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. 15 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 17 / 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.
OppenheimerFunds, Inc.
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 February 1, 1996, 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, 1995 was filed on November 30, 1995.
<PAGE>
OPPENHEIMER TAX-EXEMPT FUND
FORM N-1A
Cross Reference Sheet
Oppenheimer Intermediate Tax-Exempt Fund
- ----------------------------------------
Part A of
Form N-1A
Item No. Prospectus Heading
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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 FUND
FORM N-1A
Cross Reference Sheet
Oppenheimer Insured Tax-Exempt Fund
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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
Intermediate Tax-Exempt Fund
Prospectus dated February 1, 1996
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 February 1, 1996 Statement of Additional Information. For a
free copy, call OppenheimerFunds Services, the Fund's Transfer Agent, at
1-800-525-7048, or write to the Transfer Agent at the address on the back
cover. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
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. The calculations are based on the Fund's expenses
during its last fiscal year ended September 30, 1995.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages __ through __, for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
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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) 4% in the first 1% if shares are
(as a % of the lower of year, declining redeemed within
the original purchase to 1% in the 12 months of
price or redemption fifth year and purchase(2)
proceeds) eliminated
thereafter(2)
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Redemption Fee None(3) None(3) None(3)
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Exchange Fee None None None
<FN>
_________________________
1. If you invest $1 million or more 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 - Buying Class B Shares" and "How to Buy Shares - Buying 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 ACH
wire transfer through AccountLink, or for which check writing privileges are used (see "How To Sell Shares").
</TABLE>
- 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, OppenheimerFunds,
Inc. (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 table 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 in future
years may be more or less than the numbers in the table, 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 than the numbers in the table, 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
September 11, 1995. Therefore, the Annual Fund Operating Expenses for
Class B shares are estimates based on expenses for the period from the
inception date until September 30, 1995.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
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<S> <C> <C> <C>
Management Fees 0.50% 0.50% 0.50%
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12b-1 Distribution 0.24% 1.00% 1.00%
Plan Fees
- --------------------------------------------------------------------------
Other Expenses 0.24% 0.38% 0.38%
- --------------------------------------------------------------------------
Total Fund Operating 0.98% 1.88% 1.88%
Expenses
</TABLE>
- 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:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years(1)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $45 $65 $87 $151
- --------------------------------------------------------------------------
Class B Shares $59 $79 $112 $175
- --------------------------------------------------------------------------
Class C Shares $29 $59 $102 $220
If you did not redeem your investment, it would incur the following expenses:
Class A Shares $45 $65 $87 $151
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Class B Shares $19 $59 $102 $175
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Class C Shares $19 $59 $102 $220
<FN>
________________________
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 6 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
pay the economic equivalent of an amount greater 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 - Buying Class B Shares" for more information.
</TABLE>
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 __.
- Who Manages the Fund? The Fund's investment advisor (the
"Manager") is OppenheimerFunds, Inc., which (including a subsidiary)
manages investment company portfolios having over $40 billion in assets
at December 31, 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 is primarily responsible for the selection of the Fund's
securities, is Caryn Halbrecht. The Fund's Board of Trustees, elected by
shareholders, oversees the investment advisor and the portfolio manager.
Please refer to "How the Fund is Managed," starting on page __ for more
information about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's investments in municipal bonds are subject to changes in their
value from a number of factors such as changes in general bond market
movements, the change in value of particular bonds because of an event
affecting the issuer, or changes in interest rates. These changes affect
the value of the Fund's investments and its price per share. In the
OppenheimerFunds spectrum, the Fund is generally more conservative than
high yield bond funds, but more aggressive than money market funds. While
the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased for the
portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objectives and your shares
may be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page __
for a more complete discussion.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page __ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund offers the
individual investor 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 __ 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 __. The Fund also offers exchange privileges to other Oppenheimer
funds, described in "How to Exchange Shares" on page __.
- How Has the Fund Performed? The Fund measures its performance by
quoting its total return and yield, which measure historical performance.
Those returns and yields can be compared to the returns and yields (over
similar periods) of other funds. Of course, other funds may have
different objectives, investments, and levels of risk. The Fund's
performance can also be compared to 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 the following pages presents selected financial information
about the Fund, including per share data, expense ratios and other data
based on the Fund's average net assets. This information has been audited
by Deloitte & Touche LLP, the Fund's independent auditors, whose report
on the Fund's financial statements for the fiscal year ended September 30,
1995, 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 publicly offered
during a portion of the period, commencing September 11, 1995.
<TABLE>
<CAPTION>
CLASS A
- ----------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 14.23 $ 15.34 $ 15.09 $ 14.40
- ----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .79 .72 .77 .86
Net realized and unrealized gain (loss)
on investments .42 (1.00) .70 .69
------- ------- ------- -------
Total income (loss) from investment
operations 1.21 (.28) 1.47 1.55
- ----------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.75) (.76) (.75) (.86)
Distributions from net realized gain
on investments -- -- (.47) --
Distributions in excess of net realized gain
on investments -- (.07) -- --
------- ------- ------- -------
Total dividends and distributions
to shareholders (.75) (.83) (1.22) (.86)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $ 14.69 $ 14.23 $ 15.34 $ 15.09
------- ------- ------- -------
------- ------- ------- -------
- ----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 8.78% (1.92)% 10.31% 11.10%
- ----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $80,535 $83,456 $70,136 $29,724
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $79,681 $79,076 $48,915 $25,153
- ----------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 5,483 5,865 4,571 1,970
- ----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.55% 5.05% 5.08% 5.87%
Expenses, before voluntary assumption
by the Manager .98% 1.00% 1.07% 1.25%
Expenses, net of voluntary assumption
by the Manager N/A N/A 1.05% 1.16%
- ----------------------------------------------------------------------------------------
Portfolio turnover rate(7) 55% 51% 21% 93%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to September
30, 1994.
2. For the period from August 29, 1995 (inception of offering) to September
30, 1995.
3. For the period from November 11, 1986 (commencement of operations) to
September 30, 1987.
4. On April 7, 1990, Oppenheimer Management Corporation became the investment
advisor to the Fund.
5. 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.
<TABLE>
<CAPTION>
Class B Class C
- ---------------------------------------------- --------- ------------------------
Period
Ended
Sept. 30, Year Ended September 30,
1991 1990(4) 1989 1988 1987(3) 1995(2) 1995 1994(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 13.51 $ 13.57 $ 13.33 $ 12.56 $ 14.00 $14.62 $14.18 $15.14
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .83 .90 .98 1.05 .90 .06 .69 .46
Net realized and unrealized gain (loss)
on investments .91 (.08) .24 .77 (1.44) .07 .43 (.83)
------- ------- ------- ------- ------- ------ ------ ------
Total income (loss) from investment
operations 1.74 .82 1.22 1.82 (.54) .13 1.12 (.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders
Dividends from net investment income (.85) (.88) (.98) (1.05) (.90) (.06) (.63) (.52)
Distributions from net realized gain
on investments -- -- -- -- -- -- -- --
Distributions in excess of net realized gain
on investments -- -- -- -- -- -- -- (.07)
------- ------- ------- ------- ------- ------ ------ ------
Total dividends and distributions
to shareholders (.85) (.88) (.98) (1.05) (.90) (.06) (.63) (.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.40 $ 13.51 $ 13.57 $ 13.33 $ 12.56 $14.69 $14.67 $14.18
------- ------- ------- ------- ------- ------ ------ ------
------- ------- ------- ------- ------- ------ ------ ------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 13.20% 6.14% 9.54% 14.96% (4.11)% 0.83%
8.13% (2.54)%
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $23,675 $20,287 $19,350 $13,480 $10,228 $ 119 $7,618 $8,511
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $22,071 $20,576 $17,188 $12,220 $11,152 $ 23 $7,437 $4,686
- -----------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 1,644 1,502 1,426 1,011 814 8 519 600
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.93% 6.56% 7.09% 8.01% 7.39%(6) 3.88%(6) 4.64%
3.77%(6)
Expenses, before voluntary assumption
by the Manager 1.35% 1.41% 1.56% 1.75% 1.95%(6) 1.55%(6) 1.88%
2.24%(6)
Expenses, net of voluntary assumption
by the Manager 1.16% .66% .23% N/A .40%(6) N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 75% 102% 180% 148% 98% 55% 55% 51%
</TABLE>
6. Annualized.
7. 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 period ended September 30, 1995 were $47,459,869 and
$52,812,094, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to provide a high level
of current income exempt from Federal income tax.
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 invested 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 generally will 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 seek to accomplish the Fund's
investment objective. The "Financial Highlights" above, show the Fund's
portfolio turnover rate during 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, for other than bona fide hedging purposes, 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 20% 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 segregate 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.
- Puts and Stand-By Commitments. The Fund may acquire "stand-by
commitments" or "puts" with respect to municipal obligations held in its
portfolio. Under a stand-by commitment or put option, the Fund would have
the right to sell specified securities at a specific price on demand to
the issuing broker-dealer or bank. The Fund will acquire stand-by
commitments or puts solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
- 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:
- 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;
- 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;
- 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
- 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 and in the Statement of Additional Information apply only
at the time the Fund purchases a security and the Fund need not dispose
of a security merely because the Fund's assets have 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 lawfor 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. Shares are freely transferrable. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally. Shares of a particular class vote as a class on matters
that affect that class.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Trustees,
under an Investment Advisory Agreement which states the Manager's
responsibilities. The Agreement sets forth the fees paid by the Fund to
the Manager, and describes the expenses that the Fund is responsible to
pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets in excess of $40 billion
as of December 31, 1995, and held in more than 2.8 million shareholder
accounts. The Manager is owned by Oppenheimer Acquisition Corp., a
holding company that is owned in part by senior officers of the Manager
and controlled by Massachusetts Mutual Life Insurance Company.
- Portfolio Manager. The Portfolio Manager of the Fund is Caryn
Halbrecht, a Vice President of the Manager. She has been the person
principally responsible for the day-to-day management of the Fund's
portfolio since October, 1993. Ms. Halbrecht was previously a Vice
President of Fixed Income Portfolio Management at Bankers Trust.
- 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 0.50% of average annual
net assets for its Class A, Class B 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. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. 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 and other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts
as the Distributor. The Distributor also distributes the shares of the
other "Oppenheimer funds" and is sub-distributor for funds managed by a
subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder
servicing agent for the Fund on an "at-cost" basis. It also acts as the
shareholder servicing agent for the other Oppenheimer funds. Shareholders
should direct inquiries about their accounts 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 indices and 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 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 over time, 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 that applies to the period for
which total return is shown. 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.
- 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 and Class C
shares do not reflect the deduction of the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1995,
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 ended September 30, 1995, the Fund's performance was affected by the
Federal Reserve's cut in interest rates. This caused a broad based rally
in the bond markets. When interest rates fall, bonds appreciate in value.
The Manager emphasized student loan bonds and BBB bonds.
- Comparing the Fund's Performance to the Market. The graph below
shows the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held until September 30, 1995; in the case of Class
A shares, from the commencement of operation on November 11, 1986, in the
case of Class B shares, from inception of the class on September 11, 1995,
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, the maximum 5%
contingent deferred sales charge for Class B 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 9/30/951
1 Year 5 Years Life
- ----------------------------------------------------------------------
4.98% 7.40% 7.04%
Class B 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 B Shares of the Fund at 9/30/952
1 Year 5 Years Life
- ----------------------------------------------------------------------
% % 3.18%
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 9/30/953
1 Year Life
- ------------------------------------------------------------------
7.13% 2.72%
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 B shares of the Fund were first publicly offered 9/11/95.
3Class 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. 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 Oppenheimer funds, you will not pay an initial sales charge, but
if you sell any of those shares within 18 months of buying them, you may
pay a contingent deferred sales charge. The amount of that sales charge
will vary depending on the amount you invested. Sales charges are
described in "Buying Class A Shares" below.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 6 years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you own your shares. As described below, the Fund
automatically converts Class B shares into Class A shares after 6 years.
Long-term Class B shareholders could pay the economic equivalent of more
than the maximum front-end sales charge allowed under applicable
regulations, because of the effect of the asset-based sales charge and
contingent deferred sales charge. The automatic conversion of Class B
shares to Class A Shares is designed to minimize the likelihood that this
will occur. Sales charges are described in "Buying Class B Shares" below.
- 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%. Sales charges are described in "Buying Class C Shares" below.
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 to consider are how much
you plan to invest and how long you plan to hold your investment. 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 of shares, considering 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 of shares you invest in.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. The discussion below of the factors to consider in purchasing
a particular class of shares assume that you will purchase only one class
of shares, and not a combination of shares 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
Class 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. This is 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, rather than Class A
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 $100,000 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 Class B).
If investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or more of Class B shares or
purchase orders of $1 million or more of Class C shares, respectively from
a single investor.
- 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.
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.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or Class C
shareholders, such as checkwriting, or other features (such as Automatic
Withdrawal Plans) may not be advisable (because of the effect of the
contingent deferred sales charge) in non-retirement accounts 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 to buy.
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.
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. 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 Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. 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
"OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver,
Colorado 80217. If you don't list a dealer on the application, the
Distributor will act as your agent in buying the shares. However, it is
recommended that you discuss your investment first with a financial
advisor to be sure it is appropriate for you.
- 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. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to have the Transfer Agent 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. You should 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 Oppenheimer funds) 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, Colorado. 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.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from,
sales charges or the special sales charge rates that apply to purchases
of shares of the Fund (including purchases by exchange) by a person who
was a shareholder of one of the Former Quest for Value Funds (as defined
in that Appendix).
Buying 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, purchases are not subject to an
initial sales charge, and the offering price will 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:
<TABLE>
<CAPTION>
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
- -----------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
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 Oppenheimer
funds 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
either (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class A
contingent deferred sales charge. 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 count all 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 and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also include Class A and Class B shares of other Oppenheimer funds 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 your investment in one of the
Oppenheimer funds. 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 Oppenheimer funds 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 shares or Class A and Class B shares of the Fund and other Oppenheimer
funds 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);
- 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 (those clients may be charged a transaction fee
by their dealer, broker or adviser for the purchase or sale of Fund
shares).
- directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those
persons;
- accounts for which Oppenheimer Capital is the investment adviser
(the Distributor must be advised of this arrangement) and persons who are
directors or trustees of the company or trust which is the beneficial
owner of such accounts; or
- any unit investment trust that has entered into an appropriate
agreement with the Distributor.
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 Oppenheimer funds (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 past 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; or
- purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series;
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived
if shares that would otherwise be subject to the contingent deferred sales
charge are redeemed in the following cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans ("Retirement Plans"),
- to return excess contributions made to Retirement Plans,
- to make Automatic Withdrawal Plan payments that are limited to no
more than 12% of the original account value annually,
- 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
- 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 average
net assets. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 5 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 5 years, and (3) shares held the longest during the
5-year period. The contingent deferred sales charge is not imposed in the
circumstances described in "Waivers of Class B and Class C Sales Charge,"
below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
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)
- -----------------------------------------------------------------------
<S> <C>
0-1 4.0%
- -----------------------------------------------------------------------
1-2 3.0%
- -----------------------------------------------------------------------
2-3 2.0%
- -----------------------------------------------------------------------
3-4 2.0%
- -----------------------------------------------------------------------
4-5 1.0%
- -----------------------------------------------------------------------
5 and following None
</TABLE>
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.
- 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 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,
including compensating personnel of the Distributor who support
distributions of 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.
- Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to Class B
and Class C shares redeemed in certain circumstances as described below.
The reasons for this policy are in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares
in the following cases:
- 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 last surviving shareholder (the death or
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 591/2, and distributions from
403(b)(7) custodial plans or pension or profit sharing plans before the
participant is age 591/2 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).
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C
shares in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- shares issued in plans of reorganization to which the Fund is a
party; and
- 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.
Buying 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 and
Class C Sales Charges."
- 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 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 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. At September 30, 1995, the end of the plan year, the
Distributor had incurred unreimbursed expenses under the plan of $74,888
(equal to .98% of the Fund's net assets represented by Class C shares on
that date.
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. These include 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 should 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 by sending signature-guaranteed
instructions to the Transfer Agent. AccountLink privileges will apply to
each shareholder listed in the registration on your account as well as to
your dealer representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank
account information must be made by signature-guaranteed instructions to
the Transfer Agent signed by all shareholders who own the account.
- 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 Oppenheimer funds 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
Oppenheimer funds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $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 Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each other Oppenheimer funds 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
Oppenheimer funds 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 Class B shares on which you paid a contingent deferred
sales charge when you redeemed them. It does not apply to Class C shares.
You must be sure to ask the Distributor for this privilege when you send
your payment. 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 by selling
(redeeming) some or all of your shares on any regular business day. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. 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 redemption check is not payable to all shareholders listed on
the account statement
- The redemption check is not sent to the address of record on your
account 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 on behalf of a corporation, partnership or other business or
as a fiduciary, 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
- The signatures of all registered owners exactly as the account is
registered, 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:
OppenheimerFunds Services
P.O. Box 5270,
Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held 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 statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
- Telephone Redemptions Through AccountLink or by Wire. There are
no dollar limits on telephone redemption proceeds sent to a bank account
designated when you establish AccountLink. Normally the ACH transfer to
your bank is initiated on the business day after the redemption. You do
not receive dividends on the proceeds of the shares you redeemed while
they are waiting to be transferred.
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 Oppenheimer
funds 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 Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of
shares which are considered "Class A" shares for this purpose. 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 Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. That list can change
from time to time.
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 up
to seven days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the sale of portfolio 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 day the 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 and 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 the Transfer Agent 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 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.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from taxable dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a 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, Class B 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 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, 1995, the Fund
attempted to pay dividends on its Class A shares at a targeted level above
3-month Treasury bill rates, to the extent that was consistent with the
amount of net investment income and other distributable income available
from the Fund's portfolio investments. However, the targeted level can
change and the amount of each dividend can change from time to time (or
there might not be a dividend at all on any class) depending on market
conditions, the Fund's expenses, and the composition of the Fund's
portfolio. Attempting to pay dividends at a targeted level required the
Manager to monitor the Fund's income stream from its investments compared
to Treasury bill rates and at times to select higher yielding securities
(appropriate to the Fund's investment objectives and restrictions) to try
to earn income at the targeted level. This practice did not affect the
net asset values of any class of shares. There is no targeted dividend
level for Class B shares. There is no fixed dividend rate and there can
be no assurance as to payment of any dividends.
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 Oppenheimer Funds Account.
You can reinvest all distributions in another Oppenheimer funds account
you have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. It does not matter how long you held
your shares. 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. Taxable dividends and 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 taxable 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 A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for Class
A, Class B and Class C shares of the Fund described elsewhere in this
Prospectus are modified as described below for those shareholders of (i)
Quest for Value Fund, Inc., Quest for Value Growth and Income Fund, Quest
for Value Opportunity Fund, Quest for Value Small Capitalization Fund and
Quest for Value Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment adviser to those funds, and
(ii) Quest for Value U.S. Government Income Fund, Quest for Value
Investment Quality Income Fund, Quest for Global Income Fund, Quest for
Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund
and Quest for Value California Tax-Exempt Fund when those funds merged
into various Oppenheimer funds on November 24, 1995. The funds listed
above are referred to in this Prospectus as the "Former Quest for Value
Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by
such shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds or (ii)
received by such shareholder pursuant to the merger of any of the Former
Quest for Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
- - Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
- - Purchases by Groups and Associations. The following table sets forth
the initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of
securities if that Association purchased shares of any of the Former Quest
for Value Funds or received a proposal to purchase such shares from OCC
Distributors prior to November 24, 1995.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
_____________________________________________________________________
9 or fewer 2.50% 2.56% 2.00%
_____________________________________________________________________
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Associations having 50 or more eligible employees
or members, there is no initial sales charge on purchases of Class A
shares, but those shares are subject to the Class A contingent deferred
sales charge described on page 26 of this Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of members of an
Association or the sales charge rate that applies under the Rights of
Accumulation described above in the Prospectus. Individuals who qualify
under this arrangement for reduced sales charge rates as members of
Associations also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the Fund's
Distributor.
- - Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of Former
Quest for Value Funds into those Oppenheimer funds, and which shares were
subject to a Class A contingent deferred sales charge prior to November
24, 1995 will be subject to a contingent deferred sales charge at the
following rates: if they are redeemed within 18 months of the end of the
calendar month in which they were purchased, at a rate equal to 1.0% if
the redemption occurs within 12 months of their initial purchase and at
a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six
months. Class A shares of any of the Former Quest for Value Funds
purchased without an initial sales charge on or before November 22, 1995
will continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
- - Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
- Shareholders of the Fund who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired shares of any of the Former
Quest for Value Funds by merger of a portfolio of the AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the Unified Funds.
- - Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to redemptions
of Class A shares of the Fund purchased by the following investors who
were shareholders of any Former Quest for Value Fund:
- Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under the
Employee Retirement Income Security Act of 1974 and regulations adopted
under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
- - Waivers for Redemptions of Shares Purchased Prior to March 6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest for Value Fund or into which
such fund merged, if those shares were purchased prior to March 6, 1995
in connection with: (i) withdrawals under an automatic withdrawal plan
holding only either Class B or C shares if the annual withdrawal does not
exceed 10% of the initial value of the account, and (ii) liquidation of
a shareholder's account if the aggregate net asset value of shares held
in the account is less than the required minimum value of such accounts.
- - Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which
such fund merged, if those shares were purchased on or after March 6,
1995, but prior to November 24, 1995: (1) redemptions following the death
or disability of the shareholder(s) (as evidenced by a determination of
total disability by the U.S. Social Security Administration);
(2) withdrawals under an automatic withdrawal plan (but only for Class B
or C shares) where the annual withdrawals do not exceed 10% of the initial
value of the account; and (3) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less than
the required minimum account value. A shareholder's account will be
credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, B or C shares of the Fund described in this
section if within 90 days after that redemption, the proceeds are invested
in the same Class of shares in this Fund or another Oppenheimer fund.
<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 9/30/95, in the case of the Fund's Class B shares will cover the
period from inception of the class (9/11/95) through 9/30/95 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, 1995. 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."
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer Intermediate Lehman Brothers
(Period) Ended Tax-Exempt Fund A Municipal Bond Index
<S> <C> <C>
11/11/86 $ 9,650 $10,000
9/30/87 $ 9,253 $ 9,690
9/30/88 $10,637 $10,948
9/30/89 $11,653 $11,898
9/30/90 $12,367 $12,707
9/30/91 $14,000 $14,383
9/30/92 $15,553 $15,886
9/30/93 $17,112 $16,698
9/30/94 $16,779 $16,291
9/30/95 $18,311 $18,114
Fiscal Oppenheimer Intermediate Lehman Brothers
Period Ended Tax-Exempt Fund B Municipal Bond Index
9/30/95 $9,612 $10,063
Fiscal Oppenheimer Intermediate Lehman Brothers
Period Ended Tax-Exempt Fund C Municipal Bond Index
12/1/93 $10,000 $10,000
9/30/94 $ 9,722 $ 9,824
9/30/95 $10,541 $10,923
</TABLE>
<PAGE>
Oppenheimer Intermediate Tax-Exempt Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds 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
555 Seventeenth Street
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, OppenheimerFunds, Inc.,
OppenheimerFunds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such 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 February 1, 1996
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 February 1, 1996. It should be read together with the
Fund's Prospectus, which may be obtained by writing to the Fund's Transfer
Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217
or by calling the Transfer Agent at the toll-free number shown above.
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 does not change the tax treatment of bonds issued 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. Furthermore, 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 state or municipal 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 issuers 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 Income Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Strategic Funds Trust, Oppenheimer Strategic Income & Growth 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 Oppenheimer funds") except
for Mr. Fossel, who is a Trustee, Director or Managing General Partner of
all the Denver-based Oppenheimer funds, except Oppenheimer Bond Fund and
Oppenheimer Strategic Income Fund. Ms. Macaskill is President and Mr.
Swain is Chairman of the Denver-based Oppenheimer funds.
As of January 5, 1996, 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, Ms. Macaskill
and Mr. 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, Trustee; Age 53.
Two World Trade Center, New York, New York 10048-0203
Chairman 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 74.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, Trustee; Age 47.
President, Chief Executive Officer and a Director of the Manager; Chairman
and a Director of SSI, Vice President and a Director of OAC, of
HarbourView and of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; formerly an Executive Vice President
of the Manager.
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 Oppenheimer funds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; President and a
Director of Centennial; 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 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.
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 Oppenheimer funds;
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 Oppenheimer
funds.
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 Oppenheimer funds; previously a Fund Controller of the Manager,
prior to which he was an
Accountant for Yale & Seffinger, P.C., an accounting firm 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 Oppenheimer funds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Fossel and Swain, who are both officers and
Trustees) receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Messrs. Fossel and Swain) received the total amounts shown
below from (i) the Fund, during its fiscal year ended September 30, 1995,
and (ii) from all of the Denver-based Oppenheimer funds (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 Oppenheimer funds1
<S> <C> <C> <C>
Robert G. Avis Trustee $128 $53,000.00
William A. Baker Audit and Review $178 $73,255.00
Committee Chairman
and Trustee
Charles Conrad, Jr. Audit and Review $156 $64,309.00
Committee Member
and Trustee
Raymond J. Kalinowski Trustee $158 $65,000.00
C. Howard Kast Trustee $158 $65,000.00
Robert M. Kirchner Audit and Review $166 $68,292.00
Committee Member
and Trustee
Ned M. Steel Trustee $128 $53,000.00
______________
1 For the 1995 calendar year.
</TABLE>
- Major Shareholders. As of January 5, 1996, (i) Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive EFL3, Jacksonville, Florida,
32246, owned 12,257.860 Class B shares (representing 23.38% of the Fund's
outstanding Class B shares, (ii) Dana E. Drusch, 10574 Borman Avenue,
Inver Grove, MN 55077-5343, owned 6,797.470 (representing 12.96% of the
Fund's outstanding Class B shares), (iii) Helen J. Roeland, 1 Regency
Drive, Texarkana, AR 75502-3031 owned 4,358.915 Class B shares
(representing 8.31% of the Fund's Class B shares), (iv) Roberta Blanchard
and Nancy Campbell, 3 Kent Street, Sandford, ME 04073 owned 3,970.511
Class B shares (representing 7.57% of the Funds outstanding Class B
shares), (v) Peggy Passaglia, 10388 Highland Court, Emore, VA 23350-4250
owned 3,520.201 (representing 6.71% of the Fund's outstanding Class B
shares), (vi) Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
EFL3, Jacksonville, Florida, 32246, owned 35,751.000 Class C shares
(representing 6.92% of the Fund's outstanding Class C shares) and (vii)
AP MC Evoy Jr. Separate Property PO Box 810219, Dallas, TX 75381-0219,
owned 27, 178.232 Class C shares (representing 5.26% of the Fund's Class
C shares). 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. During the Fund's fiscal years ended September 30,
1993, 1994 and 1995, the management fees paid by the Fund to the Manager
were $243,742, $413,576 and $435,665, respectively.
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. OppenheimerFunds 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, Class
B 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 fiscal years ended September 30, 1993, 1994 and 1995, the
aggregate sales charges on the Fund's Class A shares were $642,694,
$369,458 and $160,045, respectively, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $221,619, $140,136 and
$62,159 in these respective years. During the Fund's fiscal year ended
September 30, 1995, the contingent deferred sales charges collected on the
Fund's Class C shares totalled $10,384, 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. OppenheimerFunds Services, the Fund's Transfer
Agent, is responsible for maintaining the Fund's shareholder registry and
shareholder accounting records, and for shareholder servicing and
administrative functions.
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 the Manager's 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 other than affiliates that provide brokerage and/or research
services for the Fund and/or the other accounts over which the Manager and
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 the
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 B shares were
first publicly offered on September 11, 1995. Class C shares were first
publicly offered on December 1, 1993.
- Standardized Yields.
- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
Standardized Yield = 2 [(a-b
--- + 1 )6 - 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, 1995, the standardized yields for
the Fund's Class A, Class B and Class C shares were 4.04% and 3.26% and
3.30%, 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, Class B and Class C shares for the 30-day period
ended September 30, 1995 were 6.69%, 5.40% and 5.46%, 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, Class B 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)
+ 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 and 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, 1995 were 5.08% and 5.26% when
calculated at maximum offering price and net asset value, respectively.
The dividend yield on Class B and Class C shares for the 30-day period
ended September 30, 1995 were 4.46% and 4.40%, respectively when
calculated at net asset value.
- Total Return Information.
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
ERV 1/n
--- - 1 = Average Annual Total Return
P
The "average annual total return" on an investment in Class A shares
of the Fund for the one and five year periods ended September 30, 1995
were 4.98% and 7.40%, respectively, and for the period from the inception
of the Fund on November 11, 1986 through September 30, 1995 was 7.04%.
The "average annual total return" on an investment in Class B shares for
the period from inception on September 11, 1995 through September 30,1 995
was 31.25%. The "average annual total return" on an investment in Class
C shares for the year ended September 30, 1995 was 7.13%, and for the
period from inception on December 1, 1993 through September 30, 1995 was
2.92%.
- 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 B and 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 one year and five year periods ended September 30, 1995
were 4.98% and 42.87%, respectively and for the period from November 11,
1986 (inception of the Fund) through September 30, 1995, was 83.11%. The
cumulative total return on Class B shares for the period September 11,
1995 (the inception of the Class) through September 30, 1995 was 3.18%.
The cumulative total return on Class C shares for the one year period
ended September 30, 1995 was 7.13% and for the period from December 1,
1993 (the inception of the class) through September 30, 1995 was 5.41%.
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, Class B 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 and five year periods
ended September 30, 1995 was 8.78 and 48.05% respectively and for the
period November 11, 1986 (inception of the Fund) through September 30,
1995 was 89.74%. The "average annual total return" on the Fund's Class
B shares from September 11, 1995 (inception of the Class through September
30, 1995 was 10.01%. The cumulative "total returns at net asst value" on
the Fund's Class B shares for the period September 11, 1995 (inception of
the Class) through September 30, 1995 was 0.83%. The total return at net
asset value for the Fund's Class C shares year ended September 30, 1995
was 8.13%.
- 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 for Class B shares 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 to
obtain the approval of Class B as well as Class A shareholders for a
proposed amendment to the Class A Plan that would materially increase
payments under the 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 payments were 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, 1995, payments under the Class A Plan totalled
$187,036, of which $167,772 was paid by the Distributor to Recipients,
including $19,264 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,
1995, payments made under the Class C Plan totalled $74,513, of which
$54,543 was retained by the Distributor as reimbursement for Class C
Distribution-related expenses and sales commissions. Payments made under
the Class B Plan for the period from 9/11/95 through 9/30/95 totalled $15.
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.
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 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 Class B shares does not constitute a
taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class
B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event for
the holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to 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 Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution 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
"Exchange") on each day that the Exchange is open by dividing the value
of the Fund's net assets attributable to that class by the number of Fund
shares of that class outstanding. The Exchange normally closes at 4:00
P.M., New York time, but may close earlier on some days (for example, in
case of weather emergencies or on days falling before a holiday). The
Exchange's most recent annual holiday schedule (which is subject to
change) states that it will close 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 may be significantly affected on such days when shareholders may
not 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. 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 some days. If Federal Funds are received
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 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 Oppenheimer Funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer 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 Income 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
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Rochester Fund Municipals
Rochester Fund Series - The Bond Fund For Growth
Rochester Portfolio Series - Limited-Term New York Municipal 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 Oppenheimer funds 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 Oppenheimer
funds that were acquired subject to a Class A initial or contingent
deferred sales charge or (ii) Class B shares of one of the other
Oppenheimer funds 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
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, 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 checks submitted to purchase shares are
returned unpaid) causes a loss to be incurred when the net asset value of
the Fund's shares on the date of cancellation is less than on the purchase
date. That loss is equal to the difference in net asset value per share
multiplied by the number of shares in the purchase order. The investor
is responsible for such 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 by seeking 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 Oppenheimer
funds 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 Oppenheimer funds within 90 days of payment of the sales charge,
the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the
loss or increase the gain recognized from the redemption. However, in
that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may
amend, suspend or cease offering this reinvestment privilege at any time
as to shares redeemed after the date of such amendment, suspension or
cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of 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 an order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes (normally that
is 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 Oppenheimer funds automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
- 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 ACH transfer 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
Oppenheimer funds having more than one class of shares may be exchanged
only for shares of the same class of other Oppenheimer funds. Shares of
the Oppenheimer funds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All Oppenheimer funds offer
Class A, B and C shares except Oppenheimer Money Market Fund, Inc.,
Centennial Money Market Trust, Centennial Tax Exempt Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial
California Tax Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares and Oppenheimer
Main Street California Tax-Exempt Fund which only offers Class A and Class
B shares, (Class B and Class C shares of Oppenheimer Cash Reserves are
generally available only by exchange from the same class of shares of
other Oppenheimer funds or through OppenheimerFunds sponsored 401(k)
plans). A list showing which funds offer which class can be obtained by
calling the Distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
Oppenheimer funds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of Oppenheimer
funds 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 Oppenheimer funds
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 Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for shares of any of
the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of shares
of any class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other Oppenheimer funds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares. The
Class B contingent deferred sales charge 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 Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, 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 Oppenheimer funds 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
FUND:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Intermediate
Tax-Exempt Fund as of September 30, 1995, the related statement of operations
for the year then ended, the statements of changes in net assets for the
years ended September 30, 1995 and 1994, and the financial highlights for the
period October 1, 1989 to September 30, 1995. 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 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, 1995 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 Intermediate Tax-Exempt Fund at September 30, 1995, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 20, 1995
<PAGE>
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--98.5%
- -------------------------------------------------------------------------------------------------------------------------
ALASKA--1.3% North Slope Boro, Alaska General Obligation Bonds,
Series B, CGIC Insured, 7.50%, 6/30/01 Aaa/AAA $1,000,000 $1,146,654
- -------------------------------------------------------------------------------------------------------------------------
CALIFORNIA--7.5% California Pollution Control Financing Authority
Revenue Bonds, Southern California Edison,
Series A, MBIA--IBC Insured, 6.90%, 9/1/06 Aaa/AAA 1,000,000 1,072,597
-----------------------------------------------------------------------------------------------
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 1,080,120
-----------------------------------------------------------------------------------------------
Corona, California Certificates of Participation,
Prerefunded, Series B, 10%, 11/1/20 Aaa/AAA 1,000,000 1,341,544
-----------------------------------------------------------------------------------------------
Foothill/Eastern Transportation Corridor Agency
California Toll Road Cv. Capital Appreciation
Revenue Bonds, Sr. Lien, Series A, 0%/6.95%,
1/1/07(1) Baa/BBB-/BBB 2,000,000 1,077,652
-----------------------------------------------------------------------------------------------
Sacramento, California Cogeneration Authority
Revenue Bonds, Procter & Gamble Project, 6.375%,
7/1/10 NR/BBB- 1,100,000 1,107,099
-----------------------------------------------------------------------------------------------
San Bernardino County, California Certificates of
Participation, Medical Center Financing Project, 6%,
8/1/09 Baa1/A- 1,000,000 989,726
---------
6,668,738
-----------------------------------------------------------------------------------------------
COLORADO--1.8% Denver, Colorado City & County Airport Revenue
Bonds, Series A, 7%, 11/15/99 Baa/BB 1,000,000 1,062,584
-----------------------------------------------------------------------------------------------
Meridian Metropolitan District, Colorado General
Obligation Refunding Bonds, 7.50%, 12/1/11 A3/NR 500,000 553,567
---------
1,616,151
-----------------------------------------------------------------------------------------------
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 2,260,124
-----------------------------------------------------------------------------------------------
FLORIDA--2.9% Florida State Board of Education Administration
Capital Outlay General Obligation Bonds,
Prerefunded, Series B, 7.625%, 6/1/09 Aaa/AAA 1,500,000 1,615,197
-----------------------------------------------------------------------------------------------
Polk County, Florida Industrial Development
Authority Revenue Bonds, Purex Corp. Project, 6.75%,
6/1/03 NR/NR 960,000 960,391
---------
2,575,588
-----------------------------------------------------------------------------------------------
GEORGIA--2.6% Georgia State Residential Finance Authority Home
Ownership Mtg. Revenue Bonds, Series A, Subseries
A--1, FHA Insured, 7.50%, 6/1/17 Aa/AA+ 245,000 257,307
-----------------------------------------------------------------------------------------------
Savannah, Georgia Hospital Authority Revenue Bonds,
Refunding & Improvement-Chandler Hospital, 7%,
1/1/11 Baa/BBB+ 2,000,000 2,024,116
---------
2,281,423
-----------------------------------------------------------------------------------------------
ILLINOIS--5.3% Chicago, Illinois General Obligation Refunding
Bonds, Prerefunded, Series B, 9.25%, 1/1/13 A/A 500,000 552,535
-----------------------------------------------------------------------------------------------
Du Page County, Illinois First Preservation District
General Obligation Bonds, Prerefunded, 7.70%,
11/1/00 NR/AAA 1,000,000 1,089,900
-----------------------------------------------------------------------------------------------
Du Page Water Commission of Illinois Water Revenue
Bonds, Prerefunded, 6.875%, 5/1/14 NR/AAA 1,000,000 1,061,052
</TABLE>
5 Oppenheimer Intermediate Tax-Exempt Fund
<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>
ILLINOIS (CONTINUED) 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 $ 272,323
-----------------------------------------------------------------------------------------------
Southwestern Illinois Development Authority Hospital
Revenue Bonds, St. Elizabeth Medical Center, 8%, 6/1/10
NR/A- 500,000 535,273
-----------------------------------------------------------------------------------------------
Waukegan, Illinois General Obligation Bonds,
MBIA Insured, 7.50%, 12/30/03 Aaa/AAA 1,000,000 1,152,381
---------
4,663,464
-----------------------------------------------------------------------------------------------
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 1,203,747
-----------------------------------------------------------------------------------------------
Indiana University Revenue Bonds, Hospital
Facilities Project, 7%, 1/1/09 A1/A+ 215,000 225,330
---------
1,429,077
-----------------------------------------------------------------------------------------------
LOUISIANA--1.3% Louisiana State General Obligation Bonds, Series A,
AMBAC Insured, 8%, 5/1/99 Aaa/AAA/AAA 1,000,000 1,118,959
-----------------------------------------------------------------------------------------------
MAINE--1.5% Maine Educational Loan Marketing Corp. Student
Loan Revenue Refunding Bonds, Series A, 6.05%, 11/1/04 Aaa/NR 750,000 783,514
-----------------------------------------------------------------------------------------------
Maine State Housing Authority Revenue Bonds,
Mtg. Purchase Project, Series A, 7.50%, 11/15/22 A1/AA 500,000 527,799
---------
1,311,313
-----------------------------------------------------------------------------------------------
MARYLAND--1.4% Howard County, Maryland Certificates of
Participation, Series A, 8.05%, 2/15/21 NR/AA+ 350,000 447,792
-----------------------------------------------------------------------------------------------
Maryland Water Quality Financing Administration
Revenue Bonds, Revolving Loan Fund, Series A,
Zero Coupon, 9/1/07 Aa/AA/AA- 1,500,000 800,946
---------
1,248,738
-----------------------------------------------------------------------------------------------
MASSACHUSETTS--1.4% Massachusetts State Dedicated Income Tax Bonds,
Series A, 7.875%, 6/1/97 A1/A+/A+ 665,000 706,505
-----------------------------------------------------------------------------------------------
Massachusetts State General Obligation Bonds,
FGIC Insured, 7.875%, 6/1/97 Aaa/AAA/AAA 500,000 532,713
---------
1,239,218
------------------------------------------------------------------------------------------------
MICHIGAN--3.6% Detroit, Michigan General Obligation Refunding Bonds,
Series B, 7%, 4/1/04 Ba1/BBB 2,000,000 2,141,336
-----------------------------------------------------------------------------------------------
Detroit, Michigan Self-Insurance Bonds, Series A,
5.70%, 5/1/02 NR/BBB- 1,000,000 995,068
---------
3,136,404
-----------------------------------------------------------------------------------------------
NEVADA--2.6% Clark County, Nevada School District General
Obligation Bonds, Series A, MBIA Insured, 9.75%,
6/1/01 Aaa/AAA 1,800,000 2,263,115
-----------------------------------------------------------------------------------------------
NEW JERSEY--1.8% Ocean County, New Jersey General Obligation
Bonds, 7.40%, 10/15/00 Aa/AA-/AA 1,400,000 1,583,386
-----------------------------------------------------------------------------------------------
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 500,000 551,177
</TABLE>
6 Oppenheimer Intermediate Tax-Exempt Fund
<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>
NEW YORK--16.6% City of New York General Obligation Bonds, Series B,
6.20%, 8/15/06 Baa1/BBB+/A- $3,000,000 $3,047,178
-----------------------------------------------------------------------------------------------
City of New York General Obligation Bonds,
Series F, 8.40%, 11/15/07 Aaa/BBB+/A- 4,500,000 5,396,008
-----------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Special Facility Revenue Bonds, Terminal One
Group Assn. Project, 6%, 1/1/08 A/A/A- 2,000,000 2,033,474
-----------------------------------------------------------------------------------------------
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 2,033,308
-----------------------------------------------------------------------------------------------
New York State General Obligation Refunding Bonds,
7.80%, 11/15/99 A/A- 1,000,000 1,131,014
-----------------------------------------------------------------------------------------------
New York State Urban Development Corp.
Revenue Refunding Bonds, Correctional
Facilities Project, 5.25%, 1/1/02 Baa1/BBB/A 1,035,000 1,037,099
---------
14,678,081
-----------------------------------------------------------------------------------------------
OKLAHOMA--1.4% Oklahoma County, Oklahoma Home Finance
Authority Revenue Bonds, GNMA Collateral Mtg.
Program, 7.65%, 1/1/23 NR/AA- 125,000 133,082
-----------------------------------------------------------------------------------------------
Oklahoma State Industrial Authority Revenue Bonds,
Health Systems-Baptist Medical Center, Series C,
AMBAC Insured, 7%, 8/15/05 Aaa/AAA/AAA 955,000 1,095,161
---------
1,228,243
-----------------------------------------------------------------------------------------------
PENNSYLVANIA--10.2% Pennsylvania State Industrial Development Authority
Revenue Bonds, Economic Development Project,
AMBAC Insured, 6%, 1/1/99 Aaa/AAA/AAA 2,000,000 2,094,064
-----------------------------------------------------------------------------------------------
Pennsylvania State Industrial Development Authority
Revenue Bonds, Economic Development Project,
Series A, 6.80%, 7/1/01 NR/A-/AAA 3,000,000 3,359,085
-----------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Airport Revenue Bonds,
Philadelphia Airport System, Series A, AMBAC Insured,
5.75%, 6/15/08 Aaa/AAA/AAA 1,000,000 1,019,550
-----------------------------------------------------------------------------------------------
Schuylkill County, Pennsylvania Industrial
Development Authority Resource Recovery Revenue
Refunding Bonds, Schuylkill Energy Resources, Inc.,
6.50%, 1/1/10 NR/NR 2,500,000 2,511,218
---------
8,983,917
-----------------------------------------------------------------------------------------------
SOUTH CAROLINA--4.4% Richland County, South Carolina Hospital Facilities
Revenue Bonds, Community Provider Pooled Loan
Program, CGIC Insured, Series A, 7.125%, 7/1/17 Aaa/AAA 250,000 272,861
-----------------------------------------------------------------------------------------------
South Carolina State Education Assistance Authority
Revenue Bonds, Insured Student Loan, 6.30%, 9/1/01 NR/AA 1,400,000 1,473,924
-----------------------------------------------------------------------------------------------
South Carolina State Public Service Authority Revenue
Refunding Bonds, Prerefunded, 8%, 7/1/04 Aaa/AA-/A+ 2,000,000 2,119,490
---------
3,866,275
</TABLE>
7 Oppenheimer Intermediate Tax-Exempt Fund
<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>
SOUTH DAKOTA--1.7% South Dakota Student Loan Finance Revenue Bonds,
Series A, 5.95%, 8/1/01 NR/A+ $1,500,000 $ 1,531,692
- -------------------------------------------------------------------------------------------------------------------------
TENNESSEE--2.1% Chattanooga-Hamilton County, Tennessee Hospital
Authority Revenue Bonds, Erlanger Medical Center,
Prerefunded, Series B, FSA Insured,
Inverse Floater, 9.774%, 5/25/21(2) Aaa/AAA 1,500,000 1,868,050
- -------------------------------------------------------------------------------------------------------------------------
TEXAS--6.4% Harris County, Texas Flood Control Bonds,
Series A, 7.125%, 10/1/98 Aa/AA+ 1,315,000 1,426,225
-----------------------------------------------------------------------------------------------
Harris County, Texas Health Facilities Development
Corp. Hospital Revenue Bonds, Hermann Trust,
Prerefunded, 9%, 10/1/17 Aaa/AAA 2,500,000 2,780,155
-----------------------------------------------------------------------------------------------
Harris County, Texas Revenue Bonds, Toll Road
Project, Prerefunded, 10.375%, 8/1/14 Aaa/NR 300,000 339,788
-----------------------------------------------------------------------------------------------
Texas National Research Laboratory Commission
Financing Corp. Lease Revenue Bonds, Superconducting
Super Collider, 6.25%, Escrowed to Maturity, 12/1/00 Aaa/AAA/A 1,000,000 1,072,831
----------
5,618,999
- -------------------------------------------------------------------------------------------------------------------------
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 900,000 968,787
- -------------------------------------------------------------------------------------------------------------------------
VIRGINIA--2.7% Chesapeake, Virginia Public Improvement General
Obligation Bonds, 7%, 5/1/99 Aa/AA 2,155,000 2,349,480
- -------------------------------------------------------------------------------------------------------------------------
WASHINGTON--1.2% Port of Seattle, Washington Revenue Bonds,
Series B, 6.30%, 11/1/02 A1/AA-/AA- 1,000,000 1,079,834
- -------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA--1.0% West Virginia School Building Authority Revenue
Bonds, Prerefunded, MBIA Insured, 7.25%, 7/1/15 Aaa/AAA 750,000 848,103
- -------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--10.0% Puerto Rico Commonwealth General Obligation
Bonds, 6.35%, 7/1/10 Baa1/A 2,000,000 2,101,598
-----------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue Bonds,
Series P, 6.75%, 7/1/03 Baa1/A- 2,000,000 2,209,440
-----------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority
Revenue Refunding Bonds, Series S, 7%, 7/1/07 Baa1/A- 2,000,000 2,277,480
-----------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue Bonds,
AMBAC Insured, Inverse Floater, 3.55%, 1/1/03(2) Aaa/AAA/AAA 2,400,000 2,202,895
----------
8,791,413
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $84,667,837) 98.5% 86,906,403
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.5 1,365,333
--------- -----------
NET ASSETS 100.0% $88,271,736
--------- -----------
--------- -----------
</TABLE>
1. Represents a zero coupon bond that converts to a
fixed rate of interest at a designated future date.
2. 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 2. Inverse floaters amount
to $4,070,945 or 4.6% of the Fund's net assets at
September 30, 1995.
See accompanying Notes to Financial Statements.
8 Oppenheimer Intermediate Tax-Exempt Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments, at value (cost $84,667,837)--see accompanying statement $86,906,403
-----------------------------------------------------------------------------------------------
Cash 159,192
-----------------------------------------------------------------------------------------------
Receivables:
Interest 1,602,440
Shares of beneficial interest sold 13,929
-----------------------------------------------------------------------------------------------
Other 26,516
-----------
Total assets 88,708,480
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES Payables and other liabilities:
Dividends 261,786
Shares of beneficial interest redeemed 88,154
Distribution and service plan fees--Note 4 52,252
Shareholder reports 13,807
Transfer and shareholder servicing agent fees--Note 4 3,579
Trustees' fees 63
Other 17,103
-----------
Total liabilities 436,744
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $88,271,736
-----------
-----------
- -------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $88,366,036
NET ASSETS -----------------------------------------------------------------------------------------------
Overdistributed net investment income (66,542)
-----------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (2,266,324)
-----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 2,238,566
-----------
Net assets $88,271,736
-----------
-----------
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $80,535,209 and 5,483,053 shares of beneficial interest outstanding) $14.69
Maximum offering price per share (net asset value plus sales charge
of 3.50% of offering price) $15.22
-----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $118,918 and 8,097 shares of beneficial interest outstanding) $14.69
-----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $7,617,609 and 519,407 shares of beneficial interest outstanding) $14.67
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Intermediate Tax-Exempt Fund
<PAGE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME Interest $5,684,381
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 4 435,665
---------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 187,036
Class B 15
Class C 74,513
----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 78,432
----------------------------------------------------------------------------------------------
Shareholder reports 52,243
----------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 21,316
Class C 12,030
----------------------------------------------------------------------------------------------
Legal and auditing fees 24,847
----------------------------------------------------------------------------------------------
Custodian fees and expenses 11,833
----------------------------------------------------------------------------------------------
Insurance expenses 6,727
----------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,071
----------------------------------------------------------------------------------------------
Other 13,516
-----------
Total expenses 919,244
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 4,765,137
- ------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized loss from:
GAIN (LOSS) ON INVESTMENTS Investments (1,421,045)
Closing of futures contracts (169,368)
-----------
Net realized loss (1,590,413)
----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 4,069,030
-----------
Net realized and unrealized gain on investments 2,478,617
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$7,243,754
-----------
-----------
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Intermediate Tax-Exempt Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment income $ 4,765,137 $ 4,139,249
--------------------------------------------------------------------------------------------------
Net realized loss on investments (1,590,413) (1,005,299)
--------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 4,069,030 (4,866,867)
----------- ------------
Net increase (decrease) in net assets resulting from operations 7,243,754 (1,732,917)
- ----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.7524 and $.7572 per share, respectively) (4,224,351) (4,028,765)
SHAREHOLDERS Class B ($.0571 per share) (78) --
Class C ($.6332 and $.5157 per share, respectively) (310,776) (164,731)
--------------------------------------------------------------------------------------------------
Distributions in excess of gain on investments:
Class A ($.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 (5,399,631) 19,304,315
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 118,895 --
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from Class C
beneficial interest transactions--Note 2 (1,122,859) 8,794,633
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase (decrease) (3,695,046) 21,831,271
--------------------------------------------------------------------------------------------------
Beginning of period 91,966,782 70,135,511
----------- -----------
End of period (including overdistributed net investment
income of $66,542 and $142,634, respectively) $88,271,736 $91,966,782
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Intermediate Tax-Exempt Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
- ----------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 14.23 $ 15.34 $ 15.09 $ 14.40
- ----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .79 .72 .77 .86
Net realized and unrealized gain (loss)
on investments .42 (1.00) .70 .69
------- ------- ------- -------
Total income (loss) from investment
operations 1.21 (.28) 1.47 1.55
- ----------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.75) (.76) (.75) (.86)
Distributions from net realized gain
on investments -- -- (.47) --
Distributions in excess of net realized gain
on investments -- (.07) -- --
------- ------- ------- -------
Total dividends and distributions
to shareholders (.75) (.83) (1.22) (.86)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $ 14.69 $ 14.23 $ 15.34 $ 15.09
------- ------- ------- -------
------- ------- ------- -------
- ----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 8.78% (1.92)% 10.31% 11.10%
- ----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $80,535 $83,456 $70,136 $29,724
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $79,681 $79,076 $48,915 $25,153
- ----------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 5,483 5,865 4,571 1,970
- ----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.55% 5.05% 5.08% 5.87%
Expenses, before voluntary assumption
by the Manager .98% 1.00% 1.07% 1.25%
Expenses, net of voluntary assumption
by the Manager N/A N/A 1.05% 1.16%
- ----------------------------------------------------------------------------------------
Portfolio turnover rate(7) 55% 51% 21% 93%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to September
30, 1994.
2. For the period from August 29, 1995 (inception of offering) to September
30, 1995.
3. For the period from November 11, 1986 (commencement of operations) to
September 30, 1987.
4. On April 7, 1990, Oppenheimer Management Corporation became the investment
advisor to the Fund.
5. 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.
12 Oppenheimer Intermediate Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ---------------------------------------------- --------- ------------------------
Period
Ended
Sept. 30, Year Ended September 30,
1991 1990(4) 1989 1988 1987(3) 1995(2) 1995 1994(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 13.51 $ 13.57 $ 13.33 $ 12.56 $ 14.00 $14.62 $14.18 $15.14
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .83 .90 .98 1.05 .90 .06 .69 .46
Net realized and unrealized gain (loss)
on investments .91 (.08) .24 .77 (1.44) .07 .43 (.83)
------- ------- ------- ------- ------- ------ ------ ------
Total income (loss) from investment
operations 1.74 .82 1.22 1.82 (.54) .13 1.12 (.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders
Dividends from net investment income (.85) (.88) (.98) (1.05) (.90) (.06) (.63) (.52)
Distributions from net realized gain
on investments -- -- -- -- -- -- -- --
Distributions in excess of net realized gain
on investments -- -- -- -- -- -- -- (.07)
------- ------- ------- ------- ------- ------ ------ ------
Total dividends and distributions
to shareholders (.85) (.88) (.98) (1.05) (.90) (.06) (.63) (.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.40 $ 13.51 $ 13.57 $ 13.33 $ 12.56 $14.69 $14.67 $14.18
------- ------- ------- ------- ------- ------ ------ ------
------- ------- ------- ------- ------- ------ ------ ------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 13.20% 6.14% 9.54% 14.96% (4.11)% 0.83%
8.13% (2.54)%
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $23,675 $20,287 $19,350 $13,480 $10,228 $ 119 $7,618 $8,511
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $22,071 $20,576 $17,188 $12,220 $11,152 $ 23 $7,437 $4,686
- -----------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 1,644 1,502 1,426 1,011 814 8 519 600
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.93% 6.56% 7.09% 8.01% 7.39%(6) 3.88%(6) 4.64%
3.77%(6)
Expenses, before voluntary assumption
by the Manager 1.35% 1.41% 1.56% 1.75% 1.95%(6) 1.55%(6) 1.88%
2.24%(6)
Expenses, net of voluntary assumption
by the Manager 1.16% .66% .23% N/A .40%(6) N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 75% 102% 180% 148% 98% 55% 55% 51%
</TABLE>
6. Annualized.
7. 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 period ended September 30, 1995 were $47,459,869 and
$52,812,094, respectively.
See accompanying Notes to Financial Statements.
13 Oppenheimer Intermediate Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Intermediate Tax-Exempt Fund (the Fund), operating under the name
Oppenheimer Intermediate Tax-Exempt Bond Fund through August 29, 1995, is a
separate series of Oppenheimer Tax-Exempt 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 Class A, Class B and Class C
shares. Class A shares are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent deferred sales charge. All
three 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 are valued 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.
- -------------------------------------------------------------------------------
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. At September 30, 1995,
the Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $975,000 expiring in 2003.
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment income
each day the New York Stock Exchange is open for business and pay such
dividends monthly. 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.
During the year ended September 30, 1995, 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, during the year ended
September 30, 1995, amounts have been reclassified to reflect a decrease in
undistributed net investment income of $153,840. Accumulated net realized
loss on investments was decreased by the same amount.
14 Oppenheimer Intermediate Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
1. SIGNIFICANT
ACCOUNTING POLICIES
(continued)
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. 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. 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.
- -------------------------------------------------------------------------------
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995(2) SEPTEMBER 30, 1994(1)
------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,003,900 $ 14,290,724 2,161,013 $ 32,133,399
Dividends and distributions reinvested 196,934 2,809,242 201,137 2,968,987
Redeemed (1,583,239) (22,499,597) (1,067,987) (15,798,071)
---------- ------------ ---------- ------------
Net increase (decrease) (382,405) $ (5,399,631) 1,294,163 $ 19,304,315
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
- --------------------------------------------------------------------------------------------------
Class B:
Sold 8,097 $ 118,895 -- $ --
Dividends reinvested -- -- -- --
Redeemed -- -- -- --
---------- ------------ ---------- ------------
Net increase 8,097 $ 118,895 -- $ --
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
- --------------------------------------------------------------------------------------------------
Class C:
Sold 208,137 $ 2,981,674 664,985 $ 9,719,514
Dividends and distributions reinvested 18,316 259,921 8,536 122,637
Redeemed (307,226) (4,364,454) (73,341) (1,047,518)
---------- ------------ ---------- ------------
Net increase (decrease) (80,773) $ (1,122,859) 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.
2. For the year ended September 30, 1995 for Class A and Class C shares and
for the period from August 29, 1995 (inception of offering) to September 30,
1995 for Class B shares.
- -------------------------------------------------------------------------------
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1995, net unrealized appreciation on investments of
$2,238,566 was composed of gross appreciation of $2,897,673, and gross
depreciation of $659,107.
- -------------------------------------------------------------------------------
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of .50% on the
first $100 million of average annual 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 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.
15 Oppenheimer Intermediate Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
(continued)
For the year ended September 30, 1995, commissions (sales charges paid by
investors) on sales of Class A shares totaled $160,045, of which $62,159 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 and
Class C shares totaled $1,830 and $28,282, respectively, of which $6,183 was
paid to an affiliated broker/dealer for Class C shares. During the year ended
September 30, 1995, OFDI received contingent deferred sales charges of
$10,384 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 compensate 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 and Class C shares are subject to an
asset-based sales charge of .75% of net assets annually, to compensate 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 or 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 B or Class C shares sold prior to termination or
discontinuance of the plan. At September 30, 1995, OFDI had incurred
unreimbursed expenses of $74,888. During the year ended September 30, 1995,
OFDI paid $19,264 to an affiliated broker/dealer as compensation for Class A
personal service and maintenance expenses and retained $54,543 as
compensation 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, 1996. 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>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Intermediate Tax-Exempt Fund Yield of
Tax 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Joint Return Bracket Is Equivalent to a Taxable Yield of:
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 above 39.60% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76%
Single Return
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 above 39.60% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76%
</TABLE>
<PAGE>
Appendix C
Corporate Industry Classifications
General Obligation Bonds
Special Tax Bonds
Lease/Rental
Revenue
Education
Hospitals
Housing
Transportation
Utilities
Student Loans
Corporate Backed Municipals
Industrial Development
Pollution Control
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds 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
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER
Insured Tax-Exempt Fund
Prospectus dated February 1, 1996
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 February 1, 1996 Statement of Additional Information. For a
free copy, call OppenheimerFunds Services, the Fund's Transfer Agent, at
1-800-525-7048, or write to the Transfer Agent at the address on the back
cover. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
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. The calculations are based on the Fund's expenses
during its last fiscal year ended September 30, 1995.
- Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," from pages
__ through __, for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------------
<S> <C> <C> <C>
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
<FN>
__________________________
1. If you invest $1 million or more 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 - Buying 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 ACH
wire transfer through AccountLink, or for which check writing privileges are used (see "How To Sell Shares").
</TABLE>
- 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, OppenheimerFunds,
Inc. (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 table 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 than the numbers in the table, 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 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, the "Annual Fund Operating Expenses" for
Class C shares are estimates based on expenses from the inception date
until September 30, 1995.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.45% 0.45% 0.45%
- --------------------------------------------------------------------------
12b-1 Distribution 0.24% 1.00% 1.00%
Plan Fees
- --------------------------------------------------------------------------
Other Expenses 0.26% 0.26% 0.26%
- --------------------------------------------------------------------------
Total Fund Operating 0.95% 1.71% 1.71%
Expenses
</TABLE>
- 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:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years(1)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares $57 $76 $98 $159
- ----------------------------------------------------------------------
Class B Shares $67 $84 $113 $163
- ----------------------------------------------------------------------
Class C Shares $27 $54 $93 $202
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 $57 $76 $98 $159
- ----------------------------------------------------------------------
Class B Shares $17 $54 $93 $163
- ----------------------------------------------------------------------
Class C Shares $7 $54 $93 $202
<FN>
_________________________
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 6 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
pay the economic equivalent of an amount greater 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 - Buying Class B Shares" for more information.
</TABLE>
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 __.
- Who Manages the Fund? The Fund's investment advisor is
OppenheimerFunds, Inc., which (including a subsidiary) manages investment
company portfolios having over $40 billion in assets at December 31, 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 Caryn
Halbrecht. The Fund's Board of Trustees, elected by shareholders,
oversees the investment advisor and the portfolio manager. Please refer
to "How the Fund is Managed," starting on page __ for more information
about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The risk of issuer default is minimized by the Fund's policy of investing
in insured municipal bonds. However, the Fund's investments in municipal
bonds are subject to changes in their value from a number of factors such
as changes in general bond market movements, the change in value of
particular bonds because of an event affecting the issuer, or changes in
interest rates. These changes affect the value of the Fund's investments
and its price per share. In the OppenheimerFunds spectrum, the Fund is
more conservative than high yield bond funds, but more aggressive than
money market funds. While the Manager tries to reduce risks by
diversifying investments, by carefully researching securities before they
are purchased for the portfolio, 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 __ for a more
complete discussion.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page __ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund offers the
individual investor 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 __ 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 __. The Fund also offers exchange privileges to the other
Oppenheimer funds, 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. The information for the fiscal years
ended September 30, 1990, 1991, 1992, 1993, 1994 and 1995 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,
1995, 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 publicly offered
only during a portion of that period, commencing August 29, 1995.
<TABLE>
<CAPTION>
CLASS A
- -----------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $16.14 $18.06 $16.92 $16.17
- -----------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .90 .89 .93 .96
Net realized and unrealized gain (loss) on
investments .71 (1.84) 1.35 .73
------ ------ ------ ------
Total income (loss) from investment operations 1.61 (.95) 2.28 1.69
- -----------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.89) (.89) (.96) (.91)
Distributions from net realized gain on
investments -- (.08) (.18) (.03)
------ ------ ------ -------
Total dividends and distributions to
shareholders (.89) (.97) (1.14) (.94)
- ------------------------------------------------------------------------------------
Net asset value, end of period $16.86 $16.14 $18.06 $16.92
------ ------ ------ ------
------ ------ ------ ------
- -----------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 10.29% (5.46)% 14.02% 10.74%
- -----------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $76,691 $67,793 $62,158 $33,751
- -----------------------------------------------------------------------------------
Average net assets (in thousands) $70,650 $66,953 $45,949 $27,811
- -----------------------------------------------------------------------------------
Number of shares outstanding at end of period
(in thousands) 4,548 4,201 3,442 1,995
- -----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.52% 5.23% 5.40% 5.81%
Expenses, before voluntary assumption by the
Manager .95% 1.05% 1.18% 1.35%
Expenses, net of voluntary assumption by the
Manager N/A N/A 1.10% .95%
- ------------------------------------------------------------------------------------
Portfolio turnover rate(7) 58% 99% 7% 47%
</TABLE>
1. For the period from August 29, 1995 (inception of offering) to September
30, 1995.
2. For the period from May 3, 1993 (inception of offering) to September 30,
1993.
3. For the period from November 11, 1986 (commencement of operations) to
September 30, 1987.
4. On April 7, 1990, Oppenheimer Management Corporation became the investment
advisor to the Fund.
5. 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.
<TABLE>
<CAPTION>
CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR
ENDED
YEAR ENDED SEPTEMBER 30, SEPT. 30,
1991 1990(4) 1989 1988 1987(3) 1995 1994 1993(2) 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.16 $15.27 $14.96 $13.79 $16.00 $16.15 $18.07 $17.33 $16.71
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .92 .98 1.06 1.07 .92 .78 .77 .30 .08
Net realized and unrealized gain (loss) on
investments 1.01 (.11) .31 1.17 (2.21) .71 (1.86) .74 .15
------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from investment operations 1.93 .87 1.37 2.24 (1.29) 1.49 (1.09) 1.04 .23
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.92) (.98) (1.06) (1.07) (.92) (.77) (.75) (.30) (.08)
Distributions from net realized gain on
investments -- -- -- -- -- -- (.08) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and distributions to
shareholders (.92) (.98) (1.06) (1.07) (.92) (.77) (.83) (.30) (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.17 $15.16 $15.27 $14.96 $13.79 $16.87 $16.15 $18.07 $16.86
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 13.08% 5.81% 9.37% 16.67% (8.36)% 9.47% (6.20)%
6.04% 1.30%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $23,791 $16,863 $13,105 $8,483 $5,449 $13,341 $11,571 $5,104 $211
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $19,936 $15,145 $11,200 $6,936 $5,435 $11,987 $9,209 $2,298 $1
- ---------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at end of period
(in thousands) 1,471 1,113 858 567 395 791 717 282 13
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.83% 6.43% 6.87% 7.34% 6.69%(6) 4.75% 4.43% 3.99%(6)
4.89%(6)
Expenses, before voluntary assumption by the
Manager 1.60% 1.62% 2.04% 2.50% 2.98%(6) 1.71% 1.82% 1.96%(6)
1.07%(6)
Expenses, net of voluntary assumption by the
Manager .91% .62% .42% .13% .34%(6) N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 67% 62% 142% 141% 112% 58% 99% 7% 58%
</TABLE>
6. Annualized.
7. 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 period ended September 30, 1995 were $54,302,795 and
$47,216,762, 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.
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 invested 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.
- 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
Temporary Investments 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 will 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 seek 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 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 does not intend to lend its portfolio
securities during the coming year. If it does 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 segregate 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.
- Puts and Stand-By Commitments. The Fund may acquire "stand-by
commitments" or "puts" with respect to municipal obligations held in its
portfolio. Under a stand-by commitment or put option, the Fund would have
the right to sell specified securities at a specific price on demand to
the issuing broker-dealer or bank. The Fund will acquire stand-by
commitments or puts solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
- 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:
- 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;
- 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;
- 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
- 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 and in the Statement of Additional Information 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 have 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 as a class on matters that affect that class
alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Trustees,
under an Investment Advisory Agreement which states the Manager's
responsibilities. The Agreement sets forth the fees paid by the Fund to
the Manager, and describes the expenses that the Fund is responsible to
pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets in excess of $40 billion
as of December 31, 1995, and held in more than 2.8 million shareholder
accounts. The Manager is owned by Oppenheimer Acquisition Corp., a
holding company that is owned in part by senior officers of the Manager
and controlled by Massachusetts Mutual Life Insurance Company.
- Portfolio Manager. The portfolio manager of the Fund is Caryn
Halbrecht, a Vice President of the Manager. She has been the person
principally responsible for the day-to-day management of the Fund's
portfolio since October, 1993. Ms. Halbrecht was previously a Vice
President of Fixed Income Portfolio Management at Bankers Trust.
- 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 0.45% of
average annual net assets for its Class A, Class B 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. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. 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,
brokers and other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts
as the Fund's Distributor. The Distributor also distributes the shares
of the other "Oppenheimer funds" and is sub-distributor for funds managed
by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder
servicing agent for the Fund on an "at-cost" basis. It also acts as the
shareholder servicing agent for the other Oppenheimer funds. 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 indices and 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 over time, 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. When total returns are shown for a one-year period
or less for Class C shares, they reflect the effect of the contingent
deferred sales charge. Total returns may also be quoted "at net asset
value," without considering the effect of the sales charge and those
returns would be reduced if sales charges were deducted.
- 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 and Class C
shares do not reflect the deduction of the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1995,
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
ended September 30, 1995, the Fund's performance was affected by the
Federal Reserve's move away from a tight monetary policy. The Federal
Reserve has been raising interest rates steadily for a year out of fears
that unchecked economic growth would spark inflation. In February 1995,
on evidence the economy's growth rate was slowing, the Federal Reserve
stopped raising interest rates and the bond market advanced since that
point. The Manager emphasized insured health care bonds and California
bonds insured by the state of California.
- Comparing the Fund's Performance to the Market. The graph below
shows the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held until September 30, 1995; in the case of Class
A shares, from the commencement of operations on November 11, 1986, in the
case of Class B shares, from the inception of the class on May 3, 1993,
and in the case of Class C shares from inception of the class on August
29, 1995, 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, the maximum 5.0%
contingent deferred sales charge on Class B 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 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 9/30/95
<TABLE>
<CAPTION>
1-Year 5-Year Life
<S> <C> <C> <C>
Class A:* 5.06% 7.24% 6.07%
Class B:** 4.47% 0.45%
Class C:*** 0.30%
______________________________
* The inception date of the Fund (Class A shares) was 11/11/86.
**Class B shares were first publicly offered on 5/3/93.
*** Class C shares were firs publicly offered on 8/29/95.
</TABLE>
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 Oppenheimer funds, and you sell any of those shares within 18
months of buying them, you may pay a contingent deferred sales charge.
The amount of that sales charge will vary depending on the amount you
invested. Sales charges are described in "Buying Class A Shares" below.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 6 years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you own your shares. 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. Sales charges are described in "Buying Class B Shares" below.
- 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. Sales charges are described in "Buying
Class C Shares" below.
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 to consider are how much
you plan to invest and how long you plan to hold your investment. 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 of shares, considering 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 of shares you invest in.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. 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.
- 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. This is 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, rather than Class A
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 Class 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 the shares respectively from a
single investor.
- 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.
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.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or Class C
shareholders, such as checkwriting or other features (such as Automatic
Withdrawal Plans) may not be advisable (because of the effect of the
contingent deferred sales charge) in non-retirement accounts 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 to buy.
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.
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. 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 Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the Oppenheimer funds AccountLink. 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
"OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver,
Colorado 80217. If you don't list a dealer on the application, the
Distributor will act as your agent in buying the shares. However, it is
recommended that you discuss your investment first with a financial
advisor to be sure it is appropriate for you.
- 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 Oppenheimer funds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to have the Transfer Agent 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. You should 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 Oppenheimer funds) 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, Colorado. 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.
Special Sales Charge Arrangements for Certain Persons. Appendix A to this
Prospectus sets forth conditions for the waiver of, or exemption from,
sales charges or the special sales charge rates that apply to purchases
of shares of the Fund (including purchases by exchange) by a person who
was a shareholder of one of the Former Quest for Value Funds (as defined
in that Appendix).
Buying 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, purchases are not subject to an initial
sales charge, and the offering price will 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:
<TABLE>
<CAPTION>
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
- -----------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
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 Oppenheimer
funds 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
either (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class A
contingent deferred sales charge. 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 count all 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 and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also include Class A and Class B shares of other Oppenheimer funds 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 your investment in one of the
Oppenheimer funds. 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 Oppenheimer funds 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 shares or Class A and Class B shares of the Fund and other
Oppenheimer funds 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 (1) providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker or adviser
for the purchase or sale of Fund shares) or (2) to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provide administrative services;
- directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
- accounts for which Oppenheimer Capital is the investment
adviser (the Distributor must be advised of this arrangement)
and persons who are directors or trustees of the company or
trust which is the beneficial owner of such accounts; or
- any unit investment trust that has entered into an appropriate
agreement with the Distributor.
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 Oppenheimer funds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor; or
- shares purchased and paid for with the proceeds of shares redeemed
in the past 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.
- purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series;
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived
if shares that would otherwise be subject to the contingent deferred sales
charge are redeemed in the following cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans ("Retirement Plans"),
- to return excess contributions made to Retirement Plans,
- to make Automatic Withdrawal Plan payments that are limited to no
more than 12% of the original account value annually,
- 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
- 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.
Buying 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. 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 contingent deferred sales charge is not imposed in the
circumstances described in "Waivers of Class B Sales Charge," below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
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)
- -----------------------------------------------------------------------
<S> <C>
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
</TABLE>
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 and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to Class B
and Class C shares redeemed in certain circumstances as described below.
The reasons for this policy are in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares
in the following cases:
- 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 last surviving shareholder (the death or
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 591/2, and distributions from
403(b)(7) custodial plans or pension or profit sharing plans before the
participant is age 591/2 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).
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B shares in the
following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- shares issued in plans of reorganization to which the Fund is a
party; and
- 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 Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At September, 30, 1995, the end of the
Plan year, the Distributor had incurred unreimbursed expenses under the
Plan of $522,040 (equal to 3.91% of the Fund's net assets represented by
Class B shares on that date), which have been carried over into the
present Plan year. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for expenses it incurred before the plan was
terminated.
Buying 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 and
Class C Sales Charges."
- 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. These include 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 should 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 by sending signature-guaranteed
instructions to the Transfer Agent. AccountLink privileges will apply to
each shareholder listed in the registration on your account as well as to
your dealer representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank
account information must be made by signature-guaranteed instructions to
the Transfer Agent signed by all shareholders who own the account.
- 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 Oppenheimer funds 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
Oppenheimer funds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $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 Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each other Oppenheimer funds 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
Oppenheimer funds 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 Class B shares on which you paid a contingent deferred
sales charge when you redeemed them. It does not apply to Class C shares.
You must be sure to ask the Distributor for this privilege when you send
your payment. 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 by selling
(redeeming) some or all of your shares on any regular business day. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, by checkwriting 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 check is not payable to all shareholders listed on the
account statement
- A redemption check is not sent to the address of record on your
account 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 on behalf of a corporation, partnership or other business
or as a fiduciary, 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,
- The signatures of all registered owners exactly as the account is
registered, 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:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of the New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held 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 statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
- 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 Oppenheimer
funds 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, Oppenheimer Money Market Fund, Inc. offers only one class of
shares which are considered to be Class A shares for this purpose. 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 Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. This list can change
from time to time.
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 up
to seven days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the sale of portfolio 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 day the 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, and 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 the Transfer Agent 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.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from taxable dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a 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, Class B 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 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, 1995, 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 Oppenheimer Fund Account.
You can reinvest all distributions in another Oppenheimer fund account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. It does not matter how long you held
your shares. 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. Taxable dividends and 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 dividends.
- "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 taxable 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 A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for Class
A, Class B and Class C shares of the Fund described elsewhere in this
Prospectus are modified as described below for those shareholders of (i)
Quest for Value Fund, Inc., Quest for Value Growth and Income Fund, Quest
for Value Opportunity Fund, Quest for Value Small Capitalization Fund and
Quest for Value Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment adviser to those funds, and
(ii) Quest for Value U.S. Government Income Fund, Quest for Value
Investment Quality Income Fund, Quest for Global Income Fund, Quest for
Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund
and Quest for Value California Tax-Exempt Fund when those funds merged
into various Oppenheimer funds on November 24, 1995. The funds listed
above are referred to in this Prospectus as the "Former Quest for Value
Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by
such shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds or (ii)
received by such shareholder pursuant to the merger of any of the Former
Quest for Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
- - Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
- - Purchases by Groups and Associations. The following table sets forth
the initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of
securities if that Association purchased shares of any of the Former Quest
for Value Funds or received a proposal to purchase such shares from OCC
Distributors prior to November 24, 1995.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
_____________________________________________________________________
9 or fewer 2.50% 2.56% 2.00%
_____________________________________________________________________
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Associations having 50 or more eligible employees
or members, there is no initial sales charge on purchases of Class A
shares, but those shares are subject to the Class A contingent deferred
sales charge described on page 27 of this Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of members of an
Association or the sales charge rate that applies under the Rights of
Accumulation described above in the Prospectus. Individuals who qualify
under this arrangement for reduced sales charge rates as members of
Associations also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the Fund's
Distributor.
- - Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of Former
Quest for Value Funds into those Oppenheimer funds, and which shares were
subject to a Class A contingent deferred sales charge prior to November
24, 1995 will be subject to a contingent deferred sales charge at the
following rates: if they are redeemed within 18 months of the end of the
calendar month in which they were purchased, at a rate equal to 1.0% if
the redemption occurs within 12 months of their initial purchase and at
a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six
months. Class A shares of any of the Former Quest for Value Funds
purchased without an initial sales charge on or before November 22, 1995
will continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
- - Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
- Shareholders of the Fund who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired shares of any of the Former
Quest for Value Funds by merger of a portfolio of the AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the Unified Funds.
- - Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to redemptions
of Class A shares of the Fund purchased by the following investors who
were shareholders of any Former Quest for Value Fund:
- Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under the
Employee Retirement Income Security Act of 1974 and regulations adopted
under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
- - Waivers for Redemptions of Shares Purchased Prior to March 6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest for Value Fund or into which
such fund merged, if those shares were purchased prior to March 6, 1995
in connection with: (i) withdrawals under an automatic withdrawal plan
holding only either Class B or C shares if the annual withdrawal does not
exceed 10% of the initial value of the account, and (ii) liquidation of
a shareholder's account if the aggregate net asset value of shares held
in the account is less than the required minimum value of such accounts.
- - Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which
such fund merged, if those shares were purchased on or after March 6,
1995, but prior to November 24, 1995: (1) redemptions following the death
or disability of the shareholder(s) (as evidenced by a determination of
total disability by the U.S. Social Security Administration);
(2) withdrawals under an automatic withdrawal plan (but only for Class B
or C shares) where the annual withdrawals do not exceed 10% of the initial
value of the account; and (3) liquidation of a shareholder's account if
the aggregate net asset value of shares held in the account is less than
the required minimum account value. A shareholder's account will be
credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, B or C shares of the Fund described in this
section if within 90 days after that redemption, the proceeds are invested
in the same Class of shares in this Fund or another Oppenheimer fund.
<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
9/30/95, 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, 1995,
and in the case of the Fund's Class C shares, that graph will cover the
period from the inception of the class (8/29/95) through September 30,
1995. 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."
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer Insured Lehman Brothers
(Period) Ended Tax-Exempt Fund A Municipal Bond Index
<S> <C> <C>
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 $ 11,786 $ 12,707
9/30/91 $ 13,326 $ 14,383
9/30/92 $ 14,758 $ 15,886
9/30/93 $ 16,777 $ 17,910
9/30/94 $ 15,860 $ 17,473
9/30/95 $ 17,551 $ 19,428
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 $ 9,922 $ 10,255
9/30/95 $ 11,184 $ 11,403
Fiscal Year Oppenheimer Insured Lehman Brothers
(Period) Ended Tax-Exempt Fund C Municipal Bond Index
9/30/95 $ 10,230 $ 10,063
</TABLE>
<PAGE>
Oppenheimer Insured Tax-Exempt Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds 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
555 Seventeenth Street
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, OppenheimerFunds, Inc.,
OppenheimerFunds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR0865.001.0196.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 February 1, 1996
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 February 1, 1996. It should be read together with the
Prospectus, which may be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
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,
OppenheimerFunds, Inc. (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 does not change the tax treatment of bonds issued 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. Furthermore, 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 state or municipal 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 issuers 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 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.
Shares of the Fund represent an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitle
the holder to one vote per share (and a fractional vote for a fractional
share) on matters submitted to their vote at shareholders' meetings.
Shareholders of the Fund vote together in the aggregate on certain matters
at shareholders' meetings, such as the election of Trustees and
ratification of appointment of auditors for the Trust. Shareholders of
a particular class vote separately on proposals which affect that class,
and shareholders of a class which is not affected by that matter are not
entitled to vote on the proposal. Shareholders of a class vote on certain
amendments to the Distribution and/or Service Plans if the amendments
affect that class.
The Trustees are authorized to create new series and classes of
series. The Trustees may
reclassify unissued shares of the Trust or its series or classes into
additional series or classes of shares. The Trustees may also divide or
combine the shares of a class into a greater or lesser number of shares
provided that the proportionate beneficial interest of a shareholder in
the Fund is not changed. Shares do not have cumulative voting rights or
preemptive or subscription rights. Shares may be voted in person or by
proxy.
The 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 Income Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Strategic Funds Trust, Oppenheimer Strategic Income & Growth 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 Oppenheimer funds") except
for Mr. Fossel, who is a Trustee, Director or Managing General Partner of
all the Denver-based Oppenheimer funds, except Oppenheimer Bond Fund and
Oppenheimer Strategic Income Fund. Ms. Macaskill is President and Mr.
Swain is Chairman of the Denver-based Oppenheimer funds.
As of January 9, 1996, 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,
Ms. Macaskill and Mr. 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, Trustee; Age 53.*
Two World Trade Center, New York, New York 10048-0203
Chairman 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 74.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, Trustee; Age 47.
President, Chief Executive Officer and a Director of the Manager; Chairman
and a Director of SSI, Vice President and a Director of OAC, of
HarbourView and of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; formerly an Executive Vice President
of the Manager.
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
OppenheimerFunds Distributor, Inc. (the "Distributor"); an officer of
other Oppenheimer funds; President and a director of Centennial; 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
Oppenheimer funds.
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 Oppenheimer funds;
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 Oppenheimer
funds.
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 Oppenheimer funds; 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 Oppenheimer funds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Fossel and Swain, who are both officers and
Trustees) receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Messrs. Fossel and Swain) received the total amounts shown
below from (i) the Fund, during its fiscal year ended September 30, 1995,
and (ii) from all 21 of the Denver-based Oppenheimer funds (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 Oppenheimer funds1
<S> <C> <C>
Robert G. Avis - Trustee $237 $53,000.00
William A. Baker - Audit and Review $328 $73,255.00
Committee Chairman and Trustee
Chares Conrad, Jr. - Audit and Review $288 $64,309.00
Committee Member and Trustee
Raymond J. Kalinowski - Trustee $291 $65,000.00
C. Howard Kast - Trustee $291 $65,000.00
Robert M. Kirchner - Audit and Review $306 $68,292.00
Committee Member and Trustee
Ned M. Steel - Trustee $237 $53,000.00
<FN>
______________
1 For the 1995 calendar year.
</TABLE>
- Major Shareholders. As of January 9, 1996, 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
Class A and Class B shares. As of that date, the only shareholders which
owned of record or were known by the Fund to own beneficially 5% or more
of the Fund's Class C shares were Merrill, Lynch, Pierce, Fenner & Smith,
4800 Deer Lake Drive, 3rd Floor, Jacksonville, Florida 32246-6482 who
owned of record 14,439 Class C shares (representing 51.56% of the Fund's
outstanding Class C shares) and PaineWebber for the benefit of Arthur A.
Newman, Joan R. Newman and Laurie A. Newman, 2622 King Richard, El Dorado
Hills, California 95762-4126 who owned of record 12,455.516 Class C shares
(representing 44.31% of the Fund's outstanding Class C 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 (Ms. Macaskill 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, 1995,
the management fees were $371,750.
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. OppenheimerFunds 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.
During the fiscal years ended September 30, 1993, 1994 and 1995 the
aggregate sales charges in the Fund's Class A shares was $582,215,
$376,541 and $153,803, respectively of which the Distributor and an
affiliated broker-dealer retained in the aggregate $151,408, $92,979 and
$43,162, in those respective years. During the Fund fiscal year ended
September 30, 1995, the contingent deferred sales charges collected on the
Fund's Class B shares totalled $37,243, 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. Sales charges advanced to
broker/dealers by the Distributor on sales of the Fund's Class C shares
during the fiscal year ended September 30, 1995 were $153,803.
- The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer
Agent, is responsible for maintaining the Fund's shareholder registry and
shareholder accounting records, and for shareholder servicing and
administrative functions.
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 and
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 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 B shares were
first publicly offered on May 3, 1993. Class C shares were first publicly
offered on August 29, 1995.
- 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:
Standardized Yield = 2 [( a-b
--- + 1 )6 - 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, 1995, the standardized yields for
the Fund's Class A, Class B and Class C shares were 4.46%, 3.90% and
4.34%, 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, Class B and Class C shares for the 30-day period ended September
30, 1995 were 7.38%, 6.46% and 7.19%, respectively, for an individual in
the 39.6% 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)
plus 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, 1995 were 5.05% and 5.30% 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, 1995 was 4.53% when calculated at net asset value. The dividend yield
on Class C shares for the 30-day period ended September 30, 1995 was
4.98%.
- Total Return Information.
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
ERV 1/n
--- - 1 = Average Annual Total Return
P
The "average annual total return" on an investment in Class A shares
of the Fund for the one and five year periods ended September 30, 1995 was
5.06% and 7.24%, respectively and for the period from inception of the
Fund on November 11, 1986 through September 30, 1995 was 6.33%. The
"average annual total return" on an investment in Class B shares of the
Fund for the one year ended September 30, 1995 was 4.47%. For the period
from inception of Class B shares on May 3, 1993 through September 30,
1995, the average annual total return was 2.45%. For the period from
inception of Class C shares on August 29, 1995, through September 30,
1995, the average annual total return was 3.56%.
- 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. 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, 1995,
was 75.50%. The cumulative total return on Class B shares for the period
from May 3, 1993 (inception of the class) through September 30, 1995 was
5.99%. The cumulative total return on the Class C shares for the period
from August 29, 1995 (inception of the class) through September 30, 1995
was .30%.
- 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,
1995 was 10.29%. The total return at net asset value for the Fund's Class
B shares for the year ended September 30, 1995 was 9.47%. The total
return at net asset value for the Fund's Class C shares for the period
ended September 30, 1995 was 1.30%.
- 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
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 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 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 under the 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 must provide
separate written reports to the Fund's Board of Trustees at least
quarterly describing the amount of payments made pursuant to each Plan and
the purpose for which the payments were made. The Class B report also
must include the Distributor's distribution costs for the quarter, and
such costs for previous quarters that have been carried forward. The
Class A and Class B reports also must include the identity of each
Recipient that received any payment. These reports are subject to the
review and approval 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, 1995, payments under the
Class A Plan totalled $70,117, all of which was paid by the Distributor
to Recipients, including $6,524 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, 1995 totalled $119,807,
including $993 paid to a dealer affiliated with the Distributor and
$100,572 retained by the Distributor.
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 Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution 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, 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.
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 some 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 or
broker or dealer incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, siblings, sons- and daughters-in-
law, a sibling's spouse and a spouse's siblings.
- The Oppenheimer funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer 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 International Bond Fund Oppenheimer Enterprise Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income 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 Income & Growth Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value 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 Oppenheimer funds 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 of the Fund or Class A and Class B shares of
other Oppenheimer funds 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 Oppenheimer funds) 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 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
up 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 of the other
Oppenheimer funds 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 Oppenheimer funds that were acquired subject
to a Class A initial or contingent deferred sales charge or (ii) Class B
shares of one of the other Oppenheimer funds 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 "How to Exchange Shares," 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
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, 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 such 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 by seeking 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 Oppenheimer
funds 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 Oppenheimer funds within 90 days of payment of the sales charge,
the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the
loss or increase the gain recognized from the redemption. However, in
that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may
amend, suspend or cease offering this reinvestment privilege at any time
as to shares redeemed after the date of such amendment, suspension or
cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of 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 an order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes (normally 4:00
P.M., but 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 Oppenheimer funds automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent and the Fund shall incur no liability
to the Planholder for any action taken or omitted by the Transfer Agent
in good faith to administer the Plan. Certificates will not be issued for
shares of the Fund purchased for and held under the Plan, but the Transfer
Agent will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or ACH 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
Oppenheimer funds having more than one class of shares may be exchanged
only for shares of the same class of other Oppenheimer funds. Shares of
the Oppenheimer funds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All of the Oppenheimer funds
offer Class A, B and C shares except Oppenheimer Money Market Fund, Inc.,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, Centennial
America Fund, L.P. and Daily Cash Accumulation Fund Inc., which only offer
Class A shares and Oppenheimer Main Street California Tax Exempt Fund
which only offers Class A and Class B shares (Class B and Class C shares
of Oppenheimer Cash reserves are generally available only by exchange from
the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401 (k) plans). A list of funds showing which
funds offer which classes can be obtained by calling the Distributor at
1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
Oppenheimer funds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of Oppenheimer
funds 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 Oppenheimer funds
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 Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for shares of any of
the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of shares
of any class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other Oppenheimer funds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares. The
Class B contingent deferred sales charge 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 Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, 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 Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. 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 FUND:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Insured Tax-Exempt
Fund as of September 30, 1995, the related statement of operations for the
year then ended, the statements of changes in net assets for the years ended
September 30, 1995 and 1994 and the financial highlights for the period
October 1, 1989 to September 30, 1995. 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 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, 1995 by correspondence with the custodian;
where replies 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 Insured Tax-Exempt Fund at September 30, 1995, the results of its
operations, the changes in its net assets, and the financial highlights for
the respective stated periods, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 20, 1995
<PAGE>
FINANCIALS
CONTENTS
STATEMENT OF INVESTMENTS 6
STATEMENT OF ASSETS & LIABILITIES 11
STATEMENT OF OPERATIONS 12
STATEMENTS OF CHANGES IN NET ASSETS 13
FINANCIAL HIGHLIGHTS 14
NOTES TO FINANCIAL STATEMENTS 16
5 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES--98.2%
- -------------------------------------------------------------------------------------------------------------------------
ALABAMA--1.2% Pelham, Alabama General Obligation
Warrants, AMBAC Insured, 7.10%,
8/1/15 Aaa/AAA/AAA $1,000,000 $1,139,782
- -------------------------------------------------------------------------------------------------------------------------
ALASKA--4.3% Alaska Energy Authority Power Revenue
Bonds, Bradley Lake Hydroelectric
Project, Series 2, MBIA Insured,
7.25%, 7/1/21 Aaa/AAA 500,000 551,141
-----------------------------------------------------------------------------------------------
North Slope Boro, Alaska General
Obligation Revenue Refunding Bonds,
Series G, FSA Insured, 8.35%, 6/30/98 Aaa/AAA/A- 3,000,000 3,322,632
----------
3,873,773
- -------------------------------------------------------------------------------------------------------------------------
CALIFORNIA--13.4% California Pollution Control
Financing Authority Revenue Bonds,
Southern California Edison, Series
A, MBIA--IBC Insured, 6.90%, 9/1/06 Aaa/AAA 2,410,000 2,584,959
-----------------------------------------------------------------------------------------------
California Public Capital
Improvements Financing Authority
Revenue Bonds, Pooled Project, Series
B, BIG Insured, 8.10%, 3/1/18 Aaa/AAA 235,000 254,290
-----------------------------------------------------------------------------------------------
California State Public Works Board
Lease Revenue Bonds, Department of
Corrections-California State Prison,
Series B, MBIA Insured, 5.50%, 12/1/12 Aaa/AAA/A- 1,090,000 1,054,645
-----------------------------------------------------------------------------------------------
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 1,080,120
-----------------------------------------------------------------------------------------------
Los Angeles County, California
Sanitation District Financing
Authority Revenue Bonds, Capital
Projects, Series A, 5.375%, 10/1/13 Aaa/AAA 3,050,000 2,878,626
-----------------------------------------------------------------------------------------------
Los Angeles, California General
Obligation Bonds, Series A, FGIC
Insured, 6.10%, 9/1/12 Aaa/AAA 1,000,000 1,019,315
-----------------------------------------------------------------------------------------------
Northern California Power Agency
Public Power Revenue Refunding Bonds,
Hydroelectric Project No. 1,
Prerefunded, Series A, 8%, 7/1/13 A/A- 2,000,000 2,101,450
-----------------------------------------------------------------------------------------------
Sacramento, California Municipal
Utility District Electric Revenue
Refunding Bonds, Series G, MBIA
Insured, 6.50%, 9/1/13 Aaa/AAA/A- 1,000,000 1,085,499
----------
12,058,904
- -------------------------------------------------------------------------------------------------------------------------
COLORADO--5.2% Colorado Health Facilities Authority
Revenue Bonds, PSL Health System
Project, Series A, FSA Insured,
7.25%, 2/15/16 Aaa/AAA 500,000 550,389
-----------------------------------------------------------------------------------------------
Denver, Colorado City & County
Airport Revenue Bonds, Series B, MBIA
Insured, 5.75%, 11/15/17 Aaa/AAA 3,000,000 2,894,319
-----------------------------------------------------------------------------------------------
Douglas County, Colorado School
District No. RE-1 Douglas & Elbert
Counties General Obligation
Improvement Bonds, Series A, MBIA
Insured, 8%, 12/15/09 Aaa/AAA 1,000,000 1,253,266
----------
4,697,974
</TABLE>
6 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
DELAWARE--2.4% Delaware Transportation Authority
Transportation System Revenue Bonds,
Prerefunded, 7.75%, 7/1/04 Aaa/AAA $2,000,000 $2,201,786
- -------------------------------------------------------------------------------------------------------------------------
FLORIDA--1.1% Dade County, Florida Seaport Revenue
Refunding Bonds, MBIA Insured, 5.75%,
10/1/15 Aaa/AAA/AAA 1,000,000 987,135
- -------------------------------------------------------------------------------------------------------------------------
ILLINOIS--6.4% Cook County, Illinois Community
College District No. 508 Certificates
of Participation, FGIC Insured,
8.75%, 1/1/05 Aaa/AAA/AAA 500,000 635,802
-----------------------------------------------------------------------------------------------
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 3,035,420
-----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority
Revenue Bonds, Memorial Medical
Center Project, MBIA Insured, 6.75%,
10/1/11 Aaa/AAA 2,000,000 2,113,352
----------
5,784,574
- -------------------------------------------------------------------------------------------------------------------------
INDIANA--4.7% Fort Wayne, Indiana Hospital
Authority Revenue Bonds, Parkview
Memorial Hospital Project, Series A,
FGIC Insured, 7.50%, 11/15/11 Aaa/AAA/AAA 250,000 275,236
-----------------------------------------------------------------------------------------------
Hamilton Southeastern, Indiana
Consolidated School Building Corp.
Revenue Refunding Bonds, First Mtg.,
AMBAC Insured, 7%, 7/1/11 Aaa/AAA/AAA 500,000 547,537
-----------------------------------------------------------------------------------------------
Indiana State Office Building
Commission Capital Complex Revenue
Bonds, Series B, MBIA Insured, 7.40%,
7/1/15 Aaa/AAA 2,500,000 2,920,812
-----------------------------------------------------------------------------------------------
Whitko, Indiana Middle School
Building Corp. Revenue Bonds, First
Mtg., AMBAC Insured, 6.75%, 7/15/12 Aaa/AAA/AAA 500,000 530,677
----------
4,274,262
- -------------------------------------------------------------------------------------------------------------------------
KENTUCKY--1.3% Kentucky State Turnpike Authority
Economic Development Road Revenue
Refunding Bonds, Revitalization
Projects, AMBAC Insured, 6.50%, 7/1/08 Aaa/AAA/AAA 1,050,000 1,166,669
- -------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS--7.4% Massachusetts State General
Obligation Bonds, FGIC Insured,
7.875%, 6/1/97 Aaa/AAA/AAA 1,500,000 1,598,140
-----------------------------------------------------------------------------------------------
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 1,946,336
-----------------------------------------------------------------------------------------------
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 1,048,186
-----------------------------------------------------------------------------------------------
Massachusetts State Housing Finance
Revenue Bonds, Series A, AMBAC
Insured, 6.60%, 7/1/14 Aaa/AAA/AAA 2,000,000 2,063,456
----------
6,656,118
</TABLE>
7 Oppenheimer Insured Tax-Exempt Fund
<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>
- -------------------------------------------------------------------------------------------------------------------------
MICHIGAN--2.2% Michigan Municipal Board Authority
Revenue Bonds, Local Government,
Partially Prerefunded, Group 19,
AMBAC Insured, 7.50%, 11/1/09 Aaa/AAA/AAA $250,000 $271,585
-----------------------------------------------------------------------------------------------
Michigan State Hospital Finance
Authority Revenue Refunding Bonds,
Oakwood Hospital Obligation Group,
Series A, FGIC Insured, 5.50%, 11/1/13 Aaa/AAA/AAA 1,785,000 1,692,853
----------
1,964,438
- -------------------------------------------------------------------------------------------------------------------------
NEBRASKA--0.6% Nebraska Investment Finance Authority
Hospital Revenue Bonds, Nebraska
Methodist Health System, MBIA
Insured, 7%, 3/1/06 Aaa/AAA 500,000 554,355
- -------------------------------------------------------------------------------------------------------------------------
NEVADA--5.9% Clark County, Nevada Passenger
Facility Charge Revenue Bonds, Las
Vegas/MacArran International Airport
Project, Series A, MBIA Insured, 6%,
7/1/17 Aaa/AAA 2,000,000 1,959,358
-----------------------------------------------------------------------------------------------
Clark County, Nevada School District
General Obligation Bonds, Series B,
MBIA Insured, 6.75%, 3/1/08 Aaa/AAA 2,000,000 2,158,892
-----------------------------------------------------------------------------------------------
Humboldt County, Nevada Pollution
Control Revenue Bonds, Idaho Power
Co. Project, AMBAC Insured, 8.30%,
12/20/14 Aaa/AAA/AAA 1,000,000 1,188,261
----------
5,306,511
- -------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE--0.6% New Hampshire Turnpike System Revenue
Refunding Bonds, Series A, FGIC
Insured, 6.75%, 11/1/11 Aaa/AAA/AAA 500,000 552,849
- -------------------------------------------------------------------------------------------------------------------------
NEW JERSEY--1.4% East Orange, New Jersey General Obligation Bonds,
FSA Insured, 8.40%, 8/1/06 Aaa/AAA 1,000,000 1,272,072
- -------------------------------------------------------------------------------------------------------------------------
NEW YORK--4.4% City of New York Municipal Water
Finance Authority Water & Sewer
System Revenue Bonds, Series F, AMBAC
Insured, 5.50%, 6/15/11(1) Aaa/AAA/AAA 2,000,000 1,981,156
-----------------------------------------------------------------------------------------------
New York State Medical Care
Facilities Finance Agency Revenue
Bonds, Unrefunded Balance, MBIA--IBC
Insured, 7.75%, 8/15/10 Aaa/AAA 370,000 414,872
-----------------------------------------------------------------------------------------------
Niagara Falls, New York General
Obligation Public Improvement Bonds,
MBIA Insured, 7.50%, 3/1/12 Aaa/AAA 1,340,000 1,598,125
----------
3,994,153
- -------------------------------------------------------------------------------------------------------------------------
OHIO--1.8% Cincinnati, Ohio Student Loan Funding
Corp. Revenue Bonds, Series A, AMBAC
Insured, 5.75%, 8/1/03 Aaa/AAA/AAA 1,000,000 1,042,147
-----------------------------------------------------------------------------------------------
Streetsboro, Ohio City School
District General Obligation Bonds,
AMBAC Insured, 7.125%, 12/1/10 Aaa/AAA/AAA 500,000 577,508
----------
1,619,655
</TABLE>
8 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
OKLAHOMA--4.7% Grove, Oklahoma Municipal Services
Authority Utility & Sales Tax Revenue
Bonds, Series 1991, CGIC Insured, 7%,
2/1/16 Aaa/AAA $1,115,000 $1,217,267
-----------------------------------------------------------------------------------------------
Oklahoma Baptist University Authority
Revenue Bonds, FGIC Insured, 7.10%,
8/1/09 Aaa/AAA/AAA 150,000 162,034
-----------------------------------------------------------------------------------------------
Oklahoma State Industrial Authority
Revenue Bonds, Health Systems-Baptist
Medical Center, Series C, AMBAC
Insured, 7%, 8/15/05 Aaa/AAA/AAA 2,000,000 2,293,532
-----------------------------------------------------------------------------------------------
Tulsa, Oklahoma Airports Improvement
Trust Consolidated General Revenue
Bonds, Refunding Pending, MBIA
Insured, 7.50%, 6/1/08 Aaa/AAA 500,000 538,928
----------
4,211,761
- -------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA--7.5% 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 1,529,032
-----------------------------------------------------------------------------------------------
Berks County, Pennsylvania General
Obligation Bonds, FGIC Insured,
Inverse Floater, 8.487%, 11/10/20(2) Aaa/AAA/AAA 1,000,000 1,108,831
-----------------------------------------------------------------------------------------------
Pennsylvania State Higher Education
Assistance Agency Student Loan
Revenue Bonds, AMBAC Insured, Inverse
Floater, 8.099%, 3/1/22(2) Aaa/AAA/AAA 1,250,000 1,199,547
-----------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Airport
Revenue Bonds, Philadelphia Airport
System, Series A, AMBAC Insured,
5.75%, 6/15/08 Aaa/AAA/AAA 1,000,000 1,019,550
-----------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Regional
Port Authority Lease Revenue Bonds,
MBIA Insured, Inverse Floater, 8.27%,
9/1/20(2) Aaa/AAA 1,900,000 1,903,407
----------
6,760,367
- -------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA--2.8% South Carolina State Public Service
Authority Revenue Refunding Bonds,
Series B, FGIC Insured, 5.875%, 1/1/23 Aaa/AAA/AAA 2,000,000 1,970,378
---------------------------------------------------------------------------------------------------
Sumter County, South Carolina School
District No. 017 Certificates of
Participation, Series A, CGIC
Insured, 7.125%, 1/1/11 Aaa/AAA 500,000 552,694
----------
2,523,072
- -------------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA--1.3% South Dakota State Lease Revenue
Trust Certificates, Series B, CGIC
Insured, 8%, 9/1/02 Aaa/AAA 1,000,000 1,177,505
- -------------------------------------------------------------------------------------------------------------------------
TENNESSEE--2.1% Chattanooga-Hamilton County,
Tennessee Hospital Authority Revenue
Bonds, Erlanger Medical Center,
Prerefunded, Series B, FSA Insured,
Inverse Floater, 9.774%, 5/25/21(2) Aaa/AAA 1,500,000 1,868,050
</TABLE>
9 Oppenheimer Insured Tax-Exempt Fund
<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>
- -------------------------------------------------------------------------------------------------------------------------
TEXAS--10.6% Austin, Texas Combined Utility
Systems Revenue Refunding Bonds,
Series A, MBIA Insured, Zero Coupon,
11/15/09 Aaa/AAA $3,615,000 $1,654,394
-----------------------------------------------------------------------------------------------
Grand Prairie, Texas Health
Facilities Revenue Refunding Bonds,
Dallas/Ft. Worth Medical Center
Project, AMBAC Insured, 6.875%,
11/1/10 Aaa/AAA 1,800,000 1,955,790
-----------------------------------------------------------------------------------------------
Harris County, Texas Revenue Bonds,
Toll Road Project, Prerefunded,
10.375%, 8/1/14 Aaa/NR 1,200,000 1,359,153
-----------------------------------------------------------------------------------------------
Houston, Texas Certificates of
Participation, Water Conveyance
System Project, Series J, AMBAC
Insured, 6.125%, 12/15/08 Aaa/AAA/AAA 2,345,000 2,500,490
-----------------------------------------------------------------------------------------------
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 2,088,906
----------
9,558,733
- -------------------------------------------------------------------------------------------------------------------------
WASHINGTON--3.3% Tacoma, Washington Electric Systems
Revenue Bonds, AMBAC Insured, 6.514%,
1/2/15 A1/A+/AAA 2,000,000 2,076,684
-----------------------------------------------------------------------------------------------
Washington State Public Power Supply
System Revenue Refunding Bonds,
Series A, FGIC Insured, Zero Coupon,
7/1/09 Aaa/AAA/AAA 2,000,000 882,152
----------
2,958,836
- -------------------------------------------------------------------------------------------------------------------------
WISCONSIN--1.6% Wisconsin State Health & Educational
Facilities Authority Revenue Bonds,
SSM Health Care Project, Series A,
MBIA Insured, 5.75%, 6/1/12 Aaa/AAA 1,500,000 1,468,407
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $86,347,959) 98.2% 88,631,741
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.8 1,610,965
---- ----------
NET ASSETS 100.0% $90,242,706
----- ----------
----- ----------
</TABLE>
1. Securities with an aggregate market value of
$79,576 are held in collateralized accounts to cover
initial margin requirements on open futures sales
contracts. See Note 4 of Notes to Financial
Statements.
2. 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 $6,079,835 or 6.74% of
the Fund's net assets at September 30, 1995.
See accompanying Notes to Financial Statements.
10 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS Investments, at value (cost $86,347,959)--see accompanying statement $88,631,741
-----------------------------------------------------------------------------------------------
Cash 1,351,002
-----------------------------------------------------------------------------------------------
Receivables:
Interest 1,338,464
Shares of beneficial interest sold 264,018
Receivable for daily variation margin on futures contracts 1,562
-----------------------------------------------------------------------------------------------
Other 28,771
-----------
Total assets 91,615,558
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES Payables and other liabilities:
Investments purchased 975,562
Dividends 265,745
Distribution and service plan fees--Note 5 53,494
Shares of beneficial interest redeemed 48,089
Transfer and shareholder servicing agent fees--Note 5 4,378
Trustees' fees 147
Other 25,437
-----------
Total liabilities 1,372,852
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS $90,242,706
-----------
-----------
- ----------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $89,583,798
NET ASSETS -----------------------------------------------------------------------------------------------
Undistributed net investment income 28,628
-----------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (1,655,064)
-----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 2,285,344
-----------
Net assets $90,242,706
-----------
-----------
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $76,690,551 and 4,548,054 shares of beneficial interest outstanding) $16.86
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $17.70
-----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $13,341,146 and 790,806 shares of beneficial interest
outstanding) $16.87
-----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $211,009 and 12,515 shares of beneficial interest
outstanding) $16.86
See accompanying Notes to Financial Statements.
</TABLE>
11 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME Interest $5,347,504
- ----------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 5 371,750
-----------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 5:
Class A 170,117
Class B 119,807
-----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 5 83,373
-----------------------------------------------------------------------------------------------
Shareholder reports 54,751
-----------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 24,443
Class B 4,580
-----------------------------------------------------------------------------------------------
Legal and auditing fees 22,836
-----------------------------------------------------------------------------------------------
Insurance expenses 9,363
-----------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,979
-----------------------------------------------------------------------------------------------
Other 12,433
----------
Total expenses 875,432
- ----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 4,472,072
- ----------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain (loss) from:
GAIN (LOSS) ON INVESTMENTS Investments (908,871)
Closing of futures contracts 23,438
----------
Net realized loss (885,433)
-----------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 4,568,736
----------
Net realized and unrealized gain on investments 3,683,303
- ----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$8,155,375
----------
----------
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment income $4,472,072 $3,906,344
------------------------------------------------------------------------
Net realized loss on investments (885,433) (811,863)
------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation on investments 4,568,736 (7,639,229)
---------- -----------
Net increase (decrease) in net assets
resulting from operations 8,155,375 (4,544,748)
- -------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.8916 and $.8902 per share,
SHAREHOLDERS respectively) (3,855,661) (3,458,716)
Class B ($.7687 and $.755 per share,
respectively) (562,560) (401,013)
Class C ($.075 per share) (5) --
------------------------------------------------------------------------
Distributions from net realized gain on
investments:
Class A ($.0011 and $.0763 per share,
respectively) (5,059) (279,752)
Class B ($.0011 and $.0763 per share,
respectively) (788) (27,180)
- -------------------------------------------------------------------------------------------
BENEFICIAL Net increase in net assets resulting
INTEREST from Class A beneficial interest
TRANSACTIONS transactions--Note 2 5,681,837 13,295,652
------------------------------------------------------------------------
Net increase in net assets resulting
from Class B beneficial interest
transactions--Note 2 1,255,100 7,516,981
------------------------------------------------------------------------
Net increase in net assets resulting
from Class C beneficial interest
transactions--Note 2 211,000 --
- -------------------------------------------------------------------------------------------
NET ASSETS Total increase 10,879,239 12,101,224
------------------------------------------------------------------------
Beginning of period 79,363,467 67,262,243
---------- -----------
End of period (including undistributed
net investment income of $28,628 and
$20,250, respectively) $90,242,706 $79,363,467
----------- ------------
----------- ------------
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
- -----------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $16.14 $18.06 $16.92 $16.17
- -----------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .90 .89 .93 .96
Net realized and unrealized gain (loss) on
investments .71 (1.84) 1.35 .73
------ ------ ------ ------
Total income (loss) from investment operations 1.61 (.95) 2.28 1.69
- -----------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.89) (.89) (.96) (.91)
Distributions from net realized gain on
investments -- (.08) (.18) (.03)
------ ------ ------ -------
Total dividends and distributions to
shareholders (.89) (.97) (1.14) (.94)
- ------------------------------------------------------------------------------------
Net asset value, end of period $16.86 $16.14 $18.06 $16.92
------ ------ ------ ------
------ ------ ------ ------
- -----------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 10.29% (5.46)% 14.02% 10.74%
- -----------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $76,691 $67,793 $62,158 $33,751
- -----------------------------------------------------------------------------------
Average net assets (in thousands) $70,650 $66,953 $45,949 $27,811
- -----------------------------------------------------------------------------------
Number of shares outstanding at end of period
(in thousands) 4,548 4,201 3,442 1,995
- -----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.52% 5.23% 5.40% 5.81%
Expenses, before voluntary assumption by the
Manager .95% 1.05% 1.18% 1.35%
Expenses, net of voluntary assumption by the
Manager N/A N/A 1.10% .95%
- ------------------------------------------------------------------------------------
Portfolio turnover rate(7) 58% 99% 7% 47%
</TABLE>
1. For the period from August 29, 1995 (inception of offering) to September
30, 1995.
2. For the period from May 3, 1993 (inception of offering) to September 30,
1993.
3. For the period from November 11, 1986 (commencement of operations) to
September 30, 1987.
4. On April 7, 1990, Oppenheimer Management Corporation became the investment
advisor to the Fund.
5. 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.
14 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR
ENDED
YEAR ENDED SEPTEMBER 30, SEPT. 30,
1991 1990(4) 1989 1988 1987(3) 1995 1994 1993(2) 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.16 $15.27 $14.96 $13.79 $16.00 $16.15 $18.07 $17.33 $16.71
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .92 .98 1.06 1.07 .92 .78 .77 .30 .08
Net realized and unrealized gain (loss) on
investments 1.01 (.11) .31 1.17 (2.21) .71 (1.86) .74 .15
------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from investment operations 1.93 .87 1.37 2.24 (1.29) 1.49 (1.09) 1.04 .23
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.92) (.98) (1.06) (1.07) (.92) (.77) (.75) (.30) (.08)
Distributions from net realized gain on
investments -- -- -- -- -- -- (.08) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and distributions to
shareholders (.92) (.98) (1.06) (1.07) (.92) (.77) (.83) (.30) (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.17 $15.16 $15.27 $14.96 $13.79 $16.87 $16.15 $18.07 $16.86
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 13.08% 5.81% 9.37% 16.67% (8.36)% 9.47% (6.20)%
6.04% 1.30%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $23,791 $16,863 $13,105 $8,483 $5,449 $13,341 $11,571 $5,104 $211
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $19,936 $15,145 $11,200 $6,936 $5,435 $11,987 $9,209 $2,298 $1
- ---------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at end of period
(in thousands) 1,471 1,113 858 567 395 791 717 282 13
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.83% 6.43% 6.87% 7.34% 6.69%(6) 4.75% 4.43% 3.99%(6)
4.89%(6)
Expenses, before voluntary assumption by the
Manager 1.60% 1.62% 2.04% 2.50% 2.98%(6) 1.71% 1.82% 1.96%(6)
1.07%(6)
Expenses, net of voluntary assumption by the
Manager .91% .62% .42% .13% .34%(6) N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 67% 62% 142% 141% 112% 58% 99% 7% 58%
</TABLE>
6. Annualized.
7. 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 period ended September 30, 1995 were $54,302,795 and
$47,216,762, respectively.
See accompanying Notes to Financial Statements.
15 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Insured Tax-Exempt Fund (the Fund), operating under the name
Oppenheimer Insured Tax-Exempt Bond Fund through August 29, 1995, is a
separate series of Oppenheimer Tax-Exempt 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 Class A, Class B and Class C
shares. Class A shares are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent deferred sales charge. All
three 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 are valued 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.
- ------------------------------------------------------------------------------
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. At September 30, 1995,
the Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $1,189,000 expiring in 2003.
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment income
each day the New York Stock Exchange is open for business and pay such
dividends monthly. 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.
During the year ended September 30, 1995, 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, during the year ended
September 30, 1995, amounts have been reclassified to reflect a decrease in
paid-in capital of $209, a decrease in undistributed net investment income of
$45,468 and a decrease in accumulated net realized loss on investments of
$45,677.
- ------------------------------------------------------------------------------
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. 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. 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.
16 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
- -------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1995(1) Year Ended September 30, 1994
-------------------------------- -----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,022,063 $ 16,640,954 1,358,474 $ 23,400,749
Dividends and distributions reinvested 172,727 2,816,467 164,884 2,823,809
Redeemed (847,904) (13,775,584) (763,948) (12,928,906)
--------- ------------ --------- ------------
Net increase 346,886 $ 5,681,837 759,410 $ 13,295,652
========= ============ =========
============
- ------------------------------------------------------------------------------------------------------------
Class B:
Sold 242,343 $ 3,984,619 503,586 $ 8,682,918
Dividends and distributions reinvested 22,203 362,232 15,806 267,832
Redeemed (190,378) (3,091,751) (85,174) (1,433,769)
--------- ------------ --------- ------------
Net increase 74,168 $ 1,255,100 434,218 $ 7,516,981
========= ============ =========
============
- ------------------------------------------------------------------------------------------------------------
Class C:
Sold 12,515 $ 211,000 -- $ --
Dividends and distributions reinvested -- -- -- --
Redeemed -- -- -- --
--------- ------------ --------- ------------
Net increase 12,515 $ 211,000 -- $ --
========= ============ =========
============
</TABLE>
1. For the year ended September 30, 1995 for Class A and Class B shares and
for the period from August 29, 1995 (inception of offering) to September 30,
1995 for Class C shares.
- ------------------------------------------------------------------------------
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At September 30, 1995, net unrealized appreciation on investments of
$2,285,344 was composed of gross appreciation of $2,962,092, and gross
depreciation of $676,748.
- ------------------------------------------------------------------------------
4. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also
buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss when
the contract is closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable or
payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include
the possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value
of the underlying securities.
At September 30, 1995, the Fund had outstanding futures contracts to
sell debt securities as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Date Futures Contracts September 30, 1995 Appreciation
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bond Future 12/95 25 $2,852,344 $1,562
</TABLE>
17 Oppenheimer Insured Tax-Exempt Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------------------------
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of .45% on the
first $100 million of average annual net assets, .40% on the next $150
million, .375% on the next $250 million and .35% on net assets in excess of
$500 million. The Manager has agreed to assume Fund expenses (with specified
exceptions) in excess of the most stringent 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 year ended September 30, 1995, commissions (sales charges paid
by investors) on sales of Class A shares totaled $153,803, of which $43,162
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 $110,251, of which $15,611 was paid to an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of
the Fund's Class C shares totaled $2,100. During the year ended September 30,
1995, OFDI received contingent deferred sales charges of $37,243 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 compensate 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 and C shares are subject to an asset-based
sales charge of .75% of net assets annually, to compensate 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
or 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 B or Class C shares sold prior to termination or discontinuance of the
plan. At September 30, 1995, OFDI had incurred unreimbursed expenses of
$522,040. During the year ended September 30, 1995, OFDI paid $6,524 and
$993, respectively, to an affiliated broker/dealer as compensation for Class
A and Class B personal service and maintenance expenses and retained $100,572
as compensation 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, 1996. Federal
taxable income refers to the net amount subject to Federal income tax
after deductions and exemptions. The tables assume that an investor's
highest tax bracket applies to the change in taxable income resulting from
a switch between taxable and non-taxable investments, that the investor
is not subject to the Alternative Minimum Tax, and that state income tax
payments are fully deductible for Federal income tax purposes. The income
tax brackets are subject to indexing in future years to reflect changes
in the Consumer Price Index. The brackets do not reflect the phaseout of
itemized deductions and personal exemptions at higher income levels,
resulting in higher effective tax rates and tax equivalent yields.
<TABLE>
<CAPTION>
Federal
Taxable Income: Effective A Oppenheimer Insured Tax-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 above 39.60% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76%
Single Return
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 above 39.60% 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
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER TAX-EXEMPT FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements
--------------------
(1) Financial Highlights at 9/30/95 (audited) (See
Part A, Prospectus and Part B, Statement of Additional Information): Filed
herewith.
(2) Independent Auditors' Report at 9/30/95 (See
Part B, Statement of Additional Information): Filed herewith.
(3) Statement of Investments at 9/30/95 (audited)
(See Part B, Statement of Additional Information): Filed herewith.
(4) Statement of Assets and Liabilities at 9/30/95
(audited) (See Part B, Statement of Additional Information): Filed
herewith.
(5) Statement of Operations at 9/30/95 (audited)
(See Part B, Statement of Additional Information): Filed herewith.
(6) Statements of Changes in Net Assets at 9/30/95
(audited) (See Part B, Statement of Additional Information): Filed
herewith.
(7) Notes to Financial Statements at 9/30/95
(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 with Post-Effective Amendment No. 15 to
Registrant's Registration Statement, 8/25/95 and incorporated herein by
reference.
(2) By-Laws, as amended through 7/10/90: Filed with
Post-Effective Amendment No. 15 to Registrant's Registration Statement,
8/25/95 and incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Share Certificate for Class A
shares of Oppenheimer Intermediate Tax-Exempt Bond Fund: Previously filed
with Post-Effective Amendment No. 10 to Registrant's Registration
Statement, 11/24/93 and incorporated herein by reference.
(ii) Specimen Share Certificate for Class B
shares of Oppenheimer Intermediate Tax-Exempt Fund: Filed with Post-
Effective Amendment No. 15 to Registrant's Registration Statement, 8/25/95
and incorporated herein by reference.
(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 with Post-Effective
Amendment No. 15 to Registrant's Registration Statement, 8/25/95 and
incorporated herein by reference.
(5) (i) Investment Advisory Agreement dated
October 22, 1990 (Insured Series): Previously filed with Post-Effective
Amendment No. 6 to Registrant's Registration Statement 12/3/90, 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 with Post-Effective Amendment No. 15 to
Registrant's Registration Statement, 8/25/95 and incorporated herein by
reference.
(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 with Post-Effective Amendment No. 15 to Registrant's Registration
Statement, 8/25/95 and incorporated herein by reference.
(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 with Post-Effective Amendment No. 15 to Registrant's
Registration Statement, 8/25/95 and incorporated herein by reference.
(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 with Post-Effective Amendment No. 15 to Registrant's
Registration Statement, 8/25/95, and incorporated herein by reference.
(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) Oppenheimer Funds Multiple Class Plan under
Rule 18f-3 dated 10/24/95: Previously filed with Post-Effective Amendment
No. 12 to the Registration Statement of Oppenheimer California Tax-Exempt
Fund (Reg. No. 33-23566), 11/1/95, and incorporated herein by reference.
-- 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.
-- Power of Attorney for Bridget A. Macaskill.
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 January 9, 1996
-------------- ------------------
Shares of Beneficial Interest - Class A 3,165
Shares (Oppenheimer Intermediate
Tax-Exempt Fund)
Shares of Beneficial Interest - Class B 22
Shares (Oppenheimer Intermediate
Tax-Exempt Fund)
Shares of Beneficial Interest - Class C 372
Shares (Oppenheimer Intermediate
Tax-Exempt Fund)
Shares of Beneficial Interest - Class A 4,202
Shares (Oppenheimer Insured
Tax-Exempt Fund)
Shares of Beneficial Interest - Class B 386
Shares (Oppenheimer Insured
Tax-Exempt Fund)
Shares of Beneficial Interest - Class C 3
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) OppenheimerFunds, Inc. 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 OppenheimerFunds, Inc. is, or at any time during
the past two fiscal years has been, engaged for his/her own account or in
the capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections with
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- -------------------------------
<S> <C>
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Robert J. Bishop,
Assistant Vice President Treasurer of the Oppenheimer Funds
(listed below); previously a Fund
Controller for OppenheimerFunds,
Inc. (the "Manager").
Bruce Bartlett,
Vice President Vice President and Portfolio
Manager of Oppenheimer Total Return
Fund, Inc., Oppenheimer Main Street
Funds, Inc. and Oppenheimer
Variable Account Funds; formerly a
Vice President and Senior Portfolio
Manager at First of America
Investment Corp.
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Secretary and Treasurer of the
Denver-based Oppenheimer Funds.
Vice President and Treasurer of
OppenheimerFunds Distributor, Inc.
(the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment
adviser subsidiary of the Manager;
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 the Manager;
President, Treasurer and Director
of Centennial Capital Corporation;
Vice President and Treasurer of
Main Street Advisers.
Michael A. Carbuto,
Vice President Vice President and Portfolio
Manager of Centennial California
Tax Exempt Trust, Centennial New
York Tax Exempt Trust and
Centennial Tax Exempt Trust; Vice
President of Centennial.
William Colbourne,
Assistant Vice President Formerly, Director of Alternative
Staffing 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,
Executive Vice President Formerly Co-Director of Fixed
Income for State Street Research &
Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President Vice President and Portfolio
Manager of Oppenheimer Growth Fund,
Oppenheimer Variable Account Funds;
Senior Vice President and Portfolio
Manager of Oppenheimer Strategic
Income & Growth Fund; Vice
President of Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest
Officers Value Fund, Oppen-heimer
Quest For Value Funds and
Oppenheimer Quest Global Value
Fund, Inc.
John Doney,
Vice President Vice President and Portfolio
Manager of Oppenheimer Equity
Income Fund.
Andrew J. Donohue,
Executive Vice President
& General Counsel Secretary of the New York-based
Oppenheimer Funds; Vice President
of the Denver-based Oppenheimer
Funds; Executive Vice President,
Director and General Counsel of the
Distributor; President and a
director of Centennial; formerly
Senior Vice President and Associate
General Counsel of the Manager and
the Distributor.
Kenneth C. Eich,
Executive Vice President /
Chief Financial Officer Treasurer of Oppenheimer
Acquisition Corporation ("OAC").
George Evans,
Vice President Vice President and Portfolio
Manager of Oppenheimer Global
Emerging Growth Fund.
Scott Farrar,
Assistant Vice President Assistant Treasurer of the
Oppenheimer Funds; previously a
Fund Controller for the Manager.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView, Main
Street Advisers, Inc. and
Centennial; Secretary, Vice
President and Director of
Centennial Capital Corp.
Ronald H. Fielding,
Senior Vice President Chairman of the Board and Director
of Rochester Fund Distributors,
Inc. ("RFD"); President and
Director of Fielding Management
Company, Inc. ("FMC"); President
and Director of Rochester Capital
Advisors, Inc. ("RCAI"); President
and Director of Rochester Fund
Services, Inc. ("RFS"); President
and Director of Rochester Tax
Managed Fund, Inc.; Vice President
and Portfolio Manager of Rochester
Fund Municipals and Rochester
Portfolio Series - Limited Term New
York Municipal Fund.
Jon S. Fossel,
Chairman of the Board and Director Director of OAC, the Manager's
parent holding company; President,
CEO and a director of HarbourView;
a director of SSI and SFSI;
President, Director, Trustee, and
Managing General Partner of the
Denver-based Oppenheimer Funds;
President and Chairman of the Board
of Main Street Advisers, Inc.;
formerly Chief Executive Officer of
the Manager.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; 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 Oppenheimer Funds
and Executive Vice President &
General Counsel of the Manager and
the Distributor.
Linda Gardner,
Assistant Vice President None.
Ginger Gonzalez,
Vice President Formerly 1st Vice President /
Director of Creative Services for
Shearson Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Dorothy Grunwager, None.
Assistant Vice President
Caryn Halbrecht,
Vice President Vice President and Portfolio
Manager of Oppenheimer Insured Tax-
Exempt Fund and Oppenheimer
Intermediate Tax Exempt Fund; an
officer of other Oppenheimer Funds;
formerly Vice President of Fixed
Income Portfolio Management at
Bankers Trust.
Barbara Hennigar,
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Bennett Inkeles,
Assistant Vice President Formerly employed by Doremus &
Company, an advertising agency.
Frank Jennings,
Vice President Portfolio Manager of Oppenheimer
Global Growth & Income Fund.
Formerly a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Stephen Jobe,
Vice President None.
Heidi Kagan,
Assistant Vice President None.
Avram Kornberg,
Vice President Formerly a Vice President with
Bankers Trust.
Paul LaRocco,
Assistant Vice President Portfolio Manager of Oppenheimer
Variable Account Funds and
Oppenheimer Variable Account Funds;
Associate Portfolio Manager of
Oppenheimer Discovery Fund.
Formerly a Securities Analyst for
Columbus Circle Investors.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Senior Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of
the Oppenheimer Funds; President
and a Director of OAC, HarbourView
and Oppenheimer Partnership
Holdings, Inc.; Director of Main
Street Advisers, Inc.; and Chairman
of SSI.
Sally Marzouk,
Vice President None.
Marilyn Miller,
Vice President Formerly a Director of marketing
for TransAmerica Fund Management
Company.
Robert J. Milnamow,
Vice President Vice President and Portfolio
Manager of Oppenheimer Main Street
Funds, Inc. Formerly a Portfolio
Manager with Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Oppenheimer Asset
Allocation Fund, Oppenheimer
Strategic Income Fund, Oppenheimer
Strategic Income & Growth Fund; an
officer of other Oppenheimer Funds.
Barbara Niederbrach,
Assistant Vice President None.
Stuart Novek,
Vice President Formerly a Director Account
Supervisor for J. Walter Thompson.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Main Street
Funds, Inc., Oppenheimer Multi-
State Tax-Exempt Trust, Oppenheimer
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,
Executive Vice President
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President Associate Portfolio Manager of
Oppenheimer Growth Fund; Vice
President and Portfolio Manager of
Oppenheimer Target Fund and
Oppenheimer Variable Account Funds.
Formerly Senior Investment Officer
and Portfolio Manager with Chemical
Bank.
Russell Read,
Vice President Formerly an International Finance
Consultant for Dow Chemical.
Thomas Reedy,
Vice President Vice President of Oppenheimer
Multi-Sector Income Trust and
Oppenheimer Multi-Government Trust;
an officer of other Oppenheimer
Funds; formerly a Securities
Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Assistant Vice President Formerly a Product Manager for
Metropolitan Life Insurance
Company.
Michael S. Rosen
Vice President Vice President of RFS; President
and Director of RFD; Vice President
and Director of FMC; Vice President
and director of RCAI; General
Partner of RCA; Vice President and
Director of Rochester Tax Managed
Fund Inc.; Vice President and
Portfolio Manager of Rochester Fund
Series - The Bond Fund For Growth.
David Rosenberg,
Vice President Vice President and Portfolio
Manager of Oppenheimer Limited-Term
Government Fund, Oppenheimer U.S.
Government Trust and Oppenheimer
Integrity Funds. Formerly Vice
President and Senior Portfolio
Manager for Delaware Investment
Advisors.
Richard H. Rubinstein,
Vice President Vice President and Portfolio
Manager of Oppenheimer Asset
Allocation Fund, Oppenheimer Fund
and Oppenheimer Variable Account
Funds; an officer of other
Oppenheimer Funds; formerly Vice
President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Vice President Formerly Vice President of Dollar
Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Diane Sobin,
Vice President Vice President and Portfolio
Manager of Oppenheimer Gold &
Special Minerals Fund, Oppenheimer
Total Return Fund, Inc. Oppenheimer
Main Street Funds, Inc. and
Oppenheimer Variable Account Funds;
formerly a Vice President and
Senior Portfolio Manager for Dean
Witter InterCapital, Inc.
Nancy Sperte,
Senior Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Trustee of the New York-based
Oppenheimer Funds; formerly
Chairman of the Manager and the
Distributor.
Arthur Steinmetz,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Strategic
Income Fund, Oppenheimer Strategic
Income & Growth Fund; an officer of
other Oppenheimer Funds.
Ralph Stellmacher,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Champion
Income Fund and Oppenheimer High
Yield Fund; an officer of other
Oppenheimer Funds.
John Stoma,
Vice President Formerly Vice President of Pension
Marketing with Manulife Financial.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director
or Managing Partner of the Denver-
based Oppenheimer Funds; President
and a 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
Oppenheimer Global Emerging Growth
Fund and Oppenheimer Enterprise
Fund. Formerly Managing Director
of Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Jeffrey Van Giesen,
Vice President Formerly employed by Kidder Peabody
Asset Management.
Ashwin Vasan,
Vice President Vice President and Portfolio
Manager of Oppenheimer Multi-Sector
Income Trust, Oppenheimer Multi-
Government Trust and Oppenheimer
International Bond Fund; an officer
of other Oppenheimer Funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President Vice President and Portfolio
Manager of 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,
Vice President None.
William L. Wilby,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Oppenheimer Global
Fund and Oppenheimer Global Growth
& Income Fund; Vice President of
HarbourView; an officer of other
Oppenheimer Funds.
Susan Wilson-Perez,
Vice President None.
Carol Wolf,
Vice President Vice President and Portfolio
Manager of 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,
Senior Vice President and
Assistant Secretary Associate General Counsel of the
Manager; Assistant Secretary of the
Oppenheimer Funds; Assistant
Secretary of SSI, SFSI; an officer
of other Oppenheimer Funds.
Eva A. Zeff,
Assistant Vice President An officer of certain Oppenheimer
Funds; formerly a Securities
Analyst for the Manager.
Arthur J. Zimmer,
Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, 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; an officer of other
Oppenheimer Funds.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds and the
Denver-based Oppenheimer Funds set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise 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 Fund
Oppenheimer Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer U.S. Government Trust
Denver-based Oppenheimer Funds
- ------------------------------
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 Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Rochester-based Funds
- ---------------------
Rochester Fund Municipals
Rochester Fund Series - The Bond Fund For
Growth
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, OppenheimerFunds 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 Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc., OppenheimerFunds
Services, Centennial Asset Management Corporation, Centennial Capital
Corp., and Main Street Advisers, Inc. is 3410 South Galena Street, Denver,
Colorado 80231.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds 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
OppenheimerFunds, Inc. is the investment adviser, as described in Part A
and B of this Registration Statement and listed in Item 28(b) above.
(b) The directors and officers of the
Registrant's principal underwriter are:
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
<S> <C> <C>
Christopher Blunt Vice President None
6 Baker Avenue
Westport, CT 06880
George Clarence Bowen+ Vice President & Treasurer Vice President
and Treasurer
of the NY-based
Oppenheimer
funds / Vice
President,
Secretary and
Treasurer of
the Denver-
based Oppen-
heimer funds
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
Bill Coughlin Vice President None
1400 Laurel Avenue
Apt. W710
Minneapolis, MN 55403
Mary Crooks+ Vice President None
Paul Delli-Bovi Vice President None
750 West Broadway
Apt. 5M
Long Beach, NY 11561
Andrew John Donohue* Executive Vice Secretary of
President & Director the New York-
based Oppen-
heimer funds /
Vice President
of the Denver-
based Oppen-
heimer funds
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
Ronald H. Fielding++ Vice President None
Reed F. Finley Vice President - None
1657 Graefield Financial Institution Div.
Birmingham, MI 48009
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
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
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
19 Spinnaker Way
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
Michael S. Rosen++ Vice President None
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
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
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
William Harvey Young+ Vice President None
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
++ 350 Linden Oaks, Rochester, NY 14625-2807
</TABLE>
(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>
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 30th day of January, 1996.
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:
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ James C. Swain* Chairman of the January 30, 1996
- ---------------------- Board of Trustees
James C. Swain
/s/ Bridget A. Macaskill President and January 30, 1996
- ------------------------ Trustee
Bridget A. Macaskill
/s/ Jon S. Fossel* Trustee January 30, 1996
- ----------------------
Jon S. Fossel
/s/ George C. Bowen* Chief Financial January 30, 1996
- ---------------------- and Accounting
George C. Bowen Officer
/s/ Robert G. Avis* Trustee January 30, 1996
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee January 30, 1996
- ----------------------
William A. Baker
/s/ Charles Conrad Jr.* Trustee January 30, 1996
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee January 30, 1996
- -------------------------
Raymond J. Kalinowski
/s/ Howard Kast* Trustee January 30, 1996
- ------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 30, 1996
- ------------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee January 30, 1996
- ------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
<PAGE>
OPPENHEIMER TAX-EXEMPT FUND
Registration NO. 33-08054
POST-EFFECTIVE AMENDMENT NO. 15
EXHIBIT INDEX
Form N-1A
Item No. Description
- --------- -----------
24(b)(11) Independent Auditors' Consent
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)(iii) Financial Data Schedule for Class C 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)(v) Financial Data Schedule for Class B shares of
Oppenheimer Intermediate Tax-Exempt Fund
24(b)(17)(vi) Financial Data Schedule for Class C shares of
Oppenheimer Intermediate Tax-Exempt Fund
-- Power of Attorney for Bridget A. Macaskill
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 15 to
Registration Statement No. 33-08054 of Oppenheimer Tax-Exempt Fund of our
reports dated October 20, 1995 appearing in the Statements of Additional
Information, which are a part of such Registration Statement, and to the
reference to us under the heading "Financial Highlights" appearing in the
Prospectuses, which are also a part of such Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 26, 1996
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:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
11/28/86 0.0477718 0.0000 14.090
12/31/86 0.0848125 0.0000 14.000
01/30/87 0.0875634 0.0000 14.170
02/27/87 0.0871370 0.0000 14.230
03/31/87 0.0813719 0.0000 13.960
04/30/87 0.0838937 0.0000 13.380
05/29/87 0.0821252 0.0000 12.880
06/30/87 0.0831725 0.0000 13.080
07/31/87 0.0888137 0.0000 13.150
08/31/87 0.0832474 0.0000 13.160
09/30/87 0.0891186 0.0000 12.560
10/30/87 0.0877205 0.0000 12.770
11/30/87 0.0840883 0.0000 12.770
12/31/87 0.0967821 0.0000 12.880
01/29/88 0.0768880 0.0000 13.340
02/29/88 0.0859219 0.0000 13.300
03/31/88 0.0941727 0.0000 13.060
04/29/88 0.0818233 0.0000 13.050
05/31/88 0.0818146 0.0000 13.000
06/30/88 0.0864247 0.0000 13.120
07/29/88 0.0857280 0.0000 13.210
08/31/88 0.0871987 0.0000 13.150
09/30/88 0.1000966 0.0000 13.330
10/31/88 0.0876617 0.0000 13.510
11/30/88 0.0853195 0.0000 13.300
12/30/88 0.0904141 0.0000 13.420
01/31/89 0.0809321 0.0000 13.680
02/28/89 0.0803032 0.0000 13.500
03/31/89 0.0860533 0.0000 13.370
04/28/89 0.0746998 0.0000 13.640
05/31/89 0.0816935 0.0000 13.850
06/30/89 0.0805122 0.0000 13.940
07/31/89 0.0730053 0.0000 14.010
08/31/89 0.0776785 0.0000 13.760
09/29/89 0.0767703 0.0000 13.570
10/31/89 0.0745039 0.0000 13.780
11/30/89 0.0724353 0.0000 13.920
12/29/89 0.0739429 0.0000 13.950
01/31/90 0.0750859 0.0000 13.660
02/28/90 0.0682592 0.0000 13.750
03/31/90 0.0699771 0.0000 13.650
04/30/90 0.0731500 0.0000 13.470
05/31/90 0.0755904 0.0000 13.710
06/29/90 0.0755874 0.0000 13.780
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
Oppenheimer Intermediate Tax-Exempt Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
A Shares (continued)
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
10/10/94 0.0625000 0.0000 14.150
11/10/94 0.0625000 0.0000 13.680
12/09/94 0.0625000 0.0000 13.760
01/10/95 0.0625000 0.0000 13.890
02/10/95 0.0625000 0.0000 14.150
03/10/95 0.0625000 0.0000 14.240
04/10/95 0.0625000 0.0000 14.390
05/10/95 0.0625000 0.0000 14.480
06/09/95 0.0625000 0.0000 14.630
07/10/95 0.0625000 0.0000 14.590
08/10/95 0.0625000 0.0000 14.550
09/08/95 0.0625000 0.0000 14.720
Oppenheimer Intermediate Tax-Exempt Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares
09/08/95 0.0220253 0.0000 14.720
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
10/10/94 0.0537464 0.0000 14.110
11/10/94 0.0537043 0.0000 13.630
12/09/94 0.0538525 0.0000 13.710
01/10/95 0.0540895 0.0000 13.830
02/10/95 0.0518781 0.0000 14.130
03/10/95 0.0528084 0.0000 14.220
04/10/95 0.0524869 0.0000 14.370
05/10/95 0.0517504 0.0000 14.460
06/09/95 0.0517667 0.0000 14.610
07/10/95 0.0533424 0.0000 14.560
08/10/95 0.0518598 0.0000 14.530
09/08/95 0.0507620 0.0000 14.700
1. Average Annual Total Returns for the Periods Ended 09/30/95:
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
$1,049.75 1 $1,428.68 .2
(---------) - 1 = 4.98% (---------) - 1 = 7.40%
$1,000 $1,000
Inception
$1,831.05 .1125
(---------) - 1 = 7.04%
$1,000
Oppenheimer Intermediate Tax-Exempt Fund
Page 4
1. Average Annual Total Returns for the Periods Ended 09/30/95 (continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 4.00% for the
first year:
Inception
$ 961.18 18.9470
(---------) - 1 = <52.77%>
$1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00% for the
first year and 0.00% for the inception year:
One Year Inception
$1,071.28 1 $1,054.08 .5456
(---------) - 1 = 7.13% (---------) - 1 = 2.92%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,087.82 1 $1,480.46 .2
(---------) - 1 = 8.78% (---------) - 1 = 8.16%
$1,000 $1,000
Inception
$1,897.40 .1125
(---------) - 1 = 7.47%
$1,000
Class B Shares
Inception
$1,001.14 18.9470
(---------) - 1 = 2.18%
$1,000
Class C Shares
One Year Inception
$1,081.28 1 $1,054.08 .5456
(---------) - 1 = 8.13% (---------) - 1 = 2.92%
$1,000 $1,000
Oppenheimer Intermediate Tax-Exempt Fund
Page 5
2. Cumulative Total Returns for the Periods Ended 09/30/95:
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
$1,049.75 - $1,000 $1,428.68 - $1,000
------------------ = 4.98% ------------------ = 42.87%
$1,000 $1,000
Inception
$1,831.05 - $1,000
------------------ = 83.11%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 4.00% for the
first year:
Inception
$ 961.18 - $1,000
------------------ = -3.88%
$1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00% for the
first year and 0.00% for the inception year:
One Year Inception
$1,071.28 - $1,000 $1,054.08 - $1,000
------------------ = 7.13% ------------------ = 5.41%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,087.82 - $1,000 $1,480.46 - $1,000
------------------ = 8.78% ------------------ = 48.05%
$1,000 $1,000
Inception
$1,897.40 - $1,000
------------------ = 89.74%
$1,000
Oppenheimer Intermediate Tax-Exempt Fund
Page 6
2. Cumulative Total Returns for the Periods Ended 09/30/95 (continued):
Examples at NAV:
Class B Shares
Inception
$1,001.14 - $1,000
------------------ = 0.11%
$1,000
Class C Shares
One Year Inception
$1,081.28 - $1,000 $1,054.08 - $1,000
------------------ = 8.13% ------------------ = 5.41%
$1,000 $1,000
Oppenheimer Intermediate Tax-Exempt Fund
Page 7
3. Standardized Yield for the 30-Day Period Ended 09/30/95:
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%:
$ 345,519.30 - $ 65,796.54 6
2{(--------------------------- + 1) - 1} = 4.04%
5,510,430 x $15.22
Class B Shares
Example at NAV:
$ 88.33 - $ 31.67 6
2{(--------------------------- + 1) - 1} = 3.26%
1,430 x $14.69
Class C Shares
Example at NAV:
$ 31,368.95 - $ 11,287.60 6
2{(--------------------------- + 1) - 1} = 3.30%
501,101 x $14.67
Oppenheimer Intermediate Tax-Exempt Fund
Page 8
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/95:
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 $.0634959/30 x 365
------------------ = 5.08%
$15.22
Dividend Yield
at Net Asset Value $.0634959/30 x 365
------------------ = 5.26%
$14.69
Class B Shares
Dividend Yield
at Net Asset Value $.0538145/30 x 365
------------------ = 4.46%
$14.69
Class C Shares
Dividend Yield
at Net Asset Value $.0530869/30 x 365
------------------ = 4.40%
$14.67
Oppenheimer Intermediate Tax-Exempt Fund
Page 9
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/95:
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
.0404
----------- + 0 = 6.69%
1 - .3960
Class B Shares
.0326
----------- + 0 = 5.40%
1 - .3960
Class C Shares
.0330
----------- + 0 = 5.46%
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:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
11/28/86 0.0501779 0.0000 16.080
12/31/86 0.0893333 0.0000 15.890
01/30/87 0.0920672 0.0000 16.060
02/27/87 0.0905788 0.0000 16.160
03/31/87 0.0846170 0.0000 15.670
04/30/87 0.0872447 0.0000 14.620
05/29/87 0.0849428 0.0000 14.050
06/30/87 0.0845500 0.0000 14.430
07/31/87 0.0875104 0.0000 14.540
08/31/87 0.0835667 0.0000 14.550
09/30/87 0.0887026 0.0000 13.790
10/30/87 0.0890745 0.0000 14.170
11/30/87 0.0851601 0.0000 14.270
12/31/87 0.0984613 0.0000 14.430
01/29/88 0.0794686 0.0000 14.920
02/29/88 0.0895963 0.0000 14.880
03/31/88 0.0959605 0.0000 14.630
04/29/88 0.0822646 0.0000 14.640
05/31/88 0.0870887 0.0000 14.550
06/30/88 0.0895523 0.0000 14.670
07/29/88 0.0901535 0.0000 14.780
08/31/88 0.0897021 0.0000 14.730
09/30/88 0.0909456 0.0000 14.960
10/31/88 0.0890588 0.0000 15.180
11/30/88 0.0908232 0.0000 14.940
12/30/88 0.0972995 0.0000 15.110
01/31/89 0.0865811 0.0000 15.420
02/28/89 0.0914532 0.0000 15.160
03/31/89 0.0923004 0.0000 15.040
04/28/89 0.0793234 0.0000 15.330
05/31/89 0.0877918 0.0000 15.570
06/30/89 0.0896521 0.0000 15.660
07/31/89 0.0815859 0.0000 15.720
08/31/89 0.0861091 0.0000 15.460
09/29/89 0.0876520 0.0000 15.270
10/31/89 0.0871074 0.0000 15.490
11/30/89 0.0868449 0.0000 15.640
12/29/89 0.0868436 0.0000 15.670
01/31/90 0.0862856 0.0000 15.340
02/28/90 0.0610532 0.0000 15.470
03/31/90 0.0788984 0.0000 15.360
04/30/90 0.0817808 0.0000 15.150
05/31/90 0.0845063 0.0000 15.440
06/29/90 0.0845062 0.0000 15.520
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
Oppenheimer Insured Tax-Exempt Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
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
10/10/94 0.0719000 0.0000 16.010
11/10/94 0.0743000 0.0000 15.270
12/09/94 0.0743000 0.0000 15.480
01/10/95 0.0743000 0.0000 15.690
02/10/95 0.0743000 0.0000 16.270
03/10/95 0.0743000 0.0000 16.400
04/10/95 0.0743000 0.0000 16.600
05/10/95 0.0743000 0.0000 16.750
06/09/95 0.0743000 0.0000 16.940
07/10/95 0.0743000 0.0011 16.870
08/10/95 0.0743000 0.0000 16.630
09/08/95 0.0743000 0.0000 16.870
Oppenheimer Insured Tax-Exempt Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares
05/28/93 0.0606743 0.0000 17.360
07/09/93 0.0579357 0.0000 17.690
08/10/93 0.0687847 0.0000 17.680
09/10/93 0.0677318 0.0000 18.130
10/08/93 0.0690309 0.0000 18.130
11/10/93 0.0663926 0.0000 17.790
12/10/93 0.0624779 0.0762789 17.910
01/10/94 0.0646291 0.0000 17.950
02/10/94 0.0635708 0.0000 17.910
03/10/94 0.0610797 0.0000 17.030
04/08/94 0.0607941 0.0000 16.400
05/10/94 0.0612682 0.0000 16.320
06/10/94 0.0604760 0.0000 16.850
07/08/94 0.0623304 0.0000 16.250
08/10/94 0.0613031 0.0000 16.420
09/09/94 0.0609783 0.0000 16.410
10/10/94 0.0620894 0.0000 16.020
11/10/94 0.0642096 0.0000 15.280
12/09/94 0.0645888 0.0000 15.490
01/10/95 0.0647757 0.0000 15.700
02/10/95 0.0633166 0.0000 16.280
03/10/95 0.0648374 0.0000 16.410
04/10/95 0.0643916 0.0000 16.610
05/10/95 0.0639309 0.0000 16.760
06/09/95 0.0632081 0.0000 16.950
07/10/95 0.0644248 0.0011 16.880
08/10/95 0.0634731 0.0000 16.640
09/08/95 0.0636723 0.0000 16.880
Class C Shares
09/08/95 0.0265212 0.0000 16.870
Oppenheimer Insured Tax-Exempt Fund
Page 4
1. Average Annual Total Returns for the Periods Ended 09/30/95:
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
$1,050.60 1 $1,418.41 .2
(---------) - 1 = 5.06% (---------) - 1 = 7.24%
$1,000 $1,000
Inception
$1,755.02 .1125
(---------) - 1 = 6.53%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year, and 3.00% for the inception year:
One Year Inception
$1,044.67 1 $1,059.94 .4152
(---------) - 1 = 4.47% (---------) - 1 = 2.45%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00%:
Inception
$1,003.02 11.6100
(---------) - 1 = 3.56%
$1,000
Oppenheimer Insured Tax-Exempt Fund
Page 5
1. Average Annual Total Returns for the Periods Ended 09/30/95 (Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$1,102.93 1 $1,489.21 .2
(---------) - 1 = 10.29% (---------) - 1 = 8.29%
$1,000 $1,000
Inception
$1,842.53 .1125
(---------) - 1 = 7.12%
$1,000
Class B Shares
One Year Inception
$1,094.68 1 $1,089.14 .4152
(---------) - 1 = 9.47% (---------) - 1 = 3.61%
$1,000 $1,000
Class C Shares
Inception
$1,013.02 11.6100
(---------) - 1 = 16.21%
$1,000
2. Cumulative Total Returns for the Periods Ended 09/30/95:
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
$1,050.60 - $1,000 $1,418.41 - $1,000
------------------ = 5.06% ------------------ = 41.84%
$1,000 $1,000
Inception
$1,755.02 - $1,000
------------------ = 75.50%
$1,000
Oppenheimer Insured Tax-Exempt Fund
Page 6
2. Cumulative Total Returns for the Periods Ended 09/30/95 (Continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year, and 3.00% for the inception year:
One Year Inception
$1,044.67 - $1,000 $1,059.94 - $1,000
------------------ = 4.47% ------------------ = 5.99%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00%:
Inception
$1,003.02 - $1,000
------------------ = 0.30%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,102.93 - $1,000 $1,489.21 - $1,000
------------------ = 10.29% ------------------ = 48.92%
$1,000 $1,000
Inception
$1,842.53 - $1,000
------------------ = 84.25%
$1,000
Class B Shares
One Year Inception
$1,094.68 - $1,000 $1,089.14 - $1,000
------------------ = 9.47% ------------------ = 8.91%
$1,000 $1,000
Class C Shares
Inception
$1,013.02 - $1,000
------------------ = 1.30%
$1,000
Oppenheimer Insured Tax-Exempt Fund
Page 7
3. Standardized Yield for the 30-Day Period Ended 09/30/95:
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%:
$351,836.73 - $55,626.69 6
2{(------------------------ + 1) - 1} = 4.46%
4,545,516 x $17.70
Class B Shares
Example at NAV:
$ 59,809.06 - $17,818.20 6
2{(------------------------ + 1) - 1} = 3.90%
772,350 x $16.87
Class C Shares
Example at NAV:
$ 4.49 - $ 0.87 6
2{(------------------------ + 1) - 1} = 4.34%
60 x $16.86
Oppenheimer Insured Tax-Exempt Fund
Page 8
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/95:
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 $.0735012/30 x 365
------------------ = 5.05%
$17.70
Dividend Yield
at Net Asset Value $.0735012/30 x 365
------------------ = 5.30%
$16.86
Class B Shares
Dividend Yield
at Net Asset Value $.0628252/30 x 365
------------------ = 4.53%
$16.87
Class C Shares
Dividend Yield
at Net Asset Value $.0689939/30 x 365
------------------ = 4.98%
$16.86
Oppenheimer Insured Tax-Exempt Fund
Page 9
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/95:
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
.0446
----------- + 0 = 7.38%
1 - .3960
Class B Shares
.0390
----------- + 0 = 6.46%
1 - .3960
Class C Shares
.0434
----------- + 0 = 7.19%
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 FUND - CLASS A
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<NUMBER> 1
<NAME> OPPENHEIMER TAX-EXEMPT FUND
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<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
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<INVESTMENTS-AT-COST> 84667837
<INVESTMENTS-AT-VALUE> 86906403
<RECEIVABLES> 1616369
<ASSETS-OTHER> 26516
<OTHER-ITEMS-ASSETS> 159192
<TOTAL-ASSETS> 88708480
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 5483053
<SHARES-COMMON-PRIOR> 5865458
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<OVERDISTRIBUTION-NII> 66542
<ACCUMULATED-NET-GAINS> (2266324)
<OVERDISTRIBUTION-GAINS> 0
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<DISTRIBUTIONS-OF-INCOME> 4224351
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<NUMBER-OF-SHARES-SOLD> 1003900
<NUMBER-OF-SHARES-REDEEMED> 1583239
<SHARES-REINVESTED> 196934
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<GROSS-EXPENSE> 919244
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<PER-SHARE-NAV-BEGIN> 14.23
<PER-SHARE-NII> .79
<PER-SHARE-GAIN-APPREC> .42
<PER-SHARE-DIVIDEND> .75
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.69
<EXPENSE-RATIO> .98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799102
<NAME> OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND - CLASS B
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<NAME> OPPENHEIMER TAX-EXEMPT FUND
<S> <C>
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<FISCAL-YEAR-END> SEP-30-1995
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<INVESTMENTS-AT-COST> 84667837
<INVESTMENTS-AT-VALUE> 86906403
<RECEIVABLES> 1616369
<ASSETS-OTHER> 26516
<OTHER-ITEMS-ASSETS> 159192
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<REALIZED-GAINS-CURRENT> (1590413)
<APPREC-INCREASE-CURRENT> 4069030
<NET-CHANGE-FROM-OPS> 7243754
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8097
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (3695046)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (829751)
<OVERDISTRIB-NII-PRIOR> 142634
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 435665
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 919244
<AVERAGE-NET-ASSETS> 22663
<PER-SHARE-NAV-BEGIN> 14.62
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> .07
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.69
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799102
<NAME> OPPENHEIMER INTERMEDIATE TAX-EXEMPT FUND - CLASS C
<SERIES>
<NUMBER> 1
<NAME> OPPENHEIMER TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 84667837
<INVESTMENTS-AT-VALUE> 86906403
<RECEIVABLES> 1616369
<ASSETS-OTHER> 26516
<OTHER-ITEMS-ASSETS> 159192
<TOTAL-ASSETS> 88708480
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 436744
<TOTAL-LIABILITIES> 436744
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 88366036
<SHARES-COMMON-STOCK> 519407
<SHARES-COMMON-PRIOR> 600180
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 66542
<ACCUMULATED-NET-GAINS> (2266324)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2238566
<NET-ASSETS> 7617609
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5684381
<OTHER-INCOME> 0
<EXPENSES-NET> 919244
<NET-INVESTMENT-INCOME> 4765137
<REALIZED-GAINS-CURRENT> (1590413)
<APPREC-INCREASE-CURRENT> 4069030
<NET-CHANGE-FROM-OPS> 7243754
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 310776
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 208137
<NUMBER-OF-SHARES-REDEEMED> 307226
<SHARES-REINVESTED> 18316
<NET-CHANGE-IN-ASSETS> (3695046)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (829751)
<OVERDISTRIB-NII-PRIOR> 142634
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 435665
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 919244
<AVERAGE-NET-ASSETS> 7436990
<PER-SHARE-NAV-BEGIN> 14.18
<PER-SHARE-NII> .69
<PER-SHARE-GAIN-APPREC> .43
<PER-SHARE-DIVIDEND> .63
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.67
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799102
<NAME> OPPENHEIMER INSURED TAX-EXEMPT FUND - CLASS A
<SERIES>
<NUMBER> 2
<NAME> OPPENHEIMER TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 86347959
<INVESTMENTS-AT-VALUE> 88631741
<RECEIVABLES> 1604044
<ASSETS-OTHER> 28771
<OTHER-ITEMS-ASSETS> 1351002
<TOTAL-ASSETS> 91615558
<PAYABLE-FOR-SECURITIES> 975562
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 397290
<TOTAL-LIABILITIES> 1372852
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89583798
<SHARES-COMMON-STOCK> 4548054
<SHARES-COMMON-PRIOR> 4201168
<ACCUMULATED-NII-CURRENT> 28628
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1655064)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2285344
<NET-ASSETS> 76690551
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5347504
<OTHER-INCOME> 0
<EXPENSES-NET> 875432
<NET-INVESTMENT-INCOME> 4472072
<REALIZED-GAINS-CURRENT> (885433)
<APPREC-INCREASE-CURRENT> 4568736
<NET-CHANGE-FROM-OPS> 8155375
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3855661
<DISTRIBUTIONS-OF-GAINS> 5059
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1022063
<NUMBER-OF-SHARES-REDEEMED> 847904
<SHARES-REINVESTED> 172727
<NET-CHANGE-IN-ASSETS> 10879239
<ACCUMULATED-NII-PRIOR> 20250
<ACCUMULATED-GAINS-PRIOR> (809461)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 371750
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 875432
<AVERAGE-NET-ASSETS> 70649784
<PER-SHARE-NAV-BEGIN> 16.14
<PER-SHARE-NII> .90
<PER-SHARE-GAIN-APPREC> .71
<PER-SHARE-DIVIDEND> .89
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.86
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799102
<NAME> OPPENHEIMER INSURED TAX-EXEMPT FUND - CLASS B
<SERIES>
<NUMBER> 2
<NAME> OPPENHEIMER TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 86347959
<INVESTMENTS-AT-VALUE> 88631741
<RECEIVABLES> 1604044
<ASSETS-OTHER> 28771
<OTHER-ITEMS-ASSETS> 1351002
<TOTAL-ASSETS> 91615558
<PAYABLE-FOR-SECURITIES> 975562
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 397290
<TOTAL-LIABILITIES> 1372852
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89583798
<SHARES-COMMON-STOCK> 790806
<SHARES-COMMON-PRIOR> 716638
<ACCUMULATED-NII-CURRENT> 28628
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1655064)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2285344
<NET-ASSETS> 13341146
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5347504
<OTHER-INCOME> 0
<EXPENSES-NET> 875432
<NET-INVESTMENT-INCOME> 4472072
<REALIZED-GAINS-CURRENT> (885433)
<APPREC-INCREASE-CURRENT> 4568736
<NET-CHANGE-FROM-OPS> 8155375
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 562560
<DISTRIBUTIONS-OF-GAINS> 788
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 242343
<NUMBER-OF-SHARES-REDEEMED> 190378
<SHARES-REINVESTED> 22203
<NET-CHANGE-IN-ASSETS> 10879239
<ACCUMULATED-NII-PRIOR> 20250
<ACCUMULATED-GAINS-PRIOR> (809461)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 371750
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 875432
<AVERAGE-NET-ASSETS> 11986922
<PER-SHARE-NAV-BEGIN> 16.15
<PER-SHARE-NII> .78
<PER-SHARE-GAIN-APPREC> .71
<PER-SHARE-DIVIDEND> .77
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.87
<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799102
<NAME> OPPENHEIMER INSURED TAX-EXEMPT FUND - CLASS C
<SERIES>
<NUMBER> 2
<NAME> OPPENHEIMER TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 86347959
<INVESTMENTS-AT-VALUE> 88631741
<RECEIVABLES> 1604044
<ASSETS-OTHER> 28771
<OTHER-ITEMS-ASSETS> 1351002
<TOTAL-ASSETS> 91615558
<PAYABLE-FOR-SECURITIES> 975562
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 397290
<TOTAL-LIABILITIES> 1372852
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89583798
<SHARES-COMMON-STOCK> 12515
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 28628
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1655064)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2285344
<NET-ASSETS> 211009
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5347504
<OTHER-INCOME> 0
<EXPENSES-NET> 875432
<NET-INVESTMENT-INCOME> 4472072
<REALIZED-GAINS-CURRENT> (885433)
<APPREC-INCREASE-CURRENT> 4568736
<NET-CHANGE-FROM-OPS> 8155375
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12515
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10879239
<ACCUMULATED-NII-PRIOR> 20250
<ACCUMULATED-GAINS-PRIOR> (809461)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 371750
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 875432
<AVERAGE-NET-ASSETS> 1009
<PER-SHARE-NAV-BEGIN> 16.71
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> .15
<PER-SHARE-DIVIDEND> .08
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.86
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, her true
and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for her and in her capacity as a trustee of
OPPENHEIMER TAX-EXEMPT FUND, a Massachusetts business trust (the
"Fund"), to sign on her behalf any and all Registration Statements
(including any post-effective amendments to Registration Statements) under
the Securities Act of 1933, the Investment Company Act of 1940 and any
amendments and supplements thereto, and other documents in connection
thereunder, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully as to all intents and purposes as she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, and each of them, may lawfully do or cause to be done by virtue
hereof.
Dated this 24th day of October, 1995.
/s/ Bridget A. Macaskill
- -------------------------
Bridget A. Macaskill
