding one year, on up to 30 days' notice.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1995 (Unaudited)
-----------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
Assets Investments, at value (cost $87,073,531)--see accompanying statement $ 87,410,688
-----------------------------------------------------------------------------------------------------------
Cash 167,445
-----------------------------------------------------------------------------------------------------------
Receivables:
Interest 1,641,255
Shares of beneficial interest sold 345,888
-----------------------------------------------------------------------------------------------------------
Other 5,038
------------
Total assets 89,570,314
==========================================================
==========================================================
================
Liabilities Payables and other liabilities:
Dividends 258,069
Shares of beneficial interest redeemed 117,920
Distribution and service plan fees--Note 4 53,339
Transfer and shareholder servicing agent fees--Note 4 5,642
Trustees' fees 3,400
Other 3,533
------------
Total liabilities 441,903
==========================================================
==========================================================
================
Net Assets $ 89,128,411
============
==========================================================
==========================================================
================
Composition of Paid-in capital $ 91,315,141
Net Assets -----------------------------------------------------------------------------------------------------------
Overdistributed net investment income (28,834)
-----------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (2,495,053)
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 337,157
------------
Net assets $ 89,128,411
============
==========================================================
==========================================================
================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets of
$81,512,367 and 5,685,007 shares of beneficial interest outstanding) $14.34
Maximum offering price per share (net asset value plus sales charge of 3.50% of
offering price) $14.86
------------------------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $7,616,044 and 531,902 shares of beneficial interest outstanding) $14.32
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended March 31, 1995 (Unaudited)
-----------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
Investment Income Interest $ 2,848,182
==========================================================
==========================================================
================
Expenses Management fees--Note 4 215,993
-----------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 92,338
Class C--Note 4 39,343
-----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 33,825
-----------------------------------------------------------------------------------------------------------
Shareholder reports 19,167
-----------------------------------------------------------------------------------------------------------
Legal and auditing fees 5,048
-----------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,181
-----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 391
-----------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 14,926
Class C 7,301
-----------------------------------------------------------------------------------------------------------
Other 14,214
------------
Total expenses 443,727
==========================================================
==========================================================
================
Net Investment Income 2,404,455
==========================================================
==========================================================
================
Realized and Unrealized Net realized loss on investments (1,665,302)
Gain (Loss) on -----------------------------------------------------------------------------------------------------------
Investments Net change in unrealized appreciation or depreciation on investments 2,167,621
------------
Net realized and unrealized gain on investments 502,319
==========================================================
==========================================================
================
Net Increase in Net Assets Resulting From Operations $ 2,906,774
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
-----------------------------------------------------------------------------------------------------------
Six Months Ended
March 31, 1995 Year Ended
(Unaudited) Sept. 30, 1994
==========================================================
==========================================================
================
<S> <C> <C> <C>
Operations Net investment income $ 2,404,455 $ 4,139,249
-----------------------------------------------------------------------------------------------------------
Net realized loss on investments (1,665,302) (1,005,299)
-----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 2,167,621 (4,866,867)
------------ ------------
Net increase (decrease) in net assets resulting from operations 2,906,774 (1,732,917)
==========================================================
==========================================================
================
Dividends and Dividends from net investment income:
Distributions to Class A ($.375 and $.6658 per share, respectively) (2,131,166) (3,542,656)
Shareholders Class C ($.3193 and $.4535 per share, respectively) (159,489) (144,854)
-----------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0914 per share) -- (486,109)
Class C ($.0622 per share) -- (19,877)
-----------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments:
Class A ($.0698 per share) -- (340,993)
Class C ($.0698 per share) -- (271)
==========================================================
==========================================================
================
Beneficial Interest Net increase (decrease) in net assets resulting from Class A
Transactions beneficial interest transactions--Note 2 (2,497,828) 19,304,315
-----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from Class C
beneficial interest transactions--Note 2 (956,662) 8,794,633
==========================================================
==========================================================
================
Net Assets Total increase (decrease) (2,838,371) 21,831,271
-----------------------------------------------------------------------------------------------------------
Beginning of period 91,966,782 70,135,511
------------ ------------
End of period (including overdistributed net investment income
of $28,834 and $142,634, respectively) $ 89,128,411 $ 91,966,782
============
============
See accompanying Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Financial Highlights
-----------------------------------------------------------------------------------------------------------
Class A Class C
------------------------------------------------------------------ ----------------------------
Six Months Period
Six Months Ended Ended Ended
March 31, 1995 Year Ended September 30, Mar. 31, 1995 Sept. 30,
(Unaudited) 1994 1993 1992 1991 1990(2) (Unaudited) 1994(1)
==========================================================
==========================================================
================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value,
beginning of period $ 14.23 $15.34 $15.09 $14.40 $13.51 $13.57 $ 14.18 $15.14
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .39 .72 .77 .86 .83 .90 .36 .46
Net realized and unrealized
gain (loss) on investments .10 (1.00) .70 .69 .91 (.08) .10 (.83)
-------- ------- ------- ------- ------- ------- -------- ------
Total income (loss) from
investment operations .49 (.28) 1.47 1.55 1.74 .82 .46 (.37)
------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.38) (.67) (.75) (.86) (.85) (.88) (.32) (.46)
Dividends in excess of net
investment income -- (.09) -- -- -- -- -- (.06)
Distributions from
net realized
gain on investments -- -- (.47) -- -- -- -- --
Distributions in
excess of net
realized gain on
investments -- (.07) -- -- -- -- -- (.07)
-------- ------- ------- ------- ------- ------- -------- ------
Total dividends and
distributions to
shareholders (.38) (.83) (1.22) (.86) (.85) (.88) (.32) (.59)
==========================================================
==========================================================
================
Net asset value,
end of period $ 14.34 $14.23 $15.34 $15.09 $14.40 $13.51 $ 14.32 $14.18
======== ======= ======= ======= =======
======= ======== ======
==========================================================
==========================================================
================
Total Return, at
Net Asset Value(3) 3.50% (1.92)% 10.31% 11.10% 13.20% 6.14% 3.32% (2.54)%
------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net assets,
end of period
(in thousands) $ 81,512 $83,456 $70,136 $29,724 $23,675 $20,287 $ 7,616 $8,511
------------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $ 78,758 $79,076 $48,915 $25,153 $22,071 $20,576 $ 7,858 $4,686
------------------------------------------------------------------------------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 5,685 5,865 4,571 1,970 1,644 1,502 532 600
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average
net assets:
Net investment income 5.65%(4) 5.05% 5.08% 5.87% 5.93% 6.56% 4.73%(4)
3.77%(4)
Expenses, before
voluntary assumption
by the Manager .94%(4) 1.00% 1.07% 1.25% 1.35% 1.41% 1.86%(4) 2.24%(4)
Expenses, net of
voluntary assumption
by the Manager N/A N/A 1.05% 1.16% 1.16% .66% N/A N/A
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate(5) 32% 51% 21% 93% 75% 102% 32% 51%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to
September 30, 1994.
2. On April 7, 1990, Oppenheimer Management Corporation became the
investment advisor to the Fund.
3. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the six months ended March 31, 1995 were
$27,328,472 and $31,507,699, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Notes to Financial Statements (Unaudited)
-----------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
1. Significant Oppenheimer Intermediate Tax-Exempt Bond Fund (the Fund) is a separate series of Oppenheimer
Tax-Exempt
Accounting Policies 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 the close of the New York Stock Exchange on each
trading day. Listed and unlisted securities for which such information is regularly reported are valued at
the last sale price of the day or, in the absence of sales, at values based on the closing bid or asked
price or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities
which cannot be valued by the approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the
quotes reflect current market value, or under consistently applied procedures established by the Board of
Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a
remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount. Forward contracts are valued based on the closing
prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as
provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the absence of any transactions that day, the value is based
upon the last sale price on the prior trading date if it is within the spread between the closing bid and
asked prices. If the last sale price is outside the spread, the closing bid or asked price closest to the
last reported sale price is used.
-----------------------------------------------------------------------------------------------------------
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 Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income
or excise tax provision is required.
-----------------------------------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately for Class A and Class C
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.
-----------------------------------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss)
may differ for financial statement and tax purposes primarily because of premium amortization. The
character of the distributions made during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the
income or realized gain (loss) was recorded by the Fund. 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.
-----------------------------------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are purchased or sold (trade
date). 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. Original issue
discount on securities purchased is amortized over the life of the respective securities, in accordance
with federal income tax requirements. 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
-----------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
2. Shares of The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class.
Beneficial Interest Transactions in shares of beneficial interest were as follows:
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended March 31, 1995 Year Ended September 30, 1994(1)
------------------------------- --------------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 589,734 $ 8,273,344 2,161,013 $ 32,133,399
Dividends and distributions reinvested 99,225 1,386,590 201,137 2,968,987
Redeemed (869,410) (12,157,762) (1,067,987) (15,798,071)
------------ ------------ ------------ ------------
Net increase (decrease) (180,451) $ (2,497,828 1,294,163 $ 19,304,315
-----------------------------------------------------------------------------------------------------------
Class C:
Sold 85,165 $ 1,190,840 664,985 $ 9,719,514
Dividends and distributions reinvested 10,379 144,564 8,536 122,637
Redeemed (163,822) (2,292,066) (73,341) (1,047,518)
------------ ------------ ------------ ------------
Net increase (decrease) (68,278) $ (956,662) 600,180 $ 8,794,633
</TABLE>
<TABLE>
<S> <C>
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 At March 31, 1995, net unrealized appreciation on investments of $337,157 was composed of gross
Losses on appreciation of $1,716,244, and gross depreciation of $1,379,087.
Investments
4. Management Fees and Management fees paid to the Manager were in accordance with the investment advisory agreement
with the Fund
Other Transactions which provides for an annual fee of .50% on the first $100 million of net assets, .45% on the next $150
With Affiliates 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 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 six months ended March 31, 1995, commissions (sales charges paid by investors)
on sales of Class A shares totaled $86,377, of which $37,374 was retained by Oppenheimer Funds
Distributor,
Inc., (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class C shares totaled $11,276,
of
which $5,126 was paid to an affiliated broker/dealer. During the six months ended March 31, 1995, OFDI
received contingent deferred sales charges of $8,149 upon redemption of Class C 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
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 six
months ended March 31, 1995, OFDI paid $8,990 and $372, respectively, to an affiliated broker/dealer as
reimbursement for Class A and Class C personal service and maintenance expenses and retained $38,327
as
reimbursement for Class C sales commissions and service fee advances, as well as financing costs.
<PAGE>
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 YIELDS
The equivalent yield tables below compare tax-free income with taxable
income under Federal income tax rates effective January 1, 1995. 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 36% tax bracket.
</TABLE>
<TABLE>
<CAPTION>
Federal
Taxable Income:EffectiveA Oppenheimer Intermediate Tax-Exempt Bond Fund Yield of
Tax 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
Joint Return Bracket Is Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Over Not Over
$ 0 $ 39,000 15.00% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
$ 39,000 $ 94,250 28.00% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03%
$ 94,250 $143,600 31.00% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42%
$143,600 $256,500 36.00% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16%
$256,500 and above39.60%5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76%
</TABLE>
<TABLE>
<CAPTION>
Single Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Over Not Over
$ 0 $ 23,350 15.00% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
$ 23,350 $ 56,550 28.00% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03%
$ 56,550 $117,950 31.00% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42%
$117,950 $256,500 36.00% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16%
$256,500 and above39.60%5.79% 6.62% 7.45% 8.28% 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
Insured Tax-Exempt Fund
Prospectus dated August 29, 1995
Oppenheimer Insured Tax-Exempt Fund (the "Fund") is a series of
Oppenheimer Tax-Exempt Fund. The Fund has the investment objective of
seeking a high level of current income exempt from Federal income tax. The
Fund will, under normal market conditions, invest at least 80% of its
total assets in Municipal Securities and will invest at least 65% of its
total assets in insured Municipal Securities. See "Investment Objective
and Policies." While payments of principal and interest on certain
securities held by the Fund are insured, 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 __.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the August 29, 1995 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
OppenheimerFunds logo
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B 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>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly.
-- Shareholder Transaction Expenses are charges you pay when you
buy or sell shares of the Fund. Please refer to "About Your Account,"
from pages 23 through 33, for an explanation of how and when these charges
apply.
Class A Class B Class C
Shares Shares Shares
-------------------------------------------------------------------------
Maximum Sales Charge 4.75% None None
on Purchases (as a % of
offering price)
-------------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
-------------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1% if shares are
(as a % of the lower of year, declining redeemed within
the original purchase to 1% in the 12 months of
price or redemption sixth year and purchase(2)
proceeds) eliminated
thereafter(2)
-------------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3)
-------------------------------------------------------------------------
Exchange Fee None None None
1. If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares," below.
2. See "How to Buy Shares - Class B Shares" and "How to Buy Shares -
Class C Shares," below, for more information on the contingent sales
charge.
3. There is a $10 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check or by Automated Clearing House
("ACH") transfer through AccountLink, or for which check writing
privileges are used (see "How To Sell Shares").
-- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds 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 (the maximum fee is 0.25% of
average annual net assets of that class), and for Class B and Class C
shares are the Distribution and Service Plan Fees (the maximum service fee
is 0.25% of average annual net assets of that class) and the asset-based
sales charge of 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, depending on a number of factors,
including the actual amount of the assets represented by each class of
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 C shares were not publicly offered prior to
August 29, 1995. Therefore, "Other Expenses" shown for Class C shares are
estimates based on amounts that would have been payable if Class C shares
had been outstanding for the fiscal year ended September 30, 1994.
Class A Class B Class C
Shares Shares Shares
--------------------------------------------------------------------------
Management Fees 0.45% 0.45% 0.45%
--------------------------------------------------------------------------
12b-1 Distribution 0.25% 1.00% 1.00%
Plan Fees
--------------------------------------------------------------------------
Other Expenses 0.35% 0.37% 0.37%
--------------------------------------------------------------------------
Total Fund Operating 1.05% 1.82% 1.82%
Expenses
-- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and 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(1)
----------------------------------------------------------------------
Class A Shares $58 $79 $103 $170
----------------------------------------------------------------------
Class B Shares $68 $87 $119 $175
----------------------------------------------------------------------
Class C Shares $28 $57 $99 $214
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years(1)
----------------------------------------------------------------------
Class A Shares $58 $79 $103 $170
----------------------------------------------------------------------
Class B Shares $18 $57 $99 $175
----------------------------------------------------------------------
Class C Shares $18 $57 $99 $214
1. The Class B expenses in years 7 through 10 are based on the Class
A expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after six years. Because of the asset-based
sales charge and the contingent deferred sales charge imposed on Class B
and Class C shares of the Fund, long-term Class B and Class C shareholders
could bear expenses that would be the economic equivalent of more than the
maximum front-end sales charge allowed under applicable regulatory
requirements. For Class B shareholders, the automatic conversion of Class
B shares to Class A Shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares - Class B Shares" for
more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
-- What Is The Fund's Investment Objective? The Fund's investment
objective is to seek a high level of current income exempt from Federal
income tax.
-- What Does the Fund Invest In? To seek its objective, the Fund
will, under normal market conditions, invest at least 80% of its assets
in Municipal Securities and will invest at least 65% of its assets in
insured Municipal Securities. Pre-refunded Municipal Securities will be
considered to be insured for this purpose. Pre-refunded Municipal
Securities generally are rated in the highest rating category by the
various nationally recognized rating organizations because of U.S.
government agency collateral set aside to support debt service payments
on the bonds. The Fund may also use hedging instruments and some
derivative investments to try to manage investment risks. These
investments are more fully explained in "Investment Objective and
Policies," starting on page 10.
-- Who Manages the Fund? The Fund's investment advisor is
Oppenheimer Management Corporation, which (including a subsidiary) manages
investment company portfolios having over $35 billion in assets at June
30, 1995. The Manager is paid an advisory fee by the Fund, based on its
assets. The Fund's portfolio manager, who is employed by the Manager and
who is primarily responsible for the selection of the Fund's securities,
is Robert E. Patterson. The Fund's Board of Trustees, elected by
shareholders, oversees the investment advisor and the portfolio manager.
Please refer to "How the Fund is Managed," starting on page 18 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, by focusing on insured
municipal bonds, and in some cases by using hedging techniques, there is
no guarantee of success in achieving the Fund's objective and your shares
may be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page 10
for a more complete discussion.
-- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page 23 for more details.
-- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. All classes have the same investment portfolio but
different expenses. Class A shares are offered with a front-end sales
charge, starting at 4.75%, and reduced for larger purchases. Class B and
Class C shares are offered without a font-end sales charge, but may be
subject to a contingent deferred sales charge if redeemed within six years
or 12 months of purchase, respectively. There is also an annual asset-
based sales charge on Class B and Class C shares. Please review "How To
Buy Shares" starting on page 23 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, or by writing checks. Please refer to "How To Sell Shares" on
page 35. The Fund also offers exchange privileges to the other
OppenheimerFunds, described in "How to Exchange Shares," below.
-- How Has the Fund Performed? The Fund measures its performance by
quoting its total return and yield, which measure historical performance.
Those returns and yields can be compared to the returns and yields (over
similar periods) of other funds. Of course, other funds may have
different objectives, investments, and levels of risk. The Fund's
performance can also be compared to a broad market index, which we have
done on page __. Please remember that past performance does not guarantee
future results.
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data, expense ratios and other data based
on the Fund's average net assets. With the exception of the financial
information for the six months ended March 31, 1995 (which is unaudited),
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. The Fund's Class C
shares were not publicly offered during the fiscal year ended September
30, 1994, and thus no information is given below as to Class C shares.
<PAGE>
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>
Financial Highlights
-----------------------------------------------------------------------
------------------------------------
Class A
Class B
-----------------------------------------------------------------
----------------------------------
Six Months
Six Months
Ended
Ended
March 31, 1995 Year Ended September 30,
Mar. 31, 1995 Year Ended Sept. 30,
(Unaudited) 1994 1993 1992
1991 1990(2) (Unaudited) 1994 1993(1)
=======================================================================
=============================================================
Per Share Operating Data:
Net asset value, beginning
of period $16.14 $18.06 $16.92 $16.17
$15.16 $15.27 $16.15 $18.07 $17.33
-----------------------------------------------------------------------
------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .45 .89 .93 .96
.92 .98 .39 .77 .30
Net realized and
unrealized gain
(loss) on investments .39 (1.84) 1.35 .73
1.01 (.11) .39 (1.86) .74
------- ------- ------- -------
------- ------- ------- ------- ------
Total income (loss) from
investment operations .84 (.95) 2.28 1.69
1.93 .87 .78 (1.09) 1.04
-----------------------------------------------------------------------
------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.45) (.86) (.96) (.91)
(.92) (.98) (.39) (.73) (.30)
Dividends in excess of net
investment income -- (.03) -- --
-- -- -- (.02) --
Distributions from net
realized gain on investments -- (.08) (.18) (.03)
-- -- -- (.08) --
------- ------- ------- -------
------- ------- ------- ------- ------
Total dividends and
distributions to
shareholders (.45) (.97) (1.14) (.94)
(.92) (.98) (.39) (.83) (.30)
-----------------------------------------------------------------------
------------------------------------------------------------
Net asset value,
end of period $16.53 $16.14 $18.06 $16.92
$16.17 $15.16 $16.54 $16.15 $18.07
======= ======= ======= =======
======= ======= ======= ======= ======
=======================================================================
=============================================================
Total Return, at Net Asset
Value(3) 5.32% (5.46)% 14.02% 10.74%
13.08% 5.81% 4.92% (6.20)% 6.04%
=======================================================================
=============================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $71,590 $67,793 $62,158 $33,751
$23,791 $16,863 $11,928 $11,571 $5,104
-----------------------------------------------------------------------
------------------------------------------------------------
Average net assets
(in thousands) $67,205 $66,953 $45,949 $27,811
$19,936 $15,145 $11,400 $9,209 $2,298
-----------------------------------------------------------------------
------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 4,330 4,201 3,442 1,995
1,471 1,113 721 717 282
-----------------------------------------------------------------------
------------------------------------------------------------
Ratios to average
net assets:
Net investment income 5.57%(4) 5.23% 5.40% 5.81%
5.83% 6.43% 4.79%(4) 4.43% 3.99%(4)
Expenses, before voluntary
assumption by the Manager .98%(4) 1.05% 1.18% 1.35%
1.60% 1.62% 1.75%(4) 1.82% 1.96%(4)
Expenses, net of voluntary
assumption by the Manager N/A N/A 1.10% .95%
.91% .62% N/A N/A N/A
-----------------------------------------------------------------------
------------------------------------------------------------
Portfolio turnover rate(5) 28% 99% 7% 47%
67% 62% 28% 99% 7%
1. For the period from May 3, 1993 (inception of offering) to September
30, 1993.
2. On April 7, 1990, Oppenheimer Management Corporation became the
investment advisor to the Fund.
3. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected
in the total returns. Total returns are not annualized for
periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity
or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities) for the
six months ended March 31, 1995 were $21,788,074 and $21,460,608,
respectively.
See accompanying Notes to Financial Statements.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to provide a high level of
current income exempt from Federal income tax.
Investment Policies and Strategies. The Fund will seek to attain its
investment objective by investing, under normal market conditions, at
least 80% of its assets in Municipal Securities and will invest at least
65% of its assets in insured Municipal Securities. Pre-refunded Municipal
Securities will be considered to be insured for this purpose. Pre-
refunded Municipal Securities generally are rated in the highest rating
category by the various nationally recognized rating organizations because
of U.S. government agency collateral set aside to support debt service
payments on the bonds.
Under normal market conditions, no more than 20% of its total assets
will be invested in taxable investments. However, for temporary defensive
purposes, the Fund may invest up to 100% of its assets in taxable
certificates of deposit and commercial paper and taxable or tax-exempt
money market instruments. The Fund may not invest more than 20% of its
total assets in private activity municipal securities issued to benefit
a private user, the interest on which may be subject to the Federal
alternative minimum tax. The Fund will not invest more than 10% of its
total assets in securities which are not investment grade (or if not
rated, of comparable quality as determined by the Manager). Investment
grade securities are those rated - or are determined by the Manager to be
of comparable quality to those rated - within the four highest rating
categories of Moody's Investors Service, Inc., Standard & Poor's
Corporation, Fitch Investors Service, Inc. or other rating organization.
Under normal market conditions, no more than 20% of the Fund's total
assets will be invested in taxable investments. However, for temporary
defensive purposes, the Fund may invest up to 100% of its assets in
taxable certificates of deposit and commercial paper and taxable or tax-
exempt money market instruments. The Fund may not invest more than 20%
of its total assets in private activity municipal securities issued to
benefit a private user, the interest on which may be subject to the
Federal alternative minimum tax. The Fund may purchase Municipal
Securities on a "when-issued" basis and may purchase or sell Municipal
Securities on a "delayed delivery" basis. Under normal market conditions,
the Fund will maintain a dollar-weighted average portfolio maturity of
more than three years but not more than ten years. In calculating
maturity, the Fund will consider various factors, including anticipated
payments of principal. The Fund may hold securities with maturities of
more than ten years provided that under normal circumstances it maintains
a dollar-weighted average portfolio maturity as stated above.
-- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
-- Municipal Securities. "Municipal Securities" are municipal bonds,
municipal notes, tax anticipation notes, bond anticipation notes, revenue
anticipation notes, construction loan notes and other short-term loans,
tax-exempt commercial paper and other debt obligations issued by or on
behalf of states, the District of Columbia, any commonwealths, territories
or possessions of the United States, or their respective political
subdivisions, agencies, instrumentalities or authorities, the interest
from which is not subject to Federal individual income tax in the opinion
of bond counsel to the respective issuer at the time of issue.
The two principal classifications of Municipal Securities are
"general obligations" (secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest) and
"revenue obligations" (payable only from the revenues derived from a
particular facility or class of facilities or a specific excise tax or
other revenue source). The Fund may invest in Municipal Securities of
both classifications, subject to particular restrictions described below.
Yields on Municipal Securities vary depending on a variety of
factors, including the general condition of the financial markets and of
the Municipal Securities market in particular, the size of a particular
offering, the maturity of the security and the credit rating of the
issuer. Generally, Municipal Securities of longer maturities produce
higher current yields but are subject to greater price fluctuation due to
changes in interest rates (discussed below), tax laws and other general
market factors than are Municipal Securities with shorter maturities.
Similarly, lower-rated Municipal Securities generally produce a greater
yield than higher-rated Municipal Securities due to the perception of a
greater degree of risk as to the ability of the issuer to meet principal
and interest obligations. "Investment Objective and Policies" in the
Statement of Additional Information contains more information about
Municipal Securities.
-- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjusted at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
See "Floating Rate/Variable Rate Obligations" in the Statement of
Additional Information for more details.
-- Inverse Floaters and Derivative Investments. The Fund may invest
in variable rate bonds known as "inverse floaters." These bonds pay
interest at a rate that varies as the yields generally available on short-
term tax-exempt bonds change. However, the yields on inverse floaters
move in the opposite direction of yields on short-term bonds in response
to market changes. When the yields on short-term tax-exempt bonds go up,
the interest rate on the inverse floater goes down. When the yields on
short-term tax-exempt bonds go down, the interest rate on the inverse
floater goes up. As interest rates rise, inverse floaters produce less
current income. Inverse floaters are a type of "derivative security,"
which is a specially designed investment whose performance is linked to
the performance of another security or investment. Some inverse floaters
have a "cap" whereby if interest rates rise above the "cap," the security
pays additional interest income. If rates do not rise above the "cap,"
the Fund will have paid an additional amount for a feature that proves
worthless. The Fund may also invest in municipal derivative securities
that pay interest that depends on an external pricing mechanism. Examples
are interest rate swaps or caps and municipal bond or swap indices. The
Fund anticipates that it would invest no more than 10% of its total assets
in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due
on the maturity of the investment, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. That can mean that the Fund will realize less income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
-- Municipal Lease Obligations. The Fund may invest in certificates
of participation, which are tax-exempt obligations that evidence the
holder's right to share in lease, installment loan or other financing
payments by a public entity. Projects financed with certificates of
participation generally are not subject to state constitutional debt
limitations or other statutory requirements that may be applicable to
Municipal Securities. Payments by the public entity on the obligation
underlying the certificates are derived from available revenue sources;
such revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to the
certificates are not guaranteed 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
"Municipal Lease Obligations" in the Statement of Additional Information
for more details.
-- Investments in Taxable Securities and Temporary Defensive
Investment Strategy. Under normal market conditions, the Fund may invest
up to 20% of its assets in taxable investments, including (i) certain
"Temporary Investments" (described in the next paragraph); (ii) hedging
instruments (described in "Hedging" below); (iii) repurchase agreements
(explained below); and (iv) Municipal Securities issued to benefit a
private user ("Private Activity Municipal Securities"), the interest from
which may be subject to Federal alternative minimum tax (see "Taxes,"
below, and "Private Activity Municipal Securities" in the Statement of
Additional Information).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary
"defensive" position by investing some or all of its assets (there is no
limit on the amount) in short-term money market instruments. These
include the taxable obligations described above, U.S. government
securities, bank obligations, commercial paper, corporate obligations and
other instruments approved by the Fund's Board of Trustees. This strategy
would be implemented to attempt to reduce fluctuations in the value of the
Fund's assets. The Fund may hold temporary investments pending the
investment of proceeds from the sale of Fund shares or portfolio
securities, pending settlement of purchases of Municipal Securities, or
to meet anticipated redemptions. To the extent the Fund assumes a
temporary defensive position, a portion of the Fund's distributions may
be subject to Federal and state income taxes and the Fund may not achieve
its objective.
-- Interest Rate Risk. The values of Municipal Securities will vary
as a result of changing evaluations by rating services and investors of
the ability of the issuers of such securities to meet their principal and
interest payments. Such values will also change in response to changes
in interest rates: should interest rates rise, the values of outstanding
Municipal Securities will probably decline and (if purchased at principal
amount) would sell at a discount; should interest rates fall, the values
of outstanding Municipal Securities will probably increase and (if
purchased at principal amount) would sell at a premium. Changes in the
value of Municipal Securities held in the Fund's portfolio arising from
these or other factors will not affect interest income derived from those
securities but will affect the Fund's net asset value per share. 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.
Generally, securities of longer maturities are subject to greater
price fluctuations due to changes in interest rates. There are no
restrictions on the maturities of the Municipal Securities in which the
Fund may invest. The Fund will seek to invest in Municipal Securities
that, in the judgment of the Manager, will provide a high level of current
income consistent with the Fund's liquidity requirements, 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. The municipal
securities in the Fund's portfolio that are covered by insurance 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-
cancellable 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-
cancellable 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.
-- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures and municipal bond indices, or enter
into interest rate swap agreements. These are referred to as "hedging
instruments." The Fund may invest in financial futures contracts and
related options on those contracts only as a hedge against anticipated
interest rate changes, and the Fund does not intend to use hedging
instruments for speculative purposes. The hedging instruments the Fund
may use are described below and in greater detail in "Other Investment
Techniques and Strategies" in the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. The Fund may sell a futures contract or a call option on a
futures contract or purchase a put option on such futures contract if the
Manager anticipates that interest rates will rise, as a hedge against a
decrease in the value of the Fund's portfolio securities. If the Manager
anticipates that interest rates will decline, the Fund may purchase a
futures contract or a call option on a futures contract, or sell a put
option on a futures contract, to protect against an increase in the price
of securities the Fund intends to buy.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Writing
covered call options may also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
-- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers, and other
financial institutions. The Fund must receive collateral for such loans.
These loans are limited to not more than 5% of the value of the Fund's
total assets and are subject to other conditions described in the
Statement of Additional Information. The income from such loans, when
distributed by the Fund, will be taxable as ordinary income.
-- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments. Investments
may be illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on
its resale or which cannot be 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. 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) make loans, except
that the Fund may purchase or hold debt obligations, repurchase agreements
and other instruments and securities it is permitted to own and may lend
its portfolio securities and other investments it owns; (3) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities) if with respect to 75% of its total
assets, more than 5% of the Fund's total assets would be invested in
securities of that issuer or the Fund would then own more than 10% of that
issuer's voting securities; or (4) invest more than 25% of its total
assets in a single industry (although the Fund may invest more than 25%
of its assets in a particular segment of the municipal bond market, but
will not invest more than 25% of its total assets in industrial
development bonds in a single industry).
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 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 three classes of shares, Class A,
Class B and Class C. All classes invest in the same investment portfolio.
Each class has its own dividends and distributions and pays certain
expenses which may be different for the different classes. Each class may
have a different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. Only shares of
a particular class vote together on matters that affect that class alone.
Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
chooses the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $35 billion as
of June 30, 1995, and with more than 2.6 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
-- Portfolio Manager. The portfolio manager of the Fund is Robert
E. Patterson, a Senior Vice President of the Manager. He has been the
person principally responsible for the day-to-day management of the Fund's
portfolio since February, 1992. During the past five years, Mr. Patterson
has also served as an officer and portfolio manager for other
OppenheimerFunds.
-- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees: 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.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time, it may
use brokers when buying portfolio securities. When deciding which brokers
to use, the Manager is permitted by the investment advisory agreement to
consider whether brokers have sold shares of the Fund or any other funds
for which the Manager serves as investment adviser.
-- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the 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, normally they
include the payment of the maximum initial sales charge. Total returns
may also be quoted "at net asset value," without including the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for Class B shares, they include the effect
of the contingent deferred sales charge. Total returns may also be shown
based on the change in net asset value, without including the contingent
deferred sales charge. Class C shares were not offered during the fiscal
year ended September 30, 1995, and thus no total return information is
shown for that class.
-- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a
30-day period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the
absence of income taxes. It is calculated by dividing that portion of the
yield that is tax-exempt by a factor equal to one minus the applicable tax
rate. The yield of each Class will differ because of the different
expenses of each Class of shares. The yield data represents a hypothetical
investment return on the portfolio, and does not measure an investment
return based on dividends actually paid to shareholders. To show that
return, a dividend yield may be calculated. Dividend yield is calculated
by dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge. Class C
shares were not publicly offered prior to August 29, 1995 and thus no
yield information is shown for that class.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
-- Management's Discussion of Performance. During the past fiscal
year, the Fund's performance was affected by aggressive increases in
short-term interest rates by the Federal Reserve Board, which caused a
decline in the overall price of municipal 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 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 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 were first publicly offered on 5/3/93.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes
of shares. The different classes of shares represent investments in the
same portfolio of securities but are subject to different expenses and
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 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 have owned your shares. As described
below, the Fund automatically converts Class B shares into Class A shares
after six 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.
-- 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%. Long-term Class C 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.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B or Class C shares). If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the annual asset-based sales charge on Class B and Class C expenses
(which, like all expenses, will affect your investment return). For the
sake of comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns and the operating expenses borne
by each class of shares, and which class you invest in. The discussion
below of the factors to consider in purchasing a particular class of
shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. The assumptions we have made in assessing the factors to
consider in purchasing a particular class of shares assume that you will
purchase only one class, and not a combination of different classes.
-- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest.
For example, the reduced sales charges available for larger purchases of
Class A shares may, over time, offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on shares of Class B or
C for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short term investment
horizon (that is, you plan to hold your shares less than five years), you
should probably consider purchasing Class C shares rather than Class A or
Class B shares, because of the effect of the Class B contingent deferred
sales charge if you redeem in less than 7 years, as well as the effect of
the Class B asset-based sales charge on the investment return for that
class in the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000) because there is no
initial sales charge on Class C shares, and the contingent deferred sales
charge does not apply to amounts you sell after holding them one year.
However, if you plan to invest more than $1000,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge
on Class C shares will have a greater impact on your account over the
longer term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might not be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more).
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or more of Class B shares or
purchase orders of $1 million or more of Class B or C shares respectively
from a single investor. Of course, these examples are based on
approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, using the assumed annual performance
return stated above, and therefore should not be relied on as rigid
guidelines.
- Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B or Class C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
-- Are There Differences in Account Features That Matter to You?
Because some account features may not be available for Class B or Class
C shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares is better for
you. For example, share certificates are not available for Class B or
Class C shares and if you are considering using your shares as collateral
for a loan, that may be a factor to consider. Also, Checkwriting
privileges are not available for class B or Class C shares. Additionally,
the dividends payable to Class B and Class C shareholders will be reduced
by the additional expenses borne solely by that class, such as the asset-
based sales charge, as described below and in the Statement of Additional
Information.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
-- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A,
Class B or Class C shares. If you do not choose, your investment will be
made in Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares.
-- Payment by Federal Funds Wire. Shares may be purchased by Federal
Funds wire. The minimum investment is $2,500. You must first call the
Distributor's Wire Department at 1-800-525-7041 to notify the Distributor
of the wire, and to receive further instructions.
-- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from days in ACH
transmissions. You must request AccountLink privileges on the application
or dealer settlement instructions used to establish your account. Please
refer to "AccountLink" below for more details.
-- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
-- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day The New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, where purchases are not subject to an initial
sales charge, the offering price may be net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer. The current sales charge rates
and commissions paid to dealers and brokers are as follows:
Front-End Front-End
Sales Charge Sales Charge Commission
as a as a as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
-----------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
-----------------------------------------------------------------------
$50,000 or more but less 4.50% 4.71% 4.00%
than $100,000
-----------------------------------------------------------------------
$100,000 or more but less 3.50% 3.63% 3.00%
than $250,000
-----------------------------------------------------------------------
$250,000 or more but less 2.50% 2.56% 2.25%
than $500,000
-----------------------------------------------------------------------
$500,000 or more but less 2.00% 2.04% 1.80%
than $1 million
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
-- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
-- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or for trust or custodial accounts on behalf of your
children who are minors. A fiduciary can cumulate shares purchased for
a trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A
shares of the Fund and Class A and Class B shares of other
OppenheimerFunds to reduce the sale charge rate that applies to current
purchases of Class A shares. You can also count Class A and Class B
shares of other OppenheimerFunds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge
rate for current purchases of Class A shares, provided that you still hold
that investment in one of the OppenheimerFunds. The value of those shares
will be based on the greater of the amount you paid for the shares or
their current value (at offering price). The OppenheimerFunds are listed
in "Reduced Sales Charges" in the Statement of Additional Information, or
a list can be obtained from the Transfer Agent. The reduced sales charge
will apply only to current purchases and must be requested when you buy
your shares.
-- Letter of Intent. Under a Letter of Intent, if you purchase
Class A and Class B shares of the Fund and Class A and Class B shares of
other OppenheimerFunds during a 13-month period, you can reduce the sales
charge that applies to your purchases of Class A shares. The total amount
of your intended purchases of both Class A and Class B shares will
determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional
Information.
-- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in
the Statement of Additional Information) of the Fund, the Manager and
its affiliates, and retirement plans established by them for their
employees;
- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that
have entered into sales arrangements with such dealers or brokers
(and are identified to the Distributor) or with the Distributor; the
purchaser must certify to the Distributor at the time of purchase
that the purchase is for the purchaser's own account (or for the
benefit of such employee's spouse or minor children);
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other OppenheimerFunds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor.
- shares purchased and paid for with the proceeds of shares redeemed
in the prior 12 months from a mutual fund (other than a fund managed by
the Manager or any of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification from
this waiver.
The Class A contingent deferred sales charge does not apply to
purchases of Class A shares at net asset value described above and is also
waived if shares are redeemed in the following cases: (1) for retirement
distributions or loans to participants or beneficiaries from qualified
retirement plans, deferred compensation plans or other employee benefit
plans ("Retirement Plans"), (2) to return excess contributions made to
Retirement Plans, (3) to make Automatic Withdrawal Plan payments that are
limited to no more than 12% of the original account value annually, (4)
involuntary redemptions of shares by operation of law or under the
procedures set forth in the Fund's Declaration of Trust or adopted by the
Board of Trustees, and (5) Class A shares that would otherwise be subject
to the Class A contingent deferred sales charge are redeemed, but at the
time the purchase order for your shares was placed, the dealer agreed to
accept the dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (and that no further
commission would be payable if the shares were redeemed within 18 months
of purchase).
-- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares by up to 0.25% 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:
Contingent Deferred
Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
-----------------------------------------------------------------------
0-1 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 any of the
following redemptions:
- to make distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an Automatic
Withdrawal Plan after the participant reaches age 59-1/2, as long as the
payments are no more than 10% of the account value annually (measured from
the date the Transfer Agent receives the request), or (b) following the
death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary which occurred after the account was opened;
- redemptions from accounts other than Retirement Plans following the
death or disability of the shareholder (the disability must have occurred
after the account was established and you must provide evidence of a
determination of disability by the Social Security Administration),
- to make returns of excess contributions to Retirement Plans, and
- to make distributions from IRAs (including SEP-IRAs and SAR/SEP
accounts) before the participant is age 59-1/2, and distributions from
403(b)(7) custodial plans or pension or profit sharing plans before the
participant is age 59-1/2 but only after the participant has separated
from service, if the distributions are made in substantially equal
periodic payments over the life (or life expectancy) of the participant
or the joint lives (or joint life and last survivor expectancy) of the
participant and the participant's designated beneficiary (and the
distributions must comply with other requirements for such distributions
under the Internal Revenue Code and may not exceed 10% of the account
value annually, measured from the date the Transfer Agent receives the
request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
-- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
-- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Fund pays the asset-based sales charge to the Distributor for its services
rendered in connection with the distribution of Class B shares. Those
payments, retained by the Distributor, are at a fixed rate which is not
related to the Distributor's expenses. The services rendered by the
Distributor include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B shares.
If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the service fee and/or the asset-
based sales charge to the Distributor as to shares sold before the Plan
was terminated.
Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of
1.0% will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
-- Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
redemptions or circumstances described above under "Waivers of Class B
Sales Charge."
-- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for its services 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 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 service fee
on a quarterly basis. The Distributor pays sales commissions of 0.75% of
the purchase price to dealers from its own resources at the time of sale.
The total up-front commission paid by the Distributor to the dealer at the
time of sale of Class C shares is 1.00% of the purchase price. The Fund
pays the asset-based sales charge to the Distributor for its services
rendered in connection with the distribution of Class C shares. Those
payments are at a fixed rate which is not related to the Distributor's
expense. The services rendered by the Distributor include paying and
financing the payment of sales commissions, service fees, and other costs
of distributing and selling Class C shares, including compensating
personnel of the Distributor who support distribution of Class C shares.
The Distributor retains the asset-based sales charge during the first
year shares are outstanding. The Distributor plans to pay the asset-based
sales charge as an ongoing commission to the dealer on Class C shares that
have been outstanding for a year or more.
If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the service fee and/or asset-based
sales charge to the Distributor as to shares sold before the Plan was
terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or
Class B shares of the Fund, you have up to 6 months to reinvest all or
part of the redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying a sales charge. This privilege applies to
Class A shares that you purchased subject to an initial sales charge and
to Class A or B shares on which you paid a contingent deferred sales
charge when you redeemed them. It does not apply to Class C shares. You
must be sure to ask the Distributor for this privilege when you send your
payment. A realized gain on the redemption is taxable, and the
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a loss on the redemption, some or all of the loss may
not be tax-deductible, depending on the timing and amount reinvested in
the Fund. Please consult the Statement of Additional Information for more
details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing 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 or By Wire.
Shareholders may have the Transfer Agent send redemption proceeds of
$2,500 or more by Federal Funds wire to a designated commercial bank
account. The bank must be a member of the Federal Reserve wire system.
There is a $10 fee for each Federal Funds wire. To place a wire
redemption request, call the Transfer Agent at 1-800-852-8457. The wire
will normally be transmitted on the next bank business day after the
shares are redeemed. There is a possibility that the wire may be delayed
up to seven days to enable the Fund to sell securities to pay the
redemption proceeds. No dividends are accrued or paid on the proceeds of
shares that have been redeemed and are awaiting transmittal by wire. To
establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
Selling Shares 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 $10 fee for each wire.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B or Class C shares, or Class A shares that are subject to a
contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value.
Remember: your shares fluctuate in value and you should not write a
check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 10 days.
- Don't use your checks if you changed your Fund account number.
The Fund will charge a $10 fee for any check that is not paid because
(1) the owners of the account told the Fund not to pay the check, or (2)
the check was for more than the account balance, or (3) the check did not
have the proper signatures, or (4) the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. To exchange shares, you must meet several
conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A, Class B and/or Class C shares, and a list
can be obtained by calling the Distributor at 1-800-525-7048. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
-- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of the New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into if
it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
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, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange with your
bank to provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
-- Involuntary redemptions 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 last name and address
on the Fund's records. However, each shareholder may call the Transfer
Agent at 1-800-525-7048 to ask that copies of those materials be sent
personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income on each regular business day and
pays those dividends to shareholders monthly on a date selected by the
Board of Trustees. Dividends paid on Class A shares generally are
expected to be higher than for Class B or Class C shares because expenses
allocable to Class B or Class C shares will generally be higher.
During the Fund's fiscal year ended September 30, 1994, the Fund
sought to pay distributions to shareholders at a targeted level per Class
A share each month, to the extent that target was consistent with the
Fund's net investment income and other distributable income sources,
although the amount of distributions could vary from time to time,
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by that Class. The 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.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER INSURED TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer Insured Tax-
Exempt Fund: "Comparison of Total Return of Oppenheimer Insured Tax-Exempt
Fund and the Lehman Brothers Municipal Bond Index - Change in Value of a
$10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Insured Tax-Exempt Fund (the "Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment in the
Fund. In the case of the Fund's class A shares, that graph will cover the
period from the commencement of the Fund's operations (11/11/86) through
9/30/94 and in the case of the Fund's Class 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 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 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
<PAGE>
Oppenheimer Insured Tax-Exempt Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information
and, if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR0865.001.0895.N Printed on Recycled Paper
<PAGE>
Oppenheimer Insured Tax-Exempt Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated August 29, 1995
Oppenheimer Insured Tax-Exempt Fund (the "Fund"), is a series of
Oppenheimer Tax-Exempt 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 August 29, 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 Objective and Policies. . . . . . . . . . . . .
Investment Policies and Strategies. . . . . . . . . .
Other Investment Techniques and Strategies. . . . . .
Other Investment Restrictions . . . . . . . . . . . .
How the Fund is Managed . . . . . . . . . . . . . . . . .
Organization and History. . . . . . . . . . . . . . .
Trustees and Officers of the Trust. . . . . . . . . .
The Manager and Its Affiliates. . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . .
About Your Account . . . . . . . . . . . . . . . . . . . .
How To Buy Shares. . . . . . . . . . . . . . . . . . . . .
How To Sell Shares . . . . . . . . . . . . . . . . . . . .
How To Exchange Shares . . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . . .
Additional Information About the Fund. . . . . . . . . . .
Financial Information About the Fund . . . . . . . . . . .
Independent Auditors' Report . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . .
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. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund may invest, as well as the strategies the Fund may use
to try to achieve its objective. 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) invest in real estate, but this shall not prevent the Fund from
investing in Municipal Instruments or other permissible securities
or instruments secured by real estate or interests thereon;
(2) invest in interests in oil, gas, or other mineral exploration or
development programs;
(3) purchase securities, or other instruments, on margin; however,
the Fund may invest in options, futures, options on futures and
similar instruments and may make margin deposits and payments in
connection therewith;
(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; or
(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.
As a matter of non-fundamental policy, the Fund shall not 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; or invest in common stock or any warrants related thereto.
For purposes of the Fund's policy not to concentrate described under
investment restriction number 4 in the Prospectus, the Fund has adopted
the industry classifications set forth in Appendix C to this Statement of
Additional Information. This is not a fundamental policy.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund'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 64.*
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 65.
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 53.*
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.
Raymond J. Kalinowski, Trustee; Age 66.
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 80.
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 45.
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 52.
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 47.
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.
[FN]
--------------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-- 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 (i) the Fund, during its fiscal year ended September 30, 1994,
and (ii) from all of the Denver-based OppenheimerFunds (including the
Fund) listed in the first paragraph of this section, for services in the
positions shown:
<TABLE>
<CAPTION>
Total
Compensation
Aggregate From All
Compensation Denver-based
Name/Position From Fund OppenheimerFunds1
<S> <C> <C>
Robert G. Avis - Trustee $600.00 $53,000.00
William A. Baker - Audit and Review$829.00 $73,257.01
Committee Chairman and Trustee
Charles Conrad, Jr. - Audit and Review$774.00$68,293.67
Committee Member and Trustee
Raymond J. Kalinowski - Trustee$600.00 $53,000.00
C. Howard Kast - Trustee $600.00 $53,000.00
Robert M. Kirchner - Audit and Review$774.00 $68,293.67
Committee Member and Trustee
Ned M. Steel - Trustee $600.00 $53,000.00
______________
1For 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 Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced.
-- 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, the Distributor, 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 and 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. In
either case, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
transactions in the secondary market, and are otherwise paid only if it
appears likely that a better price or execution can be obtained. When the
Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. 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. The 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.
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 Board has also
permitted the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research where the broker has represented to
Manager that: (i) the trade is not from or for the broker's own inventory,
(ii) the trade was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal
transaction.
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. Class C shares were not publicly
offered during the fiscal year ended September 30, 1994, and thus no
performance information is given below as to Class C shares.
-- 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:
1/n
(ERV)
(---) -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, Class B or Class
C 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 insured municipal
debt 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, Class B 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 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, Class B 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
Distribution and Service Plans for Class B and Class C shares under Rule
12b-1 of the Investment Company Act pursuant to which the Fund will
compensate the Distributor quarterly for its services in connection with
the distribution and/or servicing of the shares of that class, as
described in the Prospectus. Each Plan has been approved by a vote of (i)
the Board of Trustees of the Fund, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on
that Plan, and (ii) the holders of a "majority" (as defined in the
Investment Company Act) of the shares of each class. For the Distribution
and Service 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, at
not cost to the Fund. 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 Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Each Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act)
of the outstanding shares of that class. None of the Plans may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund is required by an
exemptive order issued by the Securities and Exchange Commission to obtain
the approval of Class B as well as Class A shareholders for a proposed
amendment to the Class A Plan that would materially increase the amount
to be paid by Class A shareholders under the Class A Plan. Such approval
must be by a "majority" of the Class A and Class B shares (as defined in
the Investment Company Act), voting separately by class. All material
amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any payment. Each report shall also include the
distribution costs for that quarter. 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 Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on 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 minimum amount.
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 fiscal years. Payments received by the
Distributor under the Plan for Class A shares will not be used to pay any
interest expense, carrying charges, or other financial costs, or
allocation of overhead by the Distributor.
The Class B and the Class C Plan allow the service fee payments to
be paid by the Distributor to Recipients in advance for the first year
such 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 shares sold. An exchange of shares does not entitle
the Recipient to an advance service fee payment. In the event shares are
redeemed during the first year such shares are outstanding, the Recipient
will be obligated to repay a pro rata portion of the advance of the
service fee payment 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. Since no Class C shares were outstanding
during that fiscal year, no payments were made under the Class C Plan
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fee on such
shares, or to pay Recipients the service fee on a quarterly basis, without
payment in advance, the Distributor presently 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 and the Class
C Plan by the Board. Initially, the Board has set no minimum holding
period. All payments under the Class B Plan and 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 fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution
expenses are more or less than the amounts paid by the Fund during that
period. Such payments are made in recognition that the Distributor (i)
pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described in the Prospectus, (ii) may
finance such commissions and/or the advance of the service fee payment to
Recipients under those Plans, or may provide such financing from its own
resources, or from an affiliate, (iii) employs personnel to support
distribution of shares, and (iv) may bear the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders), state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three 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 and 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 another. The Distributor normally will not
accept (i) any order for $500,000 or more of Class B shares or (ii) 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 three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by incremental expenses borne solely by each class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares 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, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to a 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 unaffiliated 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 and
Service 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, Class B and Class C 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, Class
B and Class C 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 having a remaining 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 Fund's Board of Trustees or
obtained from active market makers in the security on the basis of
reasonable inquiry; (ii) debt instruments having a maturity of more than
one year when issued, and non-money market type instruments having a
maturity of one year or less when issued, which have a remaining maturity
of 60 days or less are valued at the mean between the "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained from active market makers in the security on the
basis of reasonable inquiry; (iii) money market-type debt securities
having a maturity of less than one year when issued that having a
remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (iv) 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.
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 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 Fund
Oppenheimer Insured Tax-Exempt 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 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 Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fundand the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer 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 (referred to as a "Letter")
is an investor's statement in writing to the Distributor of the intention
to purchase Class A shares or Class A and Class B shares of the Fund (and
other OppenheimerFunds) during a 13-month period (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 of shares
which, when added to the investors holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends on distributions of capital gains and purchases
made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to
count the Class A and Class B shares purchased under the Letter to obtain
the reduced sales charge rate on purchases of Class A shares of the Fund
(and other OppenheimerFunds) that applies under the Right of Accumulation
to current purchases of Class A shares. Each purchase of Class A shares
under the Letter will be made at the public offering price (including the
sales charge) that applies to a single lump-sum purchase of shares in the
amount intended to be purchased under the Letter.
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 a Letter) include (a) Class
A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge, (b) Class B shares acquired subject to
a contingent deferred sales charge, and (c) Class A or B shares acquired
in exchange for either (i) Class A shares of one of the other
OppenheimerFunds that were acquired subject to a Class A initial or
contingent sales charge or (ii) Class B shares of one of the other
OppenheimerFunds that were acquired subject to a contingent deferred 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.
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.
-- 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.
-- 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 purchased by reinvesting dividends or
distributions or 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. This privilege is not available
to Class C shareholders. 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 closed (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.). Ordinarily, for accounts redeemed by a broker-
dealer under this procedure, payment will be made within three business
days after the shares have been redeemed upon the Distributor's receipt
of the required redemption documents in proper form, with the signature(s)
of the registered owners guaranteed in the redemption documents as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check 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, but only the following other OppenheimerFunds currently
offer Class B shares:
Oppenheimer Asset Allocation Fund
Oppenheimer International Bond 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 Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Cash Reserves (Class B shares are available only by
exchange or by direct purchase only by participants in the
OppenheimerFunds proprietary 401(k) plan)
Oppenheimer Growth Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Oppenheimer U.S. Government Trust
Only the following other OppenheimerFunds offer Class C shares:
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Target Fund
Oppenheimer Cash Reserves (Class C shares are available only by
exchange or by direct purchase only by participants in the
OppenheimerFunds proprietary 401(k) plan)
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Tax-Free Bond Fund
Oppenheimer Strategic Income Fund
Oppenheimer Main Street Income & Growth 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). However,
shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months
prior to that purchase may subsequently be exchanged for shares of other
OppenheimerFunds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for that
privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if requested, must
supply proof of entitlement to this privilege. 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 any 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. The
Class B contingent deferred sales charge is imposed on Class B shares
acquired by exchange if they are redeemed within 6 years of the initial
purchase of the exchanged Class B shares. The Class C contingent deferred
sales charge is imposed on Class C shares acquired by exchange if they are
redeemed within 12 months of the initial purchase of the exchanged Class
C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or 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 more than one class must specify
whether they intend to exchange Class A, Class B 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, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different 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
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value.
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 third 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 three 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.
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.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and
Class C," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B and Class C shares are expected to be lower than dividends on
Class A shares as a result of the asset-based sales charges on Class B and
Class C shares, and will also differ in amount as a consequence of any
difference in net asset value between the classes.
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.
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 and Class C
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.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1994
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1994
</TABLE>
<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>
5 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 6
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>
7 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 8
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>
10 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 11
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.
12 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
==========================================================
==========================================================
===============
1. SIGNIFICANT Oppenheimer Insured Tax-Exempt Bond Fund (the Fund) is a separate series of Oppenheimer
Tax-Exempt
ACCOUNTING POLICIES 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
exclusive 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.
</TABLE>
13 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<S> <C>
==========================================================
==========================================================
======
2. SHARES OF The Fund has authorized an unlimited number of no par value shares of beneficial interest of
BENEFICIAL INTEREST each class. Transactions in shares of beneficial interest were as follows:
</TABLE>
<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.
<TABLE>
==========================================================
==========================================================
======
<S> <C>
3. UNREALIZED GAINS AND At September 30, 1994, net unrealized depreciation on investments of $2,283,392 was
composed
LOSSES ON INVESTMENTS of gross appreciation of $987,289, and gross depreciation of $3,270,681.
==========================================================
==========================================================
======
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance with the investment advisory
agreement
AND OTHER TRANSACTIONS with the Fund, which provides for an annual fee of .45% on the first $100 million of net
WITH AFFILIATES 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.
</TABLE>
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
=======================================================================
=============================================================
Municipal Bonds and Notes--98.4%
-----------------------------------------------------------------------
-------------------------------------------------------------
Alabama--1.3% Pelham, Alabama General Obligation Warrants,
AMBAC Insured, 7.10%, 8/1/15
Aaa/AAA/AAA $1,000,000 $ 1,120,954
-----------------------------------------------------------------------
-------------------------------------------------------------
Alaska--4.6% 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 3,297,429
-----------
3,829,925
-----------------------------------------------------------------------
-------------------------------------------------------------
California--5.4% California Public Capital Improvements
Financing Authority Revenue Bonds, Pooled
Project, Series B, BIG Insured, 8.10%, 3/1/18
Aaa/AAA 235,000 252,956
-----------------------------------------------------------------------
------------------------------------
California Statewide Communities Development
Authority Hospital Revenue Certificates of
Participation, Cedars-Sinai Medical Center,
MBIA-IBC Insured, 6.50%, 8/1/12
Aaa/AAA 1,000,000 1,058,875
-----------------------------------------------------------------------
------------------------------------
Northern California Power Agency Public Power
Revenue Refunding Bonds, Hydroelectric
Project No. 1, Prerefunded, Series A, 8%, 7/1/13
NR/AAA 2,000,000 2,121,528
-----------------------------------------------------------------------
------------------------------------
Sacramento, California Municipal Electric Utility
District
Revenue Refunding Bonds, Series G, MBIA Insured,
6.50%, 9/1/13
Aaa/AAA/A- 1,000,000 1,069,111
-----------
4,502,470
-----------------------------------------------------------------------
-------------------------------------------------------------
Colorado--3.4% Colorado Health Facilities Authority Revenue
Bonds, PSL
Health System Project, Series A, FSA Insured,
7.25%, 2/15/16 Aaa/AAA 500,000 540,151
-----------------------------------------------------------------------
------------------------------------
Colorado Health Facilities Authority Revenue
Bonds,
Rose Medical Center, Prerefunded, MBIA Insured,
7%, 8/15/21 Aaa/AAA 500,000 558,058
-----------------------------------------------------------------------
------------------------------------
Douglas County, Colorado School District No. RE-1
Douglas and Elbert Counties General Obligation
Improvement Bonds, Series A, MBIA Insured, 8%,
12/15/09 Aaa/AAA 1,000,000 1,218,911
-----------------------------------------------------------------------
------------------------------------
Poudre Valley, Colorado Hospital District Revenue
Bonds, Prerefunded, AMBAC Insured, 6.625%,
12/1/11 Aaa/AAA/AAA 500,000 545,730
-----------
2,862,850
-----------------------------------------------------------------------
-------------------------------------------------------------
Delaware--2.6% Delaware Transportation System Authority Revenue
Refunding Bonds, 7.75%, 7/1/04
Aaa/AAA 2,000,000 2,197,278
-----------------------------------------------------------------------
-------------------------------------------------------------
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 1,018,339
-----------------------------------------------------------------------
-------------------------------------------------------------
Georgia--1.2% Fulton De Kalb, Georgia Hospital Authority
Revenue
Certificates, Prerefunded, Series A, AMBAC
Insured, 7.25%, 1/1/20
Aaa/AAA/AAA 900,000 996,399
-----------------------------------------------------------------------
-------------------------------------------------------------
Illinois--6.7% Cook County, Illinois Community College
District No. 508 Certificates of Participation,
FGIC
Insured, 8.75%, 1/1/05
Aaa/AAA/AAA 500,000 618,308
-----------------------------------------------------------------------
------------------------------------
Cook County, Illinois Community College District
No. 508 Certificates of Participation, Lease
Certificates, Series C, MBIA Insured, 7.70%,
12/1/07 Aaa/AAA 2,500,000 2,929,097
-----------------------------------------------------------------------
------------------------------------
Illinois Health Facilities Authority Revenue
Bonds, Memorial Medical Center Project, MBIA
Insured, 6.75%, 10/1/11
Aaa/AAA 2,000,000 2,078,088
-----------
5,625,493
5 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Statement of Investments (Unaudited)(Continued)
-----------------------------------------------------------------------
------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
-----------------------------------------------------------------------
-------------------------------------------------------------
Indiana--5.1% 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 $ 269,774
-----------------------------------------------------------------------
------------------------------------
Hamilton Southeastern, Indiana Consolidated
School Building Corp. Revenue Refunding Bonds,
Fst. Mtg., AMBAC Insured, 7%, 7/1/11
Aaa/AAA/AAA 500,000 536,120
-----------------------------------------------------------------------
------------------------------------
Indiana State Office Building Commission
Capital Complex Revenue Bonds, Series B, MBIA
Insured, 7.40%, 7/1/15
Aaa/AAA 2,500,000 2,890,650
-----------------------------------------------------------------------
------------------------------------
Whitko, Indiana Middle School Building Corp
Revenue Bonds, Fst. Mtg., AMBAC Insured,
6.75%, 7/15/12
Aaa/AAA/AAA 500,000 521,819
-----------
4,218,363
-----------------------------------------------------------------------
-------------------------------------------------------------
Massachusetts--7.9% Massachusetts State General Obligation Bonds,
FGIC Insured, 7.875%, 6/1/97
Aaa/AAA/AAA 1,500,000 1,591,956
-----------------------------------------------------------------------
------------------------------------
Massachusetts State Health & Educational
Facilities
Authority Revenue Bonds, Lahey Clinic Medical
Center, Series B, MBIA Insured, 5.625%, 7/1/15
Aaa/AAA 2,000,000 1,911,385
-----------------------------------------------------------------------
------------------------------------
Massachusetts State Health & Educational
Facilities
Authority Revenue Bonds, Mt. Auburn Hospital
Issue, Series B-1, MBIA Insured, 6.25%, 8/15/14
Aaa/AAA 1,000,000 1,028,614
-----------------------------------------------------------------------
------------------------------------
Massachusetts State Housing Finance Revenue
Bonds, Series A, AMBAC Insured, 6.60%, 7/1/14
Aaa/AAA/AAA 2,000,000 2,031,472
-----------
6,563,427
-----------------------------------------------------------------------
-------------------------------------------------------------
Michigan--6.0% Detroit, Michigan Sewage Disposal Revenue Bonds,
FGIC Insured, 5.70%, 7/1/23
Aaa/AAA/AAA 4,000,000 3,795,612
-----------------------------------------------------------------------
------------------------------------
Lansing, Michigan Sewer Disposal Revenue
Refunding Bonds, FGIC Insured, 5.85%, 5/1/14
Aaa/AAA/AAA 1,000,000 977,481
-----------------------------------------------------------------------
------------------------------------
Michigan Municipal Board Authority Revenue
Bonds, Local Government, Group 19, AMBAC
Insured, 7.50%, 11/1/09
Aaa/AAA/AAA 250,000 267,797
-----------
5,040,890
-----------------------------------------------------------------------
-------------------------------------------------------------
Nebraska--0.6% Nebraska Investment Finance Authority Hospital
Revenue Bonds, Nebraska Methodist Health
System, MBIA Insured, 7%, 3/1/06
Aaa/AAA 500,000 542,551
-----------------------------------------------------------------------
-------------------------------------------------------------
Nevada--3.9% Clark County, Nevada School District General
Obligation Bonds, Series B, MBIA Insured,
6.75%, 3/1/08
Aaa/AAA 2,000,000 2,115,342
-----------------------------------------------------------------------
------------------------------------
Humboldt County, Nevada Pollution Control
Revenue Bonds, Idaho Power Co. Project, AMBAC
Insured, 8.30%, 12/20/14
Aaa/AAA/AAA 1,000,000 1,168,539
-----------
3,283,881
-----------------------------------------------------------------------
-------------------------------------------------------------
New Hampshire--0.7% New Hampshire Turnpike System Revenue Refunding
Bonds, Series A, FGIC Insured, 6.75%, 11/1/11
Aaa/AAA/AAA 500,000 544,194
-----------------------------------------------------------------------
-------------------------------------------------------------
New Jersey--3.3% East Orange, New Jersey General Obligation Bonds,
FSA Insured, 8.40%, 8/1/06
Aaa/AAA 1,000,000 1,244,945
-----------------------------------------------------------------------
------------------------------------
Union City, New Jersey General Obligation Bonds,
FSA Insured, 6.375%, 11/1/10
Aaa/AAA 1,435,000 1,536,404
-----------
2,781,349
6 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
-----------------------------------------------------------------------
------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
-----------------------------------------------------------------------
-------------------------------------------------------------
New York--9.5% City of New York Municipal Water Finance
Authority
Revenue Refunding Bonds, Water & Sewer System
Project, Series F, AMBAC Insured, 5.50%, 6/15/11
Aaa/AAA/AAA $4,000,000 $ 3,874,636
-----------------------------------------------------------------------
------------------------------------
New York State Medical Care Facilities Finance
Agency Revenue Bonds, Unrefunded Balance,
MBIA-IBC Insured, 7.75%, 8/15/10
Aaa/AAA 370,000 413,333
-----------------------------------------------------------------------
------------------------------------
Niagara Falls, New York General Obligation Public
Improvement Bonds, MBIA Insured, 7.50%, 3/1/12
Aaa/AAA 1,340,000 1,575,349
-----------------------------------------------------------------------
------------------------------------
Suffolk County, New York Industrial Development
Authority Revenue Bonds, Southwest Sewer System,
FGIC Insured, 6%, 2/1/07
Aaa/AAA/AAA 2,000,000 2,084,194
-----------
7,947,512
-----------------------------------------------------------------------
-------------------------------------------------------------
Ohio--1.9% Maumee, Ohio Hospital Revenue Bonds, St. Luke's
Hospital Project, 5.80%, 12/1/14
Aaa/AAA/AAA 1,000,000 984,930
-----------------------------------------------------------------------
------------------------------------
Streetsboro, Ohio City School District General
Obligation Bonds, AMBAC Insured, 7.125%, 12/1/10
Aaa/AAA/AAA 500,000 564,505
-----------
1,549,435
-----------------------------------------------------------------------
-------------------------------------------------------------
Oklahoma--7.6% Grove, Oklahoma Municipal Services Authority
Utility & Sales Tax Revenue Bonds, Series 1991,
CGIC Insured, 7%, 2/1/16
Aaa/AAA 1,115,000 1,183,753
-----------------------------------------------------------------------
------------------------------------
Oklahoma Baptist University Authority Revenue
Bonds, FGIC Insured, 7.10%, 8/1/09
Aaa/AAA/AAA 150,000 159,406
-----------------------------------------------------------------------
------------------------------------
Oklahoma State Industrial Authority Revenue
Bonds, Health Systems-Baptist Center, Series C,
AMBAC Insured, 7%, 8/15/05
Aaa/AAA/AAA 4,000,000 4,435,724
-----------------------------------------------------------------------
------------------------------------
Tulsa, Oklahoma Airports Improvement Trust
Consolidated General Revenue Bonds, MBIA
Insured, 7.50%, 6/1/08
Aaa/AAA 500,000 530,693
-----------
6,309,576
-----------------------------------------------------------------------
-------------------------------------------------------------
Pennsylvania--6.7% 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 1,527,405
-----------------------------------------------------------------------
------------------------------------
Berks County, Pennsylvania General Obligation
Bonds, FGIC Insured, Inverse Floater,
8.28%, 11/10/20(1)
Aaa/AAA/AAA 1,000,000 1,105,657
-----------------------------------------------------------------------
------------------------------------
Pennsylvania State Higher Education Assistance
Agency Student Loan Revenue Bonds, AMBAC
Insured, Inverse Floater, 7.975%, 3/1/22(1)
Aaa/AAA/AAA 1,250,000 1,143,859
-----------------------------------------------------------------------
------------------------------------
Philadelphia, Pennsylvania Regional Port
Authority
Lease Revenue Bonds, MBIA Insured, Inverse
Floater, 8.03%, 9/1/20(1)
Aaa/AAA 1,900,000 1,847,159
-----------
5,624,080
7 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Statement of Investments March 31, 1995
(Unaudited)(Continued)
-----------------------------------------------------------------------
------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
-----------------------------------------------------------------------
-------------------------------------------------------------
South Carolina--0.7% Sumter County, South Carolina School District
No. 017 Certificates of Participation, Series A,
CGIC
Insured, 7.125%, 1/1/11
Aaa/AAA $ 500,000 $ 543,371
-----------------------------------------------------------------------
-------------------------------------------------------------
South Dakota--1.4% South Dakota State Lease Revenue Trust
Certificates, Series B, CGIC Insured, 8%, 9/1/02
Aaa/AAA 1,000,000 1,137,467
-----------------------------------------------------------------------
-------------------------------------------------------------
Texas--9.6% Austin, Texas Combined Utility Systems Revenue
Refunding Bonds, Series A, MBIA Insured,
Zero Coupon, 11/15/09
Aaa/AAA 3,615,000 1,549,143
-----------------------------------------------------------------------
------------------------------------
Grand Prairie, Texas Health Facilities Revenue
Refunding Bonds, Dallas/Ft. Worth Medical Center
Project, AMBAC Insured, 6.875%, 11/1/10
Aaa/AAA/AAA 1,800,000 1,926,169
-----------------------------------------------------------------------
------------------------------------
Houston, Texas Certificates of Participation,
Water
Conveyance System Project, Series J, AMBAC
Insured, 6.125%, 12/15/08
Aaa/AAA/AAA 2,345,000 2,455,782
-----------------------------------------------------------------------
------------------------------------
Rio Grande Valley Health Facilities Development
Corp. Texas Retirement Facility Revenue Bonds,
Golden Palms, Series B, MBIA Insured, 6.40%,
8/1/12 Aaa/AAA 2,000,000 2,066,434
-----------
7,997,528
-----------------------------------------------------------------------
-------------------------------------------------------------
Virginia--0.7% Roanoke, Virginia Industrial Development
Authority Hospital Revenue Bonds, Roanoke
Memorial Hospital Project-Carilion Health,
Prerefunded, MBIA Insured, 7.25%, 7/1/10
Aaa/AAA 500,000 558,801
-----------------------------------------------------------------------
-------------------------------------------------------------
Washington--3.4% Tacoma, Washington Electric Systems Revenue
Bonds, AMBAC Insured, 6.514%, 1/2/15
Aaa/AAA/AAA 2,000,000 2,052,998
-----------------------------------------------------------------------
------------------------------------
Washington State Public Power Supply System
Revenue Refunding Bonds, Series A, FGIC Insured,
Zero Coupon, 7/1/09
Aaa/AAA/AAA 2,000,000 827,478
-----------
2,880,476
-----------------------------------------------------------------------
-------------------------------------------------------------
Wisconsin--0.7% Wisconsin State Health & Educational Facilities
Authority Revenue Bonds, SSM Healthcare Projects,
Prerefunded, Series B, MBIA Insured, 7%, 6/1/20
Aaa/AAA 500,000 551,296
-----------------------------------------------------------------------
-------------------------------------------------------------
U.S. Possessions--2.3% Puerto Rico Commonwealth Linked Revenue
Bonds, 5.831%, 7/1/20
Aaa/AAA/AAA 2,000,000 1,930,672
-----------------------------------------------------------------------
-------------------------------------------------------------
Total Investments, at Value (Cost $81,119,393)
98.4% 82,158,577
-----------------------------------------------------------------------
-------------------------------------------------------------
Other Assets Net of Liabilities
1.6 1,359,670
---------- -----------
Net Assets
100.0% $83,518,247
========== ===========
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. The multiplier
for these inverse floaters is 1. Inverse floaters amount to
$4,096,675 or 4.9% of the Fund's net assets, at
March 31, 1995.
See accompanying Notes to Financial Statements.
8 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Statement of Assets and Liabilities March 31,
1995 (Unaudited)
-----------------------------------------------------------------------
------------------------------------
=======================================================================
=============================================================
Assets Investments, at value (cost $81,119,393)--see
accompanying statement $82,158,577
-----------------------------------------------------------------------
------------------------------------
Cash
142,197
-----------------------------------------------------------------------
------------------------------------
Receivables:
Interest
1,187,066
Shares of beneficial interest sold
730,601
-----------------------------------------------------------------------
------------------------------------
Other
5,055
-----------
Total assets
84,223,496
=======================================================================
=============================================================
Liabilities Payables and other liabilities:
Shares of beneficial interest redeemed
362,773
Dividends
253,634
Distribution and service plan fees--Note 4
48,181
Trustees' fees
5,048
Transfer and shareholder servicing agent
fees--Note 4 4,658
Other
30,955
-----------
Total liabilities
705,249
=======================================================================
=============================================================
Net Assets
$83,518,247
===========
=======================================================================
=============================================================
Composition of Paid-in capital
$84,591,082
-----------------------------------------------------------------------
------------------------------------
Net Assets Undistributed net investment income
1,771
-----------------------------------------------------------------------
------------------------------------
Accumulated net realized loss from investment
transactions (2,113,790)
-----------------------------------------------------------------------
------------------------------------
Net unrealized appreciation on investments--Note
3 1,039,184
-----------
Net assets
$83,518,247
===========
=======================================================================
=============================================================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per
share (based on net assets of
$71,590,068 and 4,330,487 shares of beneficial
interest outstanding) $16.53
Maximum offering price per share (net asset
value plus sales charge of 4.75% of
offering price)
$17.35
-----------------------------------------------------------------------
------------------------------------
Class B Shares:
Net asset value, redemption price and offering
price per share (based on net
assets of $11,928,179 and 721,161 shares of
beneficial interest outstanding) $16.54
See accompanying Notes to Financial Statements.
9 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Statement of Operations For the Six Months Ended
March 31, 1995 (Unaudited)
-----------------------------------------------------------------------
------------------------------------
=======================================================================
=============================================================
Investment Income Interest
$ 2,567,418
=======================================================================
=============================================================
Expenses Management fees--Note 4
176,339
-----------------------------------------------------------------------
------------------------------------
Distribution and service plan fees:
Class A--Note 4
79,928
Class B--Note 4
56,708
-----------------------------------------------------------------------
------------------------------------
Transfer and shareholder servicing agent
fees--Note 4 47,090
-----------------------------------------------------------------------
------------------------------------
Shareholder reports
27,274
-----------------------------------------------------------------------
------------------------------------
Registration and filing fees:
Class A
14,723
Class B
2,842
-----------------------------------------------------------------------
------------------------------------
Legal and auditing fees
6,230
-----------------------------------------------------------------------
------------------------------------
Custodian fees and expenses
2,532
-----------------------------------------------------------------------
------------------------------------
Trustees' fees and expenses
1,042
-----------------------------------------------------------------------
------------------------------------
Other
14,128
-----------
Total expenses
428,836
=======================================================================
=============================================================
Net Investment Income
2,138,582
=======================================================================
=============================================================
Realized and Unrealized Net realized loss on investments
(1,304,329)
Gain (Loss) on
-----------------------------------------------------------------------
------------------------------------
Investments Net change in unrealized appreciation or
depreciation on investments 3,322,576
Net realized and unrealized gain on investments
-----------
2,018,247
=======================================================================
=============================================================
Net Increase in Net Assets Resulting From Operations
$ 4,156,829
===========
See accompanying Notes to Financial Statements.
10 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Statements of Changes in Net Assets
-----------------------------------------------------------------------
------------------------------------
Six Months Ended
March 31, 1995 Year Ended
(Unaudited) Sept. 30, 1994
=======================================================================
=============================================================
Operations Net investment income
$ 2,138,582 $ 3,906,344
-----------------------------------------------------------------------
------------------------------------
Net realized loss on investments
(1,304,329) (811,863)
-----------------------------------------------------------------------
------------------------------------
Net change in unrealized appreciation or
depreciation on investments 3,322,576 (7,639,229)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 4,156,829 (4,544,748)
=======================================================================
=============================================================
Dividends and Dividends from net investment income:
Distributions to Class A ($.445 and $.862 per share, respectively)
(1,881,470) (3,348,993)
Shareholders Class B ($.3854 and $.731 per share,
respectively) (275,591) (388,291)
-----------------------------------------------------------------------
------------------------------------
Dividends in excess of net investment income:
Class A ($.0282 per share)
-- (109,723)
Class B ($.024 per share)
-- (12,722)
-----------------------------------------------------------------------
------------------------------------
Distributions from net realized gain on
investments:
Class A ($.0763 per share)
-- (279,752)
Class B ($.0763 per share)
-- (27,180)
=======================================================================
=============================================================
Beneficial Interest Net increase in net assets resulting from Class
A
Transactions beneficial interest transactions--Note 2
2,068,829 13,295,652
-----------------------------------------------------------------------
------------------------------------
Net increase in net assets resulting from Class
B
beneficial interest transactions--Note 2
86,183 7,516,981
=======================================================================
=============================================================
Net Assets Total increase
4,154,780 12,101,224
-----------------------------------------------------------------------
------------------------------------
Beginning of period
79,363,467 67,262,243
------------ ------------
End of period (including undistributed net
investment income
of $1,771 and $20,250, respectively)
$ 83,518,247 $ 79,363,467
============ ============
See accompanying Notes to Financial Statements.
11 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Financial Highlights
-----------------------------------------------------------------------
------------------------------------
Class A
Class B
-----------------------------------------------------------------
----------------------------------
Six Months
Six Months
Ended
Ended
March 31, 1995 Year Ended September 30,
Mar. 31, 1995 Year Ended Sept. 30,
(Unaudited) 1994 1993 1992
1991 1990(2) (Unaudited) 1994 1993(1)
=======================================================================
=============================================================
Per Share Operating Data:
Net asset value, beginning
of period $16.14 $18.06 $16.92 $16.17
$15.16 $15.27 $16.15 $18.07 $17.33
-----------------------------------------------------------------------
------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .45 .89 .93 .96
.92 .98 .39 .77 .30
Net realized and
unrealized gain
(loss) on investments .39 (1.84) 1.35 .73
1.01 (.11) .39 (1.86) .74
------- ------- ------- -------
------- ------- ------- ------- ------
Total income (loss) from
investment operations .84 (.95) 2.28 1.69
1.93 .87 .78 (1.09) 1.04
-----------------------------------------------------------------------
------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.45) (.86) (.96) (.91)
(.92) (.98) (.39) (.73) (.30)
Dividends in excess of net
investment income -- (.03) -- --
-- -- -- (.02) --
Distributions from net
realized gain on investments -- (.08) (.18) (.03)
-- -- -- (.08) --
------- ------- ------- -------
------- ------- ------- ------- ------
Total dividends and
distributions to
shareholders (.45) (.97) (1.14) (.94)
(.92) (.98) (.39) (.83) (.30)
-----------------------------------------------------------------------
------------------------------------------------------------
Net asset value,
end of period $16.53 $16.14 $18.06 $16.92
$16.17 $15.16 $16.54 $16.15 $18.07
======= ======= ======= =======
======= ======= ======= ======= ======
=======================================================================
=============================================================
Total Return, at Net Asset
Value(3) 5.32% (5.46)% 14.02% 10.74%
13.08% 5.81% 4.92% (6.20)% 6.04%
=======================================================================
=============================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $71,590 $67,793 $62,158 $33,751
$23,791 $16,863 $11,928 $11,571 $5,104
-----------------------------------------------------------------------
------------------------------------------------------------
Average net assets
(in thousands) $67,205 $66,953 $45,949 $27,811
$19,936 $15,145 $11,400 $9,209 $2,298
-----------------------------------------------------------------------
------------------------------------------------------------
Number of shares
outstanding
at end of period
(in thousands) 4,330 4,201 3,442 1,995
1,471 1,113 721 717 282
-----------------------------------------------------------------------
------------------------------------------------------------
Ratios to average
net assets:
Net investment income 5.57%(4) 5.23% 5.40% 5.81%
5.83% 6.43% 4.79%(4) 4.43% 3.99%(4)
Expenses, before voluntary
assumption by the Manager .98%(4) 1.05% 1.18% 1.35%
1.60% 1.62% 1.75%(4) 1.82% 1.96%(4)
Expenses, net of voluntary
assumption by the Manager N/A N/A 1.10% .95%
.91% .62% N/A N/A N/A
-----------------------------------------------------------------------
------------------------------------------------------------
Portfolio turnover rate(5) 28% 99% 7% 47%
67% 62% 28% 99% 7%
1. For the period from May 3, 1993 (inception of offering) to September
30, 1993.
2. On April 7, 1990, Oppenheimer Management Corporation became the
investment advisor to the Fund.
3. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date,
and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected
in the total returns. Total returns are not annualized for
periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity
or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities) for the
six months ended March 31, 1995 were $21,788,074 and $21,460,608,
respectively.
See accompanying Notes to Financial Statements.
12 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Notes to Financial Statements (Unaudited)
-----------------------------------------------------------------------
------------------------------------
=======================================================================
============================================================
1. Significant Oppenheimer Insured Tax-Exempt Bond Fund (the
Fund) is a separate series of Oppenheimer Tax-Exempt Bond
Accounting Policies 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 exclusive 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 the close of the New York Stock Exchange on each
trading day. Listed and unlisted securities for
which such information is regularly reported are valued at
the last sale price of the day or, in the absence
of sales, at values based on the closing bid or asked
price or the last sale price on the prior trading
day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing
service approved by the Board of Trustees. Such securities
which cannot be valued by the approved portfolio
pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that
the firm rendering the quotes is reliable and that the
quotes reflect current market value, or under
consistently applied procedures established by the Board of
Trustees to determine fair value in good faith.
Short-term "money market type" debt securities having a
remaining maturity of 60 days or less are valued
at cost (or last determined market value) adjusted for
amortization to maturity of any premium or
discount. Forward contracts are valued based on the closing
prices of the forward currency contract rates in
the London foreign exchange markets on a daily basis as
provided by a reliable bank or dealer. Options
are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the
absence of any transactions that day, the value is based
upon the last sale price on the prior trading
date if it is within the spread between the closing bid and
asked prices. If the last sale price is outside
the spread, the closing bid or asked price closest to the
last reported sale price is used.
-----------------------------------------------------------------------
------------------------------------
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 Taxes. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and
to distribute all of its taxable income, including any
net realized gain on investments not offset by
loss carryovers, to shareholders. Therefore, no federal
income or excise tax provision is required.
-----------------------------------------------------------------------
------------------------------------
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.
-----------------------------------------------------------------------
------------------------------------
Classification of Distributions to Shareholders.
Net investment income (loss) and net realized gain (loss)
may differ for financial statement and tax
purposes primarily because of premium amortization. The
character of the distributions made during the
year from net investment income or net realized gains may
differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the
income or realized gain (loss) was recorded by
the Fund. 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.
13 Oppenheimer Insured Tax-Exempt Bond Fund
<PAGE>
-----------------------------------------------------------------------
------------------------------------
Notes to Financial Statements (Unaudited)
(Continued)
-----------------------------------------------------------------------
------------------------------------
=======================================================================
=============================================================
1. Significant Other. Investment transactions are accounted for
on the date the investments are purchased or sold (trade
Accounting Policies date). Realized gains and losses on investments
and unrealized appreciation and depreciation are
(continued) determined on an identified cost basis, which is
the same basis used for federal income tax purposes.
Original issue discount on securities purchased
is amortized over the life of the respective securities,
in accordance with federal income tax
requirements. 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 Beneficial The Fund has authorized an unlimited number of
no par value shares of beneficial interest of each class.
Interest Transactions in shares of beneficial interest
were as follows:
Six
Months Ended March 31, 1995 Year Ended September 30, 1994
------------------------------- -----------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------
------------------------------------
Class A
Sold
524,775 $ 8,337,682 1,358,474 $ 23,400,749
Dividends and distributions reinvested
87,153 1,380,838 164,884 2,823,809
Redeemed
(482,609) (7,649,691 (763,948) (12,928,906)
-------- ------------ --------- ------------
Net increase
129,319 $ 2,068,829 759,410 $ 13,295,652
======== ============ ========= ============
-----------------------------------------------------------------------
------------------------------------
Class B
Sold
102,931 $ 1,645,138 503,586 $ 8,682,918
Dividends and distributions reinvested
11,179 177,172 15,806 267,832
Redeemed
(109,587) (1,736,127) (85,174) (1,433,769)
-------- ------------ --------- ------------
Net increase
4,523 $ 86,183 434,218 $ 7,516,981
======== ============ ========= ============
=======================================================================
=============================================================
3. Unrealized Gains At March 31, 1995, net unrealized appreciation
on investments of $1,039,184 was composed of gross
and Losses on appreciation of $2,482,872, and gross
depreciation of $1,443,688.
Investments
=======================================================================
=============================================================
4. Management Fees and Management fees paid to the Manager were in
accordance with the investment advisory agreement with the
Other Transactions Fund which provides for an annual fee of .45% on
the first $100 million of net assets, .40% on the next
With Affiliates $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 state
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 six months ended
March 31, 1995, commissions (sales charges paid by investors)
on sales of Class A shares totaled $59,485, of
which $15,078 was retained by Oppenheimer Funds Distributor,
Inc. (OFDI), a subsidiary of the Manager, as
general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on
sales of the Fund's Class B shares totaled $47,260, of which
$13,379 was paid to an affiliated broker/dealer.
During the six months ended March 31, 1995, OFDI received
contingent deferred sales charges of $14,983 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
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 six
months ended March 31, 1995, OFDI paid $3,139 and
$291, respectively, to an affiliated broker/dealer as
reimbursement for Class A and Class B personal
service and maintenance expenses and retained $49,830 as
reimbursement for Class B sales commissions and
service fee advances, as well as financing costs.
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Municipal Bond Ratings.
Moody's Investors Service, 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 YIELDS
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:EffectiveA Oppenheimer Insured Tax-Exempt Fund Yield of
Tax 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
Joint Return Bracket Is Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Over Not Over
$ 0 $ 39,000 15.00% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
$ 39,000 $ 94,250 28.00% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03%
$ 94,250 $143,600 31.00% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42%
$143,600 $256,500 36.00% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16%
$256,500 and above39.60%5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76%
</TABLE>
<TABLE>
<CAPTION>
Single Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Over Not Over
$ 0 $ 23,350 15.00% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
$ 23,350 $ 56,550 28.00% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03%
$ 56,550 $117,950 31.00% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42%
$117,950 $256,500 36.00% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16%
$256,500 and above39.60%5.79% 6.62% 7.45% 8.28% 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
865SAI
OPPENHEIMER TAX-EXEMPT FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
------- ---------------------------------
(a) Financial Statements
--------------------
(1) Financial Highlights at 3/31/95 (unaudited) and at 9/30/94
(audited) (See Part A, Prospectus and Part B, Statement of Additional
Information): Filed herewith.
(2) Independent Auditors' Report at 9/30/94 (See Part B,
Statement of Additional Information): Filed herewith.
(3) Statement of Investments at 3/31/95 (unaudited) and at
9/30/94 (audited) (See Part B, Statement of Additional Information): Filed
herewith.
(4) Statement of Assets and Liabilities at 3/31/95 (unaudited)
and at 9/30/94 (audited) (See Part B, Statement of Additional
Information): Filed herewith.
(5) Statement of Operations at 3/31/95 (unaudited) and at 9/30/94
(audited) (See Part B, Statement of Additional Information): Filed
herewith.
(6) Statements of Changes in Net Assets at 3/31/95 (unaudited)
and at 9/30/94 and 12/31/93 (audited) (See Part B, Statement of Additional
Information): Filed herewith.
(7) Notes to Financial Statements at 3/31/95 (unaudited) and at
9/30/94 (audited) (See Part B, Statement of Additional Information): Filed
herewith.
(b) Exhibits
--------
(1) Amended and Restated Agreement and Declaration of Trust dated
7/10/95: Filed herewith.
(2) By-Laws, as amended through 7/10/90: Filed herewith.
(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 B shares of
Oppenheimer Intermediate Tax-Exempt Fund: Filed herewith.
(iii) 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.
(iv) 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.
(v) 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.
(vi) Specimen Share Certificate for Class C shares of
Oppenheimer Insured Tax-Exempt Fund: Filed herewith.
(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, refiled with Registrant's
Post-Effective Amendment No. 12, 1/30/95, 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, refiled with Registrant's
Post-Effective Amendment No. 12, 1/30/95, 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, refiled
with Registrant's Post-Effective Amendment No. 12, 1/30/95, 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, refiled with Registrant's Post-Effective
Amendment No. 12, 1/30/95, 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, refiled with Registrant's Post-Effective Amendment
No. 12, 1/30/95, 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, refiled with Registrant's Post-Effective Amendment No.
12, 1/30/95, 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, 1/25/94, and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement dated July
10, 1995 for Class B Shares of Oppenheimer Intermediate Tax-Exempt Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940: Filed
herewith.
(iii) Distribution and Service Plan and Agreement dated July
10, 1995 for Class C Shares of Oppenheimer Intermediate Tax-Exempt Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940: Filed
herewith.
(iv) 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, 1/25/94, and incorporated herein by reference.
(v) Distribution and Service Plan and Agreement dated July
10, 1995 for Class B Shares of Oppenheimer Insured Tax-Exempt Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940: Filed
herewith.
(vi) Distribution and Service Plan and Agreement dated July
10, 1995 for Class C Shares of Oppenheimer Insured Tax-Exempt 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 Fund: Filed herewith.
(ii) Performance Data Computation Schedule of Oppenheimer
Intermediate Tax-Exempt Fund: Filed herewith.
(17) (i) Financial Data Schedule for Class A shares of
Oppenheimer Insured Tax-Exempt Fund: Filed herewith.
(ii) Financial Data Schedule for Class B shares of
Oppenheimer Insured Tax-Exempt Fund: Filed herewith.
(iii) Financial Data Schedule for Class C shares of
Oppenheimer Insured Tax-Exempt Fund: Not applicable.
(iv) Financial Data Schedule for Class A shares of
Oppenheimer Intermediate Tax-Exempt Fund: Filed herewith.
(v) Financial Data Schedule for Class B shares of
Oppenheimer Intermediate Tax-Exempt Fund: Not applicable.
(vi) Financial Data Schedule for Class C shares of
Oppenheimer Intermediate Tax-Exempt Fund: Filed herewith.
(18) Not applicable.
-- 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 August 1, 1995
-------------- --------------------
Shares of Beneficial Interest - Class A 3,178
Shares (Oppenheimer Intermediate
Tax-Exempt Fund)
Shares of Beneficial Interest - Class B None
Shares (Oppenheimer Intermediate
Tax-Exempt Fund)
Shares of Beneficial Interest - Class C 334
Shares (Oppenheimer Intermediate
Tax-Exempt Fund)
Shares of Beneficial Interest - Class A 4,241
Shares (Oppenheimer Insured
Tax-Exempt Fund)
Shares of Beneficial Interest - Class B 343
Shares (Oppenheimer Insured
Tax-Exempt Fund)
Shares of Beneficial Interest - Class C None
Shares (Oppenheimer Insured
Tax-Exempt Fund)
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.
Name & Current Position
with Oppenheimer Other Business and Connections
Management Corporation During the Past Two Years
----------------------- ------------------------------
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
Bruce Bartlett, Vice President and Portfolio Manager of
Vice President Oppenheimer Total Return Fund, Inc. and
Oppenheimer Variable Account Funds;
formerly a Vice President and Senior
Portfolio Manager at First of America
Investment Corp.
Robert J. Bishop Assistant Treasurer of the OppenheimerFunds
Assistant Vice President (listed below); previously a Fund Controller
for Oppenheimer Management Corporation (the
"Manager").
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.
Senior Vice President
Robert Doll, Jr., Vice President and Portfolio Manager of
Executive Vice President Oppenheimer Growth Fund, Oppenheimer
Target Fund and Oppenheimer Variable Account
Funds; 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 Oppenheimer Insured Tax-Exempt Bond Fund and
Oppenheimer Intermediate Tax Exempt Bond
Fund; 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.
Bennett Inkeles, Formerly employed by Doremus & Company, an
Assistant Vice President advertising agency.
Stephen Jobe, None.
Vice President
Heidi Kagan None.
Assistant 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
Marilyn Miller, Formerly a director of marketing for
Vice President TransAmerica Fund Management Company.
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
Robert E. Patterson, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Main Street California Tax-
Exempt Fund, Oppenheimer Insured Tax-Exempt
Bond Fund, Oppenheimer Intermediate Tax-
Exempt Bond Fund, 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
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 Robertson, None.
Vice President
Adam Rochlin, Formerly a product manager for Metropolitan
Assistant Vice President Life Insurance Company.
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.
James Ruff, None.
Executive Vice President
Ellen Schoenfeld, None.
Assistant Vice President
Diane Sobin, Vice President and Portfolio Manager of
Vice President Oppenheimer Total Return Fund, Inc. and
Oppenheimer Variable Account Funds;
formerly a Vice President and Senior
Portfolio Manager for Dean Witter
InterCapital, Inc.
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 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
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.
Susan Wilson-Perez, None.
Vice President
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, An officer of certain OppenheimerFunds;
Assistant Vice President 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.
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 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 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 International Bond Fund
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 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:
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
---------------- ------------------- -------------
George Clarence Bowen+ Vice President & Treasurer Vice
President,
Secretary and
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
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
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 Senior 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
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 Senior 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* Senior Vice President - None
Director of Key Accounts
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Joseph Norton Vice President None
1550 Bryant Street
San Francisco, CA 94103
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
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
664 Circuit Road
Portsmouth, NH 03801
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
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
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
Dave Thomas Vice President - None
3410 South Galena St. Financial Institution Div.
Executive Suites, 3rd Fl.
Denver, CO 80231
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
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
(c) Not applicable.
Item 30. Location of Accounts and Records
-------- --------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of both Oppenheimer
Management Corporation at its offices at 3410 South Galena Street, Denver,
Colorado 80231 and MassMutual at its offices at 1295 State Street,
Springfield, Massachusetts 01111.
Item 31. Management Services
-------- -------------------
Not applicable.
Item 32. Undertakings
-------- ------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
<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 New York and State of New York
on the 23rd day of August, 1995.
OPPENHEIMER TAX EXEMPT 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 of the August 23, 1995
---------------------- Board of Trustees
James C. Swain
/s/ Jon S. Fossel* Chief Executive August 23, 1995
---------------------- Officer and Trustee
Jon S. Fossel
/s/ George C. Bowen* Chief Financial August 23, 1995
---------------------- and Accounting
George C. Bowen Officer
/s/ Robert G. Avis* Trustee August 23, 1995
----------------------
Robert G. Avis
/s/ William A. Baker* Trustee August 23, 1995
----------------------
William A. Baker
/s/ Charles Conrad Jr.* Trustee August 23, 1995
----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee August 23, 1995
-------------------------
Raymond J. Kalinowski
/s/ Howard Kast* Trustee August 23, 1995
------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee August 23, 1995
------------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee August 23, 1995
------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER TAX-EXEMPT FUND
Registration NO. 33-08054
POST-EFFECTIVE AMENDMENT NO. 14
EXHIBIT INDEX
Form N-1A
Item No. Description
--------- -----------
24(b)(1) Amended and Restated Declaration of Trust dated
7/10/95
24(B)(2) Amended By-Laws as amended through 7/10/95
24(b)(4)(ii) Specimen Share Certificate for Class B shares of
Oppenheimer Intermediate Tax-Exempt Fund
24(b)(4)(vi) Specimen Share Certificate for Class C shares of
Oppenheimer Insured Tax-Exempt Fund
24(b)(11) Independent Auditors' Consent
24(b)(15)(ii) Distribution and Service Plan and Agreement for Class B
Shares of Oppenheimer Intermediate Tax-Exempt Fund dated
7/10/95
24(b)(15)(iii) Distribution and Service Plan and Agreement for Class C
Shares of Oppenheimer Intermediate Tax-Exempt Fund dated
7/10/95
24(b)(15)(v) Distribution and Service Plan and Agreement for Class B
Shares of Oppenheimer Insured Tax-Exempt Fund dated
7/10/95
24(b)(15)(vi) Distribution and Service Plan and Agreement for Class C
Shares of Oppenheimer Insured Tax-Exempt Fund dated
7/10/95
24(b)16(i) Performance Computation Schedule of Oppenheimer Insured
Tax-Exempt Fund
24(b)16(ii) Performance Computation Schedule of Oppenheimer
Intermediate Tax-Exempt 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)(iv) Financial Data Schedule for Class A shares of Oppenheimer
Intermediate Tax-Exempt Fund
24(b)(17)(vi) Financial Data Schedule for Class C shares of Oppenheimer
Intermediate Tax-Exempt Fund
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF
OPPENHEIMER TAX-EXEMPT FUND
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made this
10th day of July, 1995, 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, April 29, 1993, November 29, 1993 and June 23, 1995; 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 Trustees desire to make permitted changes to said
Declaration of Trust pursuant to Section 4 of Article IX.
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
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 (the proceeds of which may be invested
in separate, independently managed portfolios) 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 Insured Tax-Exempt Fund" and "Oppenheimer Intermediate Tax-
Exempt Fund."
The Shares of Oppenheimer Insured Tax-Exempt Fund are divided into
three Classes, which are designated "Class A," "Class B" and "Class C,"
as follows: the Shares of the Series outstanding since the inception of
the Trust are designated Class A Shares, 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, and the Shares
of the Class initially created upon the division of the Shares of that
Series into three classes are hereby designated Class C Shares.
The Shares of Oppenheimer Intermediate Tax-Exempt Fund shall be
divided into three Classes, which shall be designated "Class A," "Class
B" and "Class C," as follows: the Shares of the Series initially created
at the inception of the Trust are hereby designated Class A Shares, 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
Declaration of Trust date November 29, 1993 are hereby designated Class
C Shares, and the Shares of the Class initially created upon the division
of the Shares of that Series into three classes are hereby designated
Class B 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. Notwithstanding the foregoing, if any action to be taken by the
Shareholders or by a Series or Class at a meeting requires the affirmative
vote of more than 50% of all the votes entitled to be cast on the matter
or requires a majority of the outstanding voting securities (as defined
in the 1940 Act), then in such event the presence in person or by proxy
of the holders of a majority of the shares outstanding and entitled to
vote at such a meeting shall be a quorum for all purposes.
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.
ORGZN/860-865.795
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of the 10th day of July, 1995.
/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, California 92264 Huntington Beach, California 92648
/s/ Ned M. Steel /s/ Robert M. Richner
--------------------------------- ------------------------------
Ned M. Steel, Trustee Robert M. Kirchner, Trustee
3236 S. Steele Street 2800 S. University Boulevard
Denver, Colorado Denver, Colorado 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, Missouri Denver, Colorado 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, California 90401 St. Louis, MO 63124
/s/ Jon S. Fossel
-----------------------------
Jon S. Fossel, Trustee
Box 44 - Mead Street
Waccabuc, New York 10597
ORGZN/860-865.795
AMENDED
BY-LAWS
OF
OPPENHEIMER TAX-EXEMPT FUND
(amended through July 10, 1995)
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 OPPENHEIMER TAX-EXEMPT 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 Massachusetts Mutual Life
Insurance Company, 1295 State Street, Springfield, Massachusetts 01111,
Attention: Stephen L. Kuhn, Esq., 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 120 days before the date of any meeting of shareholders or more than
60 days before 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.
ORGZN\860865.795
Exhibit 24(b)(4)(ii)
OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
Class B Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: (upper right) box with heading:
NUMBER (OF SHARES) CLASS B SHARES
(certificate number above)
(centered below boxes)
Oppenheimer Intermediate Tax-Exempt Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) (at right)
THIS IS TO CERTIFY THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683957 609
(at left)
is the owner of
(centered)
FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
------------------------------------------------------------------------
(hereinafter called the "Fund"), transferable only on the books
of the Fund by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its
duly authorized officers.
(at left of seal) (at right of seal)
(signature) Dated:
/s/ George C. Bowen /s/ Jon S. Fossel
------------------- -----------------
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
SEAL
1986
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT CORPORATION)
Denver (Colo) Transfer Agent
By
Authorized Signature
<PAGE>
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with rights of survivorship and not as
tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received __________________ hereby sell(s), and transfer(s) unto
(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)
-------------------------------------------------------------------------
(Please print or type name and address of assignee)
------------------------------------------------------------------------
----------------- Class B Shares of beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint.
--------------------- Attorney to transfer the said shares on the books
of the within named Fund with full power of substitution in the premises.
Dated: ---------------------
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) --------------------------
guaranteed Name of Guarantor
by --------------------------
Signature of Officer/Title
(text printed vertically to right of above paragraph)
NOTICE: The signature(s) to this assignment must correspond with the
name(s) as written upon the face of the certificate in every particular
without alteration or enlargement or any change whatever.
(text printed in box to left of signature guarantee)
Signatures must be guaranteed by a financial institution of the type
described in the current prospectus of the Fund.
(at left) (at right)
PLEASE NOTE: This document contains OppenheimerFunds
a watermark when viewed at an angle. logotype
It is invalid without this watermark.
-------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(vi)
OPPENHEIMER INSURED TAX-EXEMPT FUND
Class C Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: (upper right) box with heading:
NUMBER (OF SHARES) CLASS C SHARES
(certificate number above)
(centered below boxes)
Oppenheimer Insured Tax-Exempt Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) (at right)
THIS IS TO CERTIFY THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683957 500
(at left)
is the owner of
(centered)
FULLY PAID CLASS C SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER INSURED TAX-EXEMPT FUND
------------------------------------------------------------------------
(hereinafter called the "Fund"), transferable only on the books
of the Fund by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its
duly authorized officers.
(at left of seal) (at right of seal)
(signature) Dated:
/s/ George C. Bowen /s/ Jon s. Fossel
------------------- ------------------
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER INSURED TAX-EXEMPT FUND
SEAL
1986
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT CORPORATION)
Denver (Colo) Transfer Agent
By
Authorized Signature
<PAGE>
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with rights of survivorship and not as
tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received __________________ hereby sell(s), and transfer(s) unto
(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)
-------------------------------------------------------------------------
(Please print or type name and address of assignee)
------------------------------------------------------------------------
----------------- Class C Shares of beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint.
--------------------- Attorney to transfer the said shares on the books
of the within named Fund with full power of substitution in the premises.
Dated: ---------------------
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) --------------------------
guaranteed Name of Guarantor
by --------------------------
Signature of Officer/Title
(text printed vertically to right of above paragraph)
NOTICE: The signature(s) to this assignment must correspond with the
name(s) as written upon the face of the certificate in every particular
without alteration or enlargement or any change whatever.
(text printed in box to left of signature guarantee)
Signatures must be guaranteed by a financial institution of the type
described in the current prospectus of the Fund.
(at left) (at right)
PLEASE NOTE: This document contains OppenheimerFunds
a watermark when viewed at an angle. logotype
It is invalid without this watermark.
-------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER INSURED TAX-EXEMPT FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the
10th day of July, 1995, by and between Oppenheimer Tax-Exempt Fund (the
"Trust") for the account of its OPPENHEIMER INSURED TAX-EXEMPT FUND (the
"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 Fund will compensate the Distributor
for its services in connection with the distribution of Shares, and the
personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund 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 person
or entity 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 Fund) 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 person or entity as a Recipient, whereupon such person's or
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 more
than one person or entity would otherwise qualify as Recipients as to the
same Shares, the Recipient which is the dealer of record on the Fund's
books as determined by the Distributor 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 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 Fund will compensate the Distributor and Recipients for
providing administrative support services with respect to Accounts. Such
Asset-Based Sales Charge payments received from the Fund 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
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 or the Board of Trustees still is not satisfied, either may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such Recipient'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 this
paragraph (b) 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 Service Fee and the Asset-Based Sales Charge on Shares are
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. The distribution
assistance and administrative support services to be rendered by the
Distributor in connection with the Shares may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other person or entity 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(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) obtaining financing
or providing such financing from its own resources, or from an affiliate,
for interest and other borrowing costs on the Distributor's unreimbursed
expenses incurred in rendering distribution assistance and administrative
support services to the Fund; (iv) paying other direct distribution costs,
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) providing any service
rendered by the Distributor that a Recipient may render pursuant to part
(a) of this Section 3. Such services include distribution assistance and
administrative support services rendered in connection with Shares
acquired (i) by purchase, (ii) in exchange for shares of another
investment company for which the Distributor serves as distributor or sub-
distributor, or (iii) pursuant to a plan of reorganization to which the
Fund is a party. 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) 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
Fund), or (ii) by the Distributor (a subsidiary of OMC), from its own
resources, from Asset-Based Sales Charge payments or from its borrowings.
(e) Notwithstanding any other provision of this Plan, this Plan does
not obligate or in any way make the Fund liable to make any payment
whatsoever to any person or entity other than directly to the Distributor.
In no event shall the amounts to be paid to the Distributor exceed the
rate of fees to be paid by the Fund to the Distributor set forth in
paragraph (a) of this Section 3.
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 Fund or 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 Trust
shall provide written reports to the Trust's Board for its review,
detailing services rendered in connection with the distribution of the
Shares, the amount of all payments made and the purpose for which the
payments were made. The reports shall be provided quarterly, and shall
state whether all provisions of Section 3 of this Plan have been complied
with.
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 April 18, 1995, for the purpose of voting
on this Plan, and shall take effect after approval by Class B shareholders
of the Fund, at which time it shall replace the Fund's Distribution and
Service Plan and Agreement for the Shares dated February 23, 1994. Unless
terminated as hereinafter provided, it shall continue in effect 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 all
or a portion of the Service Fee and/or the Asset-Based Sales Charge in
respect of Shares sold prior to the effective date of such termination.
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 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 FUND
for the account of its
OPPENHEIMER INSURED TAX-EXEMPT FUND
By: /s/ Andrew J. Donohue
-------------------------------------
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: Katherine P. Feld
------------------------------------
Katherine P. Feld
Vice President & Secretary
OFMI/865.B
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER INSURED TAX-EXEMPT FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the
10th day of July, 1995, by and between Oppenheimer Tax-Exempt Fund (the
"Trust") for the account of its OPPENHEIMER INSURED TAX-EXEMPT FUND (the
"Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution plan for
Class C 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 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 Fund 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
person or entity 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 Fund) 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
Fund'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 person or entity as a Recipient, whereupon such person's or
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 more
than one person or entity would otherwise qualify as Recipients as to the
same Shares, the Recipient which is the dealer of record on the Fund's
books as determined by the Distributor 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 Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the aggregate
amount (i) 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)
0.1875% (0.75% 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 "Asset Based Sales Charge"). Such Service
Fee payments received from the Fund will compensate the Distributor and
Recipients for providing administrative support services with respect to
Accounts. Such Asset Based Sales Charge payments received from the Fund
will compensate the Distributor and Recipients for providing distribution
assistance in connection with the sale 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 establishing and maintaining 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 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 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 the 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 or the Board of Trustees still is not
satisfied, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient'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.
In addition, the Distributor shall make asset-based sales charge payments
to any Recipient quarterly, within forty-five (45) days of the end of each
calendar quarter, at a rate not to exceed 0.1875% (0.75% 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 its Customers for a period of more than one (1) year.
However, no such service fee or asset-based sales charge payments
(collectively, the "Recipient 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 rates
set forth above, and/or direct the Distributor to increase or decrease the
Minimum Holding Period or the Minimum Qualified Holdings. The Distributor
shall notify all Recipients of the Minimum Qualified Holdings or Minimum
Holding Period, if any, and the rates of Recipient 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 Service Fee and the Asset-Based Sales Charge on Shares
are 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. 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 person or entity that sell Shares, and\or paying
such persons Advance Service Fee Payments in advance of, and\or greater
than, the amount provided for in Section 3(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) obtaining financing
or providing such financing from its own resources, or from an affiliate,
for the interest and other borrowing costs of the Distributor's
unreimbursed expenses incurred in rendering distribution assistance and
administrative support services to the Fund; (iv) paying 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) providing any service rendered by the
Distributor that a Recipient may render pursuant to part (a) of this
Section 3. Such services include distribution assistance and
administrative support services rendered in connection with Shares
acquired (i) by purchase, (ii) in exchange for shares of another
investment company for which the Distributor serves as distributor or sub-
distributor, or (iii) pursuant to a plan of reorganization to which the
Fund is a party. 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) 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
Fund), or (ii) by the Distributor (a subsidiary of OMC), from its own
resources, from Asset Based Sales Charge payments or from its borrowings.
(e) Notwithstanding any other provision of this Plan, this Plan
does not obligate or in any way make the Fund liable to make any payment
whatsoever to any person or entity other than directly to the Distributor.
In no event shall the amounts to be paid to the Distributor exceed the
rate of fees to be paid by the Fund to the Distributor set forth in
paragraph (a) of this section 3.
4. Selection and Nomination of Trustees. While this Plan is in
effect, the selection and nomination of those persons to be Trustees of
the Fund who are not "interested persons" of the Fund ("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 written reports to the Fund's Board for its review,
detailing services rendered in connection with the distribution of Shares,
the amount of all payments made and the purpose for which the payments
were made. The reports shall be provided quarterly and shall state
whether all provisions of Section 3 of this Plan have been complied with.
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 April 18, 1995 for the purpose of
voting on this Plan, and takes effect as of the date first set forth
above. Unless terminated as hereinafter provided, it shall continue in
effect from year to year from the date first set forth above 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 C 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 is entitled
to payment from the Fund of all or a portion of the Service Fee and/or the
Asset-Based Sales Charge in respect of Shares sold prior to the effective
date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The
Distributor understands that the obligations of the Fund under this Plan
are not binding upon any Trustee or shareholder of 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 Fund disclaiming shareholder and Trustee liability for acts
or obligations of the Fund.
OPPENHEIMER TAX-EXEMPT FUND
for the account of its
OPPENHEIMER INSURED TAX-EXEMPT FUND
By: /s/ Andrew J. Donohue
-------------------------------------
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /d/ Katherine P. Feld
------------------------------------
Katherine P. Feld
Vice President and Secretary
OFMI/865C
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the
10th day of July, 1995, by and between Oppenheimer Tax-Exempt Fund (the
"Trust") for the account of its OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
(the "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 Fund will compensate the Distributor
for its services in connection with the distribution of Shares, and the
personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund 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
person or entity 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 Fund) 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
Fund'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 person or entity as a Recipient, whereupon such person's or
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 more
than one person or entity would otherwise qualify as Recipients as to the
same Shares, the Recipient which is the dealer of record on the Fund's
books as determined by the Distributor 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 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 Fund will compensate the Distributor and Recipients for
providing administrative support services with respect to Accounts. Such
Asset-Based Sales Charge payments received from the Fund 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
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 or the Board of Trustees still is not satisfied, either
may take appropriate steps to terminate the Recipient's status as such
under the Plan, whereupon such Recipient'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
this paragraph (b) 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 Service Fee and the Asset-Based Sales Charge on Shares
are 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. The distribution
assistance and administrative support services to be rendered by the
Distributor in connection with the Shares may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other person or entity 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(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) obtaining financing
or providing such financing from its own resources, or from an affiliate,
for the interest and other borrowing costs of the Distributor's
unreimbursed expenses incurred in rendering distribution assistance and
administrative support services to the Fund; (iv) paying other direct
distribution costs, 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)
providing any service rendered by the Distributor that a Recipient may
render pursuant to part (a) of this Section 3. Such services include
distribution assistance and administrative support services rendered in
connection with Shares acquired by the Fund (i) by purchase, (ii) in
exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (ii) pursuant to
a plan of reorganization to which the Fund is a party. 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) 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
Fund), or (ii) by the Distributor (a subsidiary of OMC), from its own
resources, from Asset-Based Sales Charge payments or from its borrowings.
(e) Notwithstanding any other provision of this Plan, this Plan
does not obligate or in any way make the Fund liable to make any payment
whatsoever to any person or entity other than directly to the Distributor.
In no event shall the amounts to be paid to the Distributor exceed the
rate of fees to be paid by the Fund to the Distributor set forth in
paragraph (a) of this section 3.
4. Selection and Nomination of Trustees. While this Plan is in
effect, the selection and nomination of those persons to be Trustees of
the Fund who are not "interested persons" of the Fund ("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 written reports to the Fund's Board for its review,
detailing services rendered in connection with the distribution of the
Shares, the amount of all payments made and the purpose for which the
payments were made. The reports shall be provided quarterly and shall
state whether all provisions of Section 3 of this Plan have been complied
with.
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 April 18, 1995, for the purpose of
voting on this Plan, and shall take effect on the date that the Fund's
Registration Statement is declared effective by the Securities and
Exchange Commission. Unless terminated as hereinafter provided, it shall
continue in effect until October 31, 1995 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 the Service Fee and/or the Asset-
Based Sales Charge in respect of Shares sold prior to the effective date
of such termination.
8. Disclaimer of Shareholder Liability. The Distributor
understands that the obligations of the Fund under this Plan are not
binding upon any Trustee or shareholder of 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 Fund
disclaiming shareholder and Trustee liability for acts or obligations of
the Fund.
OPPENHEIMER TAX-EXEMPT FUND
for the account of its
OPPENHEIMER INTERMEDIATE TAX-EXEMPT 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 and Secretary
OFMI/860B
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the
10th day of July, 1995, by and between OPPENHEIMER TAX-EXEMPT FUND (the
"Trust") for the account of its OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND
(the "Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution plan for
Class C 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 Fund will compensate the Distributor for its
services incurred in connection with the distribution of Shares, and the
personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund 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 person
or entity 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 Fund) 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 person or entity as a Recipient, whereupon such person's or
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 more
than one person or entity would otherwise qualify as Recipients as to the
same Shares, the Recipient which is the dealer of record on the Fund's
books as determined by the Distributor 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 Fund will make payments to the Distributor, within forty-
five (45) days of the end of each calendar quarter, in the aggregate
amount (i) 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)
0.1875% (0.75% 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 "Asset-Based Sales Charge"). Such Service
Fee payments received from the Fund will compensate the Distributor and
Recipients for providing administrative support services with respect to
Accounts. Such Asset-Based Sales Charge payments received from the Fund
will compensate the Distributor and Recipients for providing distribution
assistance in connection with the sale 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
establishing and maintaining 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 by 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
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 the 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 or the Board of Trustees still is not satisfied, either may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such Recipient'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.
In addition, the Distributor shall make asset-based sales charge payments
to any Recipient quarterly, within forty-five (45) days of the end of each
calendar quarter, at a rate not to exceed 0.1875% (0.75% 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 its Customers for a period of more than one (1) year.
However, no such service fee or asset-based sales charge payments
(collectively, the "Recipient 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 rates set forth
above, and/or direct the Distributor to increase or decrease the Minimum
Holding Period or the Minimum Qualified Holdings. The Distributor shall
notify all Recipients of the Minimum Qualified Holdings or Minimum Holding
Period, if any, and the rates of Recipient 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 Service Fee and the Asset-Based Sales Charge on Shares are
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. The distribution
assistance and administrative support services to be rendered by the
Distributor in connection with the Shares may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other person or entity 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(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) obtaining financing
or providing such financing from its own resources, or from an affiliate,
for interest and other borrowing costs of the Distributor's unreimbursed
expenses incurred in rendering distribution assistance and administrative
support services to the Fund; (iv) paying other direct distribution costs,
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) providing any service
rendered by the Distributor that a Recipient may render pursuant to part
(a) of this Section 3. Such services include distribution assistance and
administrative support services rendered in connection with Shares
acquired (i) by purchase, (ii) in exchange for shares of another
investment company for which the Distributor serves as distributor or sub-
distributor, or (iii) pursuant to a plan of reorganization to which the
Fund is a party. 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) 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
Fund), or (ii) by the Distributor (a subsidiary of OMC), from its own
resources, from Asset-Based Sales Charge payments or from its borrowings.
(e) Notwithstanding any other provision of this Plan, this Plan does
not obligate or in any way make the Fund liable to make any payment
whatsoever to any person or entity other than directly to the Distributor.
In no event shall the amounts to be paid to the Distributor exceed the
rate of fees to be paid by the Fund to the Distributor set forth in
paragraph (a) of this Section 3.
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 Fund or 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
Trust shall provide at least quarterly a written reports to the Trust's
Board for its review, detailing services rendered in connection with the
distribution of the Shares, the amount of all payments made and the
purpose for which the payments were made. The reports shall be provided
quarterly and shall state whether all provisions of Section 3 of this Plan
have been complied with.
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 April 18, 1995 for the purpose of
voting on this Plan, and shall take effect after approval by Class C
shareholders of the Fund, at which time it shall replace the Fund's
Distribution and Service Plan and Agreement for the Shares dated
December 1, 1993. Unless terminated as hereinafter provided, it shall
continue in effect from year to year from the date first set forth above
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 C 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 is entitled
to payment from the Fund of all or a portion of the Service Fee and/or the
Asset-Based Sales Charge in respect of Shares sold prior to the effective
date of such termination.
8. Disclaimer of Shareholder and Trustee 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
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 Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Trust and the Fund.
OPPENHEIMER TAX-EXEMPT FUND
for the account of its
OPPENHEIMER INTERMEDIATE TAX-EXEMPT 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
OFMI/860.C
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 14 to
Registration Statement No. 33-08054 of Oppenheimer Tax-Exempt Fund of our
reports dated October 21, 1994 appearing in the Statements of Additional
Information, which are a part of such Registration Statement, and to the
reference 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
August 24, 1995
Oppenheimer Intermediate Tax-Exempt 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:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-TermReinvestment
Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
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
</TABLE>
Oppenheimer Intermediate Tax-Exempt Fund
Page 2
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-TermReinvestment
Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
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
</TABLE>
Oppenheimer Intermediate Tax Exempt Fund
Page 3
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-TermReinvestment
Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
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
</TABLE>
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 Fund
Page 4
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
Oppenheimer Intermediate Tax-Exempt Fund
Page 5
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
Oppenheimer Intermediate Tax-Exempt Fund
Page 6
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
Oppenheimer Intermediate Tax-Exempt Fund
Page 7
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
------------------ = 4.57%
$14.18
Oppenheimer Intermediate Tax-Exempt Fund
Page 8
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
Oppenheimer Insured Tax-Exempt 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:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-TermReinvestment
Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
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
</TABLE>
Oppenheimer Insured Tax-Exempt Fund
Page 2
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-TermReinvestment
Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
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
</TABLE>
Oppenheimer Insured Tax-Exempt Fund
Page 3
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-TermReinvestment
Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
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
</TABLE>
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 Fund
Page 4
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
Oppenheimer Insured Tax-Exempt Fund
Page 5
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 Fund
Page 6
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
Oppenheimer Insured Tax-Exempt Fund
Page 7
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
Oppenheimer Insured Tax-Exempt Fund
Page 8
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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799102
<NAME> OPPENHEIMER INTERMEDIATE TAX-EXEMPT BOND FUND
<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>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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