OPPENHEIMER MAIN STREET CALIFORNIA TAX-EXEMPT FUND
Supplement dated September 9, 1994
to the Prospectus dated October 25, 1993
The Prospectus is amended as follows:
1. The Supplement dated February 10, 1994 is hereby replaced.
2. The following is added after "Municipal Securities--Special Risk
Considerations--Borrowing" on page 7:
- Inverse Floaters and Other Derivative Investments. The
Fund may invest in variable rate bonds known as "inverse
floaters." These bonds pay interest at a rate that varies as
the yields generally available on short-term tax-exempt bonds
change. However, the yields on inverse floaters move in the
opposite direction of yields on short-term bonds in response to
market changes. When the yields on short-term tax-exempt bonds
go up, the interest rate on the inverse floater goes down. When
the yields on short-term tax-exempt bonds go down, the interest
rate on the inverse floater goes up. As interest rates rise,
inverse floaters produce less current income. Inverse floaters
are a type of "derivative security," which is a specially
designed investment whose performance is linked to the
performance of another security or investment. Some inverse
floaters have a "cap" whereby if interest rates rise above the
"cap," the security pays additional interest income. If rates
do not rise above the "cap," the Fund will have paid an
additional amount for a feature that proves worthless. The Fund
may also invest in municipal derivative securities that pay
interest that depends on an external pricing mechanism.
Examples are interest rate swaps or caps and municipal bond or
swap indices. The Fund anticipates that it would invest no more
than 10% of its total assets in inverse floaters.
The risks of investing in derivative investments include
not only the ability of the issuer of the derivative investment
to pay the amount due on the maturity of the investment, but
also the risk that the underlying security or investment might
not perform the way the Manager expected it to perform. That
can mean that the Fund will realize less income than expected.
Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater
extent than the market value of municipal securities that are
not derivative investment but have similar credit quality,
redemption provisions and maturities.
3. The section captioned "Investment Restrictions" on page 10 is
corrected to read as follows:
The Fund has certain investment restrictions which,
together with its investment objective, are fundamental policies
changeable only by a vote of a "majority" (as defined in the
Investment Company Act) of the outstanding voting securities of
the Fund. Under certain of those restrictions, the Fund cannot:
(1) lend money except in connection with the acquisition of debt
securities which the Fund's investment policies and restrictions
permit it to purchase; the Fund may also make loans of portfolio
securities, subject to the restrictions stated under "Loans of
Portfolio Securities"; or (2) concentrate investments to the
extent of 25% of its assets in any industry; however, there is
no limitation as to investment in U.S. Government Securities,
Municipal Securities or as to investment in obligations issued
by the State of California or its subdivisions, agencies,
authorities or instrumentalities; the Fund cannot invest in
securities or any other investment other than Municipal
Securities, temporary investments and Hedging Instruments. The
percentage restrictions described above and in the Additional
Statement are applicable only at the time of investment and
require no action by the Fund as a result of subsequent changes
in value of the investment or size of the Fund. A supplementary
list of investment restrictions is contained in the Additional
Statement, which also contains further information regarding the
Fund's investment policies.
September 9, 1994 PS725
