<PAGE>
Registration No. 33-23566
File No. 811-5586
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. 7 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 9 / X /
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
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(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
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(Address of Principal Executive Offices)
212-323-0200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b)
/ / On _______ pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ X / On May 1, 1994 pursuant to paragraph (a)
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 December 31, 1993, was filed on February 25, 1994.
<PAGE>
FORM N-1A
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Cover Page
2 Expenses
3 Financial History; Performance of the Fund
4 Cover Page; Investment Objectives and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes;
7 How to Exchange Shares; Special Investor Services; Service
Plan for Class A shares; Distribution and Service Plan for
Class B Shares; How to Buy Shares; How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special Investor
Services
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information or Prospectus
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Additional Investment
Restrictions
14 Trustees and Officers of the Fund; How the Fund is Managed
15 Trustees and Officers of the Fund - Major Shareholders; How
the Fund is Managed
16 How the Fund is Managed; Additional Information about the
Fund; Distribution and Service Plans; Back Cover
17 How the Fund is Managed
18 Additional Information about the Fund
19 Your Investment Account
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Additional Information about the
Fund - The Distributor; Distribution and Service Plans
22 Performance of the Fund
23 Financial Statements
_____________
* Not applicable or negative answer.
<PAGE>
Oppenheimer California Tax-Exempt Bond Fund
Prospectus dated May 1, 1994.
Oppenheimer California Tax-Exempt Fund (the "Fund") is a mutual fund
with the investment objective of seeking as high a level of current
interest income exempt from Federal and California income taxes for
individual investors as is consistent with preservation of capital. The
Fund attempts to achieve its objective through investment primarily in
municipal securities, the interest on which is exempt from the income
taxes described above. The Fund may also use certain Hedging Instruments
in an effort to protect against market risks, but not for speculation.
(See, "The Fund and Its Investment Policies.")
The Fund offers two classes of shares: (1) Class A shares sold at a
public offering price that includes a front-end sales charge, and (2)
Class B shares, which are sold without a front-end sales charge, although
you may pay a sales charge when you redeem your shares, depending on how
long you own them. Class B shares are also subject to an annual "asset-
based sales charge." Each class of shares bears different expenses. In
deciding which class of shares to buy, you should consider how much you
plan to purchase, how long you plan to keep your shares, and other factors
discussed in "How to Buy Shares" on page ____.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read it carefully and keep it for future
reference. You can find more detailed information about the Fund in the
April 29, 1994, Statement of Additional Information. For a free copy,
call Oppenheimer Shareholder Services, the Fund's Transfer Agent, at
1-800-525-7048, or write to the Transfer Agent at the address on the back
cover. The Statement has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which
means that it is legally part of this Prospectus).
Shares of the Fund are not deposits or obligations of any bank, nor are
they guaranteed by any bank or insured by the F.D.I.C. or any other
agency, and involve investment risks including possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
Page
INFORMATION ABOUT THE FUND
Expenses
Financial History
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
YOUR INVESTMENT ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix: Description of Ratings Categories
<PAGE>
INFORMATION ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution and other services and those expenses
are reflected in the Fund's net asset value per share. As a shareholder,
you pay these expenses indirectly. Shareholders pay other expenses
directly, such as sales charges. The following tables are provided to
help you understand your direct expenses of investing and your share of
the Fund's operating expenses you might expect to bear indirectly, based
on the Fund's expenses during its fiscal year ended December 31, 1993.
-- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to pages ____ through _____ for
an explanation of how and when these charges apply.
Class A Class B
Shares Shares
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Maximum Sales
Charge on Purchases
(as a % of offering price) 4.75% None
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Sales Charge on
Reinvested Dividends None None
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Deferred Sales Charge 5% in the first year,
(as a % of the lower of the declining to 1% in
original purchase price or the sixth year and
redemption proceeds) None* eliminated thereafter
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Exchange Fee $5.00** $5.00**
*If you invest more than $1 million in Class A shares, you may have to pay
a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares," below.
**Fee is waived for automated exchanges on PhoneLink, described in "How
to Buy Shares."
-- Annual Fund Operating Expenses are paid out of the Fund's assets.
The Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager") and other regular expenses for
services, such as transfer agent fees, custodial fees, audit, legal and
other business expenses. The following numbers are projections based on
the Fund's historical expenses and are calculated as a percentage of
average net assets. The actual numbers may be more or less, depending on
a number of factors, including the Fund's actual net assets.
Class A Class B
Shares Shares
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Management Fees % %
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12b-1 Distribution Plan Fees % %
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Shareholder Service Plan Fees % %
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Other Expenses % %
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Total Fund Operating Expenses % %
-- Examples. Assume that you made a $1,000 investment in the Fund,
that the Fund's annual return is 5% and that its operating expenses are
as described above in the charts.
If you redeemed your shares at the end of each period below, your
investment would incur the following expenses:
1 year 3 years 5 years 10 years*
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Class A Shares $ $ $ $
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Class B Shares $ $ $ $
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
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Class A Shares $ $ $ $
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Class B Shares $ $ $ $
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long-term Class B shareholders
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulations, because of the effect of the
asset-based sales charge and contingent deferred sales charge. The
automatic conversion is designed to minimize the likelihood that this will
occur. Please refer to "How to Buy Shares - Class B Shares" for more
information.
This example illustrates the effect of expenses on an investment, but
it is not meant to state or predict actual or expected costs or investment
returns, all of which will vary.
<PAGE>
Financial History
The table on this page presents selected per share data and ratios
for the Fund. This information has been audited by KPMG Peat Marwick, the
Fund's independent auditors, whose report on the Fund's financial
statements is included in the Annual Report in the Statement of Additional
Information. No Class B shares were publicly offered prior to May 3,
1993, and therefore no information on Class B shares is reflected in the
table below or in the Fund's other financial statements.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks as high a level of current interest income
exempt from Federal and California income taxes for individual investors
as is available from investment in Municipal Securities (defined below),
consistent with preservation of capital. Toward that objective, the Fund
may use certain Hedging Instruments (discussed below) in an effort to
protect against market risks. Since market risks are inherent in all
securities to varying degrees, assurance cannot be given that the Fund's
investment objective will be met.
Investment Policies and Strategies
Under normal market conditions, the Fund attempts to achieve its
investment objective by investing 100% of its total assets, and, as a
matter of fundamental policy, seeks to invest at least 80% of its total
assets, in municipal bonds and municipal notes (including tax anticipation
notes, bond anticipation notes, revenue anticipation notes, construction
loan notes and other short-term loans) and municipal commercial paper
issued by or on behalf of the State of California, other states and the
District of Columbia, their political subdivisions or any commonwealths,
territories or possessions of the United States, or their respective
agencies, instrumentalities or authorities, the interest on which is, in
the opinion of bond counsel to the respective issuer at the time of issue,
not subject to Federal individual income tax (collectively, these are
referred to as "Municipal Securities"). Under normal market conditions,
the Fund will invest at least 65% of its total assets in obligations of
the State of California and its political subdivisions, and their
respective agencies, authorities or instrumentalities, the interest from
which is, in the opinion of bond counsel to the respective issuer at the
time of issue, not subject to California individual income tax
(collectively, these are referred to as "California Municipal
Securities"). No independent investigation has been made by Oppenheimer
Management Corporation (the "Manager") as to the users of proceeds of bond
offerings or the application of such proceeds. The Fund may invest the
remainder of its assets in investments the income from which may be
taxable, including: (i) Municipal Securities issued to benefit a private
user ("Private Activity Municipal Securities"), the interest from which
may be subject to Federal or state alternative minimum tax (see
"Dividends, Distributions and Taxes," below and "Private Activity
Municipal Securities" in the Additional Statement); (ii) Hedging
Instruments (see "Covered Calls and Hedging," below); (iii) certain other
taxable investments described in "Investments in Taxable Securities,"
below; and (iv) repurchase agreements (explained below).
-- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies that it follows to try to achieve its objective.
Additionally, it uses certain investment techniques and strategies in
carrying out those policies. The Fund's investment policies and practices
are not "fundamental" unless a particular policy is identified in this
Prospectus as "fundamental."
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
level of shareholder approval (and this term is explained in the Statement
of Additional Information). The Fund's investment objective is a
"fundamental policy." The Fund's Board of Trustees may change non-
fundamental policies, strategies and techniques without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
Municipal Securities
"Municipal bonds" are Municipal Securities that have a maturity when
issued of one year or more and "municipal notes" are Municipal Securities
that have a maturity when issued of less than one year. The two principal
classifications of Municipal Securities are "general obligations" (secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest) and "revenue obligations" (payable only
from the revenues derived from a particular facility or class of
facilities, or specific excise tax or other revenue source). The Fund may
invest in municipal securities of both classifications. Normally, the
Fund will not invest more than 20% of its total assets in Private Activity
Municipal Securities and other taxable investments described above.
However, in times of unstable economic or market conditions, when the
Manager determines it appropriate to do so, the Fund may assume a
temporary defensive position and invest an unlimited amount of its assets
in taxable securities or Municipal Securities other than California
Municipal Securities. To the extent the Fund assumes a temporary
defensive position, all or a significant portion of the Fund's
distributions may be subject to Federal and/or California state income
tax. See "Investments in Taxable Securities," below.
Dividends paid by the Fund derived from interest attributable to
California Municipal Securities will be exempt from Federal individual
income taxes, such dividends will also be exempt from California
individual income taxes provided that at the close of each quarter, at
least 50% of the value of the Fund's assets are invested in obligations
the interest of which is exempt from taxation under California law (the
"California Investment Requirement"). Dividends derived from interest on
Municipal Securities of other governmental issuers will be exempt from
Federal individual income tax, but will be subject to California
individual income taxes. Any net interest income on taxable investments
and repurchase agreements will be taxable as ordinary income when
distributed to shareholders (see "Dividends, Distributions and Taxes"
below and "Investment Objective and Policies" in the Additional
Statement).
Municipal Securities purchased by the Fund must be rated at the time
of purchase within the four highest rating categories of Moody's Investor
Services, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), Fitch
Investors Service, Inc. ("Fitch") or, if unrated, judged by the Manager
to be of comparable quality to Municipal Securities rated within such
grades. (See Appendix A to the Additional Statement for a description of
those ratings.) Investments in unrated Municipal Securities will not, at
the time of purchase, exceed 20% of the Fund's total assets. No more than
25% of the Fund's total assets will be invested in Municipal Securities
that are: (a) municipal bonds rated either "Baa" by Moody's or "BBB" by
either S&P or Fitch, (b) municipal notes rated "SP-2" by S&P, "MIG2" by
Moody's, or "F-2" by Fitch, or (c) unrated Municipal Securities judged by
the Manager to be of comparable quality to Municipal Securities rated
within the grades described in (a) or (b), above, because such Municipal
Securities, 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 some speculative
characteristics. A reduction of the rating of a security after its
purchase by the Fund will not require the Fund to dispose of such
security. Securities that have fallen below investment grade entail a
greater risk that the ability of their issuers to meet their debt
obligations will be impaired. It is anticipated that the Municipal
Securities purchased for the Fund's portfolio will normally be those
having relatively longer maturities (approximately 7 to 30 years), but the
Fund may invest in Municipal Securities having a broad range of
maturities.
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 interest and principal payments (see "Special
Considerations," below). 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. If 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
these securities but will affect the Fund's net asset value per share.
Yields on Municipal Securities depend on a variety of factors, including
the general condition of the financial markets and of the Municipal
Securities market in particular, the size of a particular offering, the
maturity of the security and the credit rating of the issue. Generally,
Municipal Securities of longer maturities produce higher current yields
but are subject to greater price fluctuation due to changes in interest
rates, 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 risk as to the ability of
the issuer to meet principal and interest obligations. See "Investment
Objective and Policies" in the Additional Statement for further
information concerning the Fund's investment policies and more information
about Municipal Securities. The Fund generally will not engage in the
trading of securities to realize short-term gains, but the Fund may sell
securities as the Manager deems advisable to take advantage of
differentials in yield. While short-term trading increases portfolio
turnover, the Fund incurs little or no brokerage costs.
-- When-Issued Securities. The Fund may invest in Municipal
Securities on a "when-issued" or "delayed delivery" basis. In those
transactions, the Fund obligates itself to purchase or sell securities
with delivery and payment to occur at a later date to secure what is
considered to be an advantageous price and yield at the time the
obligation is entered into. The price, which is generally expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for when-issued securities takes place at a later
date (normally within 45 days of purchase). The Fund is subject to the
risk of adverse market fluctuation between purchase and settlement.
During the period between purchase and settlement, no payment is made by
the Fund for the security, and no interest accrues to the Fund from the
investment. Although the Fund is subject to the risk of market
fluctuation between purchase and settlement, the Manager does not believe
that the Fund's net asset value or income will be materially adversely
affected by its purchase of Municipal Securities on a "when-issued" or
"delayed delivery" basis. See "When-Issued and Delayed Delivery
Transactions" in the Additional Statement for more details.
-- Municipal Lease Obligations. The Fund may invest in certificate
of participation that represent a proportionate interest in or right to
the lease-purchase payment made under municipal lease obligations. 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 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. See "Investment
Objective and Policies - Municipal Securities - Municipal Lease
Obligations" in the Additional Statement for more details.
-- Non-diversification. The Fund is classified as a "non-
diversified" investment company under the Investment Company Act of 1940
(the "Investment Company Act"), so that the proportion of the Fund's
assets that may be invested in the securities of a single issuer is not
limited by the Investment Company Act. An investment in the Fund
therefore will entail greater risk than an investment in a diversified
investment company because a higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio, and economic, political or regulatory developments may
have a greater impact on the value of the Fund's portfolio than would be
the case if the portfolio were diversified among more issuers. However,
the Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), which will relieve the
Fund from liability for Federal income tax to the extent its earnings are
distributed to shareholders. Among the requirements for such
qualification are that: (1) not more than 25% of the market value of the
Fund's total assets will be invested in the securities of a single issuer,
and (2) with respect to 50% of the market value of its total assets, not
more than 5% of the market value of its total assets may be invested in
the securities of a single issuer and the Fund must not own more than 10%
of the outstanding voting securities of a single issuer.
-- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjustable 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 Additional Statement
for more details.
-- Inverse Floaters. From time to time the Fund may invest in
variable rate bonds having an interest rate that varies inversely with
movements in short-term tax-exempt yields. Such bonds are known as
"inverse floaters." As short-term rates rise, inverse floaters produce
less current income than conventional long-term municipal bonds having
fixed rates.
Special Considerations - California Municipal Securities
Because the Fund concentrates its investments in California Municipal
Securities, the market value and marketability of such Municipal
Securities and the interest income to the Fund from them could be
adversely affected by a default or a financial crisis relating to any of
such issuers. Investors should consider these matters as well as
economic trends in California, summarized in the Additional Statement
under "Special Investment Considerations - California Municipal
Securities."
Covered Calls and Hedging
The Fund may write (i.e., sell) covered call options to increase income
for liquidity purposes. For hedging purposes it may purchase certain put
and call options, Interest Rate Futures, Municipal Bond Index Futures
(both described below), and options on Interest Rate Futures and Municipal
Bond Index Futures, and engage in Interest Rate Swap transactions, all of
which are referred to as "Hedging Instruments." In general, the Fund may
use Hedging Instruments: (1) to attempt to protect against declines in the
market value of the Fund's portfolio, and thus protect the Fund's net
asset value per share against downward market trends, and (2) to establish
a position in the debt securities market as a temporary substitute for the
purchase of particular debt securities. The Fund will not use Hedging
Instruments for speculation. The covered calls and Hedging Instruments
the Fund may use are described below and in greater detail under "Covered
Calls and Hedging" in the Additional Statement. All puts and calls on
securities, Interest Rate Futures or Municipal Bond Index Futures or
options on such futures purchased or sold by the Fund will be listed on
a national securities or commodities exchange or quoted on the automatic
quotation system of the National Association of Securities Dealers, Inc.
("NASDAQ"). The aggregate premiums paid on all such options which are
held at any time will be limited to 20% of the Fund's total assets and the
aggregate margin deposits on all such futures or options thereon held at
any time will be limited to 5% of the Fund's total assets.
-- Writing Covered Call Options. The Fund may write call options
("calls") if: (i) after any sale not more than 25% of the Fund's total
assets are subject to calls; (ii) the calls are listed on a domestic
securities or commodities exchange or quoted on NASDAQ; (iii) the calls
are "covered," i.e., the Fund owns the securities subject to the call (or
other securities acceptable for applicable escrow arrangements) while the
call is outstanding; and (iv) the calls are issued by the Options Clearing
Corporation. If a covered call written by the Fund is exercised, the Fund
forgoes any profit from an increase in the market price above the call
price of the underlying investment on which the call was written.
-- Purchasing Puts, Stand-By Commitments and Calls. The Fund may
purchase put options ("puts") which relate to a debt security, Interest
Rate Futures or Municipal Bond Index Futures. The Fund may not write
("sell") puts. Under a stand-by commitment, a dealer agrees to purchase,
at the Fund's option, specified Municipal Securities at a stated price on
same day settlement. The aggregate price of a security subject to a
stand-by commitment may be higher than the price which would otherwise be
paid for the security without such stand-by commitment, thus increasing
the cost of the security and reducing its yield. The Fund may purchase
calls (i) as to debt securities, Interest Rate Futures or Municipal Bond
Index Futures, or (ii) to effect a "closing purchase transaction" to
terminate its obligation as to a call it has previously written. A call
or put may be purchased only if, after such purchase, the value of all
options (puts and calls) held by the Fund would not exceed 5% of the
Fund's total assets.
-- Interest Rate Futures and Municipal Bond Index Futures. The Fund
may buy and sell futures contracts only if they relate to debt securities
("Interest Rate Futures") or municipal bond indices ("Municipal Bond
Index Futures").
-- Interest Rate Swap Transactions. The Fund may enter into interest
rate swaps. In an interest rate swap, the Fund and another party exchange
their respective commitments to pay or receive interest on a security,
(e.g., an exchange on floating rate payments for fixed rate payments).
The Fund will not use interest rate swaps for leverage. Swap transactions
will be entered into only as to security positions held by the Fund. The
Fund may not enter into swap transactions with respect to more than 50%
of its total assets.
The Fund will segregate liquid assets (e.g., cash, U.S. Government
securities or other appropriate high grade debt obligations) equal to the
net excess, if any, of its obligations over its entitlements under the
swap and will mark to market that amount daily. There is a risk of loss
on a swap equal to the net amount of interest payments that the Fund is
contractually obligated to make. The credit risk of an interest rate swap
depends on the counterparty's ability to perform. The value of the swap
may decline if the counterparty's creditworthiness deteriorates. If the
counterparty defaults, the Fund risks the loss of the net amount of
interest payments that it is contractually entitled to receive. The Fund
may be able to reduce or eliminate its exposure to losses under swap
agreements either by assignment them to another party, or by entering into
an offsetting swap agreement with the same counterparty or another
creditworthy counterparty. See "Covered Calls and Hedging" in the
Additional Statement for further details.
-- Risks of Options and Futures Trading. "Covered Calls and Hedging"
in the Additional Statement contains further information about the
characteristics, risks and possible benefits of trading in options,
Interest Rate Futures, Municipal Bond Index Futures and options on such
Futures, and about the Fund's other limitations (which are not fundamental
policies) on investment in such Futures and options thereon. There are
certain risks in writing calls. If a call written by the Fund is
exercised, the Fund forgoes any profit from any increase in the market
price above the call price of the underlying investment. In addition, the
Fund could experience capital losses that might cause previously
distributed short-term capital gains to be re-characterized as nontaxable
return of capital to shareholders. The principal risks of Futures trading
are: (a) possible imperfect correlation between the prices of the Futures
and the market value of the Fund's portfolio securities; (b) possible lack
of a liquid secondary market for closing out a Futures position; (c) the
need for additional skills and techniques beyond those required for normal
portfolio management; and (d) losses resulting from market movements or
interest rate movements not anticipated by the Manager.
Repurchase Agreements
The Fund may acquire securities subject to repurchase agreements, to
generate income for liquidity purposes. The Fund's repurchase agreements
will be fully collateralized. However, if the seller of the securities
fails to pay the agreed-upon repurchase price on the delivery date, the
Fund's risks may include the costs of disposing of the collateral for the
agreement, and the losses that might result from any delays in foreclosing
on the collateral. There is no limit on the amount of the Fund's assets
that may be subject to repurchase agreements if the agreement has a
maturity of seven days or less. The Fund will not enter into a repurchase
agreement which will cause more than 10% of its net assets to be subject
to repurchase agreements having a maturity beyond seven days. See
"Repurchase Agreements" in the Additional Statement for further details.
Investments in Taxable Securities
In times of unstable market or economic conditions, when the Manager
determines it appropriate to do so, the Fund may assume a temporary
defensive position and invest an unlimited amount of its assets in taxable
securities. The Fund may also invest in taxable securities in any of the
following circumstances: (a) to maintain liquidity to meet anticipated
redemptions or exchanges; (b) pending the investment of proceeds from
sales of Fund shares or portfolio securities; or (c) pending settlement
of purchases of portfolio investments. The types of taxable securities
the Fund may invest in include: (i) obligations of, or guaranteed by, the
U.S. Government, its instrumentalities or agencies; (ii) cash equivalents,
including bankers acceptances, certificates of deposit and time deposits
of domestic banks with assets of $1 billion or more; (iii) commercial
paper rated in the highest category by an established rating agency; or
(iv) short-term taxable debt obligations rated "A-3" or better by S&P, "P-
3" or better by Moody's, or F-3 or better by Fitch. Any net interest
income derived from taxable securities and distributed by the Fund will
be taxable as ordinary income when distributed. Furthermore, if
investments by the Fund in taxable securities cause the Fund to fail to
meet the California Investment Requirement, all of the Fund's dividends
would be taxable as ordinary income for California individual income tax
purposes. To the extent the Fund generates taxable income, it will not
be meeting its investment objective.
Illiquid Securities
The Fund may not enter into repurchase agreements maturing in more than
seven days or invest in securities for which there are no readily-
available market quotations ("illiquid securities") if more than 15% of
the value of the Fund's net assets would consist of such securities. Over-
the-counter options held by the Fund, the assets used to cover over-the-
counter options, repurchase transactions having a maturity beyond seven
days, and certain municipal lease obligations are considered illiquid
securities. The Fund may not invest any portion of its assets in
securities the public sale of which would require registration under the
Securities Act of 1933. The Fund currently intends to invest no more than
10% of its net assets in illiquid securities.
Loans of Portfolio Securities
To attempt to increase its income for liquidity purposes, the Fund may
lend its portfolio securities (other than in repurchase transactions) if
the loan is collateralized in accordance with applicable regulatory
requirements and if, after any loan, the value of the securities loaned
does not exceed 25% of the value of its total assets. The Fund presently
does not intend that the value of securities loaned during the coming year
will exceed 5% of the Fund's total assets. The income from such loans,
when distributed by the Fund, will be taxable. See "Loans of Portfolio
Securities" in the Additional Statement for further information.
Other Investment Restrictions
The Fund has certain investment restrictions which, together with its
investment objective and the requirement that the Fund normally invest at
least 80% of its assets in Municipal Securities, are fundamental policies,
that is, subject to change only by the vote of a "majority" (as defined
in the Investment Company Act) of the Fund's outstanding voting
securities.
Under some of those restrictions, the Fund cannot: (1) invest in
securities or any other investment other than Municipal Securities, the
taxable securities and Hedging Instruments described in "The Fund and Its
Investment Policies" above; (2) make loans, except through the purchase
of portfolio securities subject to repurchase agreements or through loans
of portfolio securities as described under "Loans of Portfolio
Securities"; (3) borrow money in excess of 10% of the value of its total
assets, or make any additional investments whenever borrowings exceed 5%
of the Fund's assets; it may borrow only from banks as a temporary measure
for extraordinary or emergency purposes (not for the purpose of leveraging
its investments); (4) pledge, mortgage or otherwise encumber, transfer or
assign any of its assets to secure a debt; collateral arrangements for
premium and margin payments in connection with Hedging Instruments are not
deemed to be a pledge of assets; (5) concentrate investments to the extent
of more than 25% of its total assets in any industry; however, there is
no limitation as to investment in Municipal Securities, U.S. Government
obligations or California Municipal Securities; or (6) buy or sell futures
contracts other than Interest Rate Futures or Municipal Bond Index
Futures.
All of the percentage limitations described above and elsewhere in
this Prospectus, other than those that apply to borrowing, apply to the
Fund only at the time of purchasing 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 "Additional Investment
Restrictions" the Statement of Additional Information, along with more
information about the Fund's non-fundamental investment policies and
strategies.
How the Fund is Managed
Organization and History. The Fund is an open-end, non-diversified
management investment company organized as a Massachusetts business trust
in July, 1988.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of this Fund into two or more classes, each
having its own dividends, distributions and expenses. Each class may have
a different net asset value. The Board has done so, and the Fund
currently has two classes of shares, Class A and Class B. Each share has
one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a class vote together on matters that
affect that class alone. Shares are freely transferrable.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet throughout the year to oversee the Fund's activities, review
performance, and review the actions of the Manager. "Trustees and
Officers of the Fund" in the Statement of Additional Information names the
Trustees and provides more information about them and the officers of the
Fund. Although the Fund is not required by law to hold annual meetings,
it may hold meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove Trustees or to
take other action described in the Declaration of Trust.
The Manager and its Affiliates. The Fund is managed by the Manager, which
chooses the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since April 30,
1959. The Manager and its affiliates currently manage investment
companies, including other OppenheimerFunds with assets aggregating over
$26 billion as of December 31, 1993, and having more than 1.8 million
shareholder accounts. The Manager is owned by Oppenheimer Acquisition
Corp., a holding company owned in part by senior officers of the Manager
and controlled by Massachusetts Mutual Life Insurance Company, a mutual
life insurance company.
-- Portfolio Manager. Robert E. Patterson, a Senior Vice President
of the Manager, serves as Portfolio Manager of the Fund and has been
primarily responsible for the day-to-day management of the Fund's
portfolio since November, 1988. During the past five years, Mr. Patterson
has also served as an officer and portfolio manager for other
OppenheimerFunds. For more information about the Fund's other officers
and Trustees, see "Trustees and Officers" in the Additional Statement.
-- 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: 0.60% of the first $200 million of
the Fund's average annual net assets, 0.55% of the next $100 million,
0.50% of the next $200 million, 0.45% of the next $250 million, 0.40% of
the next $250 million, and 0.35% of net assets in excess of $1 billion.
The Fund's management fee for its last fiscal year was ____% of average
annual net assets for Class A shares and ____% for Class B shares, which
may be higher than the rate paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, 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 affect 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
portfolio transactions in "Brokerage Policies of the Fund" in the
Statement of Additional Information. Because the Fund purchases most of
its portfolio securities directly from the sellers and not through
brokers, it therefore incurs relatively little expense for brokerage.
From time to time it may use brokers when buying portfolio securities.
When deciding which brokers to use in those cases, the investment advisory
agreement allows the Manager to consider whether brokers have sold shares
of the Fund or any other funds for which the Manager also serves as
investment adviser.
-- The Distributor. The Fund's shares are sold through dealers or
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
-- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries to the
Transfer Agent at the address and toll-free numbers shown elsewhere in
this Prospectus or 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 in advertisements about the Fund or in
communications to shareholders. It 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 compare the Fund's performance. The Fund's investment performance will
vary, depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
-- Total Returns. There are different types of "total returns" used
to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares. The cumulative total return measures the change in
value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period
that would produce the cumulative total return over the entire period.
However, average annual total returns do not show the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, they reflect the
payment of the maximum initial sales charge. Total returns may be quoted
"at net asset value," without considering the effect of the sales charge,
and these returns would be reduced if sales charges were deducted. When
total returns are shown for Class B shares, they reflect the effect of the
contingent deferred sales charge that applies to the period for which
total return is shown, or else they may be shown based just on the change
in net asset value, without considering the effect of the contingent
deferred sales charge.
-- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a
30-day period by the maximum offering price on the last day of the period.
The yield of each Class will differ because of the different expenses of
each Class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1993,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
Management's Discussion of Performance
During the twelve months ended December 31, 1993, the performance of
the California municipal bond market was favorably affected by low
interest rates, Federal tax increases and gradual economic growth. The
Fund continued to maintain a strong position in higher quality bonds that
the Manager considered to be related to essential services and projects
that benefit the entire community, such as toll roads, utilities and
hospitals. Recent additions to the portfolio followed this basic
strategy. The Fund also sought to lock-in attractive rates with call
protection, which prevents the issuer of the bond from calling or
redeeming it before maturity. In the opinion of the Manager, the Fund is
diversified both by geographic location and by market sector within
California.
-- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in each Class
of shares of the Fund from the inception of the Class held through
December 31, 1993, with all dividends and capital gains distributions
reinvested in additional shares. The graph reflects the deduction of the
4.75% maximum initial sales charge on Class A shares and the maximum 5%
contingent deferred sales charge for Class B shares.
Because the Fund invests in a variety of debt securities in domestic
and foreign markets, 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 and includes a factor for the
reinvestment of interest but does not reflect expenses. Index performance
reflects reinvestment of income but not capital gains or transaction
costs, and none of the data below shows the effect of taxes. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in any one index and the index data does not reflect any
assessment of the risk of the investments included in the index.
Comparison of Change
In Value of $10,000
Hypothetical Investment in
Oppenheimer California
Tax-Exempt Fund and Lehman
Brothers Municipal Bond Index
Average Annual Total Return of the Fund at 12/31/93
A Shares 1 Year Life
7.88 9.00%
Cumulative Total Return of the Fund at 12/31/93
B Shares Life
1.66%
Oppenheimer Oppenheimer
California Lehman California Lehman
Tax-Exempt Bros. Muni Tax-Exempt Bros. Muni
Fund A Bond Index Fund B Bond Index
11/03/88 $ 9,525 $10,000
12/31/88 $ 9,661 $10,102
12/31/89 $10,783 $11,192
12/31/90 $11,468 $12,008
12/31/91 $12,719 $13,466
12/31/92 $13,768 $14,653
12/31/93 $15,604 $16,453
05/01/93 $10,000 $10,000
12/31/93 $10,166 $10,718
Past Performance is not predictive of future performance.
YOUR INVESTMENT ACCOUNT
How to Buy Shares
The Fund offers investors two different classes of shares. The
different classes of shares represent investments in the same portfolio
of securities but are subject to different expenses and will likely have
different share prices.
-- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, and you sell any of those shares within 18
months after your purchase, you will pay a contingent deferred sales
charge, which will vary depending on the amount you invested.
-- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares.
-- Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which class
of shares is better suited to your needs depends on a number of factors
which you should discuss with your financial advisors:
-- How much do you plan to invest? If you plan to invest a
substantial amount, the reduced sales charges available for larger
purchases of Class A shares may be more beneficial to you, and for
purchases over $1 million, the contingent deferred sales charge on
Class A shares may be more beneficial. The Distributor will not
accept any order for $1 million or more for Class B shares on behalf
of a single investor for that reason.
-- How long do you expect to hold your investment? While future
financial needs cannot be predicted with certainty, investors who
prefer not to pay an initial sales charge and who plan to hold their
shares for more than 6 years might consider Class B shares. Investors
who plan to redeem shares within 7 years might prefer Class A shares.
-- Are there differences in account features that matter to you?
Because some account features may not be available for Class B
shareholders, such as checkwriting, you should carefully review how
you plan to use your investment account before deciding which class
of shares is better for you. Additionally, the dividends payable to
Class B shareholders will be reduced by the additional expenses borne
solely by that class, such as the asset-based sales charge to which
Class B shares are subject, as described below and in the Statement
of Additional Information.
--How does it affect payments to my broker? A salesperson or any
other person who is entitled to receive compensation for selling Fund
shares may receive different compensation for selling one class than
for selling another class. It is important that investors understand
that the purpose of the contingent deferred sales charge and asset-
based sales charge for Class B shares is the same as the purpose of
the front-end sales charge on sales of Class A shares.
-- How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional investments at
any time with as little as $25. There are reduced minimum investments
under special investment plans:
-- With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial
and subsequent investments for as little as $25; and subsequent
purchases of at least $25 can be made by telephone through
AccountLink.
-- Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as
$250 (if your IRA is established under an Asset Builder Plan, the $25
minimum applies), and subsequent investments may be as little as $25.
-- There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other
OppenheimerFunds (a list of them appears in the Statement of
Additional Information, or you can ask your dealer or call the
Transfer Agent), or by reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
-- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A or Class B shares. If you do not choose, your investment
will be made in Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares.
-- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank
or other financial institution that is an Automated Clearing House
(ACH) member, to transmit funds electronically to purchase shares,
to send redemption proceeds, and to transmit dividends and
distributions. Shares are purchased for your account on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions
automatically, under an Asset Builder Plan, described below, or by
telephone instructions using OppenheimerFunds PhoneLink, also
described below. You must request AccountLink privileges on the
application or dealer settlement instructions used to establish your
account. Please refer to "AccountLink," below for more details.
Shares are sold at the public offering price based on the net asset
value that is next determined after the Distributor receives the purchase
order in Denver. In most cases, to receive that day's offering price, the
Distributor must receive your order by 4:00 P.M., New York time (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 4:00 P.M., 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.
-- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, where purchases are not subject to an initial
sales charge, the offering price may be net asset value. In some cases,
reduced sales charges may be available, as described below. When you
invest, the Fund receives the net asset value for your account. The sales
charge varies depending on the amount of your purchase and a portion may
be retained by the Distributor and allocated to your dealer. The current
sales charge rates and commissions paid to dealers and brokers are as
follows:
- -------------------------------------------------------------------------
Front-End Sales Charge Commission as
As a Percentage of: Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- -------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- -------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.50% 4.71% 3.75%
- -------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%
- -------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- -------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- -------------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. However, that
commission will be paid only on the amount of those purchases in excess
of $1 million that were not previously subject to a front-end sales charge
and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
-- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. From time to time, the Distributor may make special arrangements
with dealers and make additional payments if the dealer meets specified
sales criteria and other requirements. Dealers whose sales of
OppenheimerFunds (other than money market funds) under OppenheimerFunds-
sponsored 403(b) custodial plans exceed $5 million per year (calculated
per quarter), will receive monthly one-half of the Distributor's retained
commissions on those sales, and if those sales exceed $10 million per
year, those dealers will receive the Distributor's entire retained
commission on those sales. The Distributor may sponsor an annual sales
conference to which a dealer firm is eligible to send, with a guest, a
registered representative who sells more than $2.5 million of Class A
shares of OppenheimerFunds (other than money market funds) in a calendar
year, or the dealer may, at its option, receive the equivalent cash value
of that award as additional commission.
-- Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one or
more of the following ways:
-- Right of Accumulation. You and your spouse can cumulate
Class A shares you purchase for your own accounts, or jointly, or on
behalf of your children who are minors, under trust or custodial
accounts. A fiduciary can cumulate shares purchased for a trust,
estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can cumulate current purchases of Class A
shares of the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your investment in one of the
OppenheimerFunds; the value of those shares will be based on the
greater of the amount you paid for the shares or their current value
(at offering price). The OppenheimerFunds are listed in "Reduced
Sales Charges" in the Statement of Additional Information, or a list
can be obtained from the Transfer Agent. The reduced sales charge
will apply only to current purchases and must be requested when you
buy your shares.
-- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-
month period at the reduced sales charge rate that applies to the
aggregate amount of the intended purchases, including purchases made
up to 90 days before the date of the Letter. More information is
contained in the Application and in "Reduced Sales Charges" in the
Statement of Additional Information.
-- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following persons: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees (and their spouses) of dealers or brokers described above or
financial institutions that have entered into sales arrangements with such
dealers or brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the time of
purchase that the purchase is for the purchaser's own account (or for the
benefit of such employee's spouse or minor children); (6) dealers, brokers
or registered investment advisers that have entered into an agreement with
the Distributor providing specifically for the use of shares of the Fund
in particular investment products made available to their clients.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than the Cash Reserves Funds) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge is also waived if shares
are redeemed in the following cases: (1) retirement distributions or loans
to participants or beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans ("Retirement Plans"),
(2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, and (4) involuntary redemptions
of shares by operation of law or under the procedures set forth in the
Fund's Declaration of Trust or adopted by the Board of Trustees.
-- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
Years Since Purchase On Redemptions in That Year
Payment Was Made (As % of Amount Subject to Charge)
0-1 5.0%
- --------------------------------------------------------------
1-2 4.0%
- --------------------------------------------------------------
2-3 3.0%
- --------------------------------------------------------------
3-4 3.0%
- --------------------------------------------------------------
4-5 2.0%
- --------------------------------------------------------------
5-6 1.0%
- --------------------------------------------------------------
6 and following None
- --------------------------------------------------------------
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which
the purchase was made.
-- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) 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; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (as evidenced by a determination of disability by the Social
Security Administration), and (3) returns of excess contributions to
Retirement Plans.
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. 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 Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other
charge is imposed. When Class B shares convert, any other Class B shares
that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A and Class B Shares" in the
Statement of Additional Information.
-- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal service for accounts that hold Class B shares. 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 up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
If the Plan is terminated by the Fund, it provides for continuing
payments of the asset-based sales charge to the Distributor for certain
expenses already incurred. The accounting treatment for the Fund's
obligation under the Plan for those future payments is discussed in
"Distribution and Service Plans" in the Statement of Additional
Information. The accounting standards now used are currently under review
by the American Institute of Certified Public Accountants, and it is
possible that those standards will change and that the Fund's Class B Plan
would be changed as a result. At December 31, 1993, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $____________ (equal to ____% of the Fund's net assets represented by
Class B shares on that date), which have been carried over into the
present Plan year.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
-- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with the
Fund, to pay for these purchases.
-- Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically by
phone from your Fund account to another OppenheimerFunds account you
have already established by calling the special PhoneLink number.
Please refer to "Exchange Privilege," below, for details.
-- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will send
the proceeds directly to your AccountLink bank account. Please refer
to "How to Sell Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of Withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer Agent
to exchange an amount you establish in advance automatically for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each other OppenheimerFunds account is $25. These exchanges are
subject to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying
sales charge. This privilege applies to Class A shares that you sell, and
Class B shares on which you paid a contingent deferred sales charge when
you redeemed them. You must be sure to ask the Distributor for this
privilege when you send your payment. Please consult the Statement of
Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, by using the Fund's
Checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, as described above.
If you have questions about any of these procedures, and especially if you
are redeeming shares in a special situation, such as due to the death of
the owner, or from a retirement plan, please call the Transfer Agent
first, at 1-800-525-7048, for assistance.
-- To sell shares in an OppenheimerFunds retirement account in your
name, call the Transfer Agent for a distribution request form. There are
special income tax withholding requirements for distributions from
retirement plans and you must submit a Withholding form with your request
to avoid delay. If your retirement plan account is held for you by your
employer, you must arrange for the distribution request to be sent by the
plan administrator or trustee. There are additional details in the
Statement of Additional Information.
-- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
-- You wish to redeem more than $50,000 worth of shares and receive
a check
-- The check is not payable to all shareholders listed on the account
statement
-- The check is not sent to the address of record on your statement
-- Shares are being transferred to a Fund account with a different
owner or name
-- Shares are redeemed by someone other than the owners (such as an
Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or from a foreign bank that has a U.S. correspondent
bank, or from a U.S. registered dealer or broker in securities, municipal
securities or government securities, or from a U.S. national securities
exchange, a registered securities association or a clearing agency. If
you are signing as a fiduciary or on behalf of a corporation, partnership
or other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
-- Your name
-- The Fund's name
-- Your Fund account number (from your statement)
-- The dollar amount or number of shares to be redeemed
-- Any special payment instructions
-- Any share certificates for the shares you are selling, and
-- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
-- To redeem shares through a service representative, call
1-800-852-8457
-- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
-- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
CheckWriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
-- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
-- Checkwriting privileges are not available for accounts holding
Class B shares or Class A shares that are subject to a contingent deferred
sales charge.
-- Checks must be written for at least $100.
-- Checks cannot be paid if they are written for more than your
account value.
Remember: your shares fluctuate in value and you should not write a
check close to the total account value.
-- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 15 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, (4) or the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges on PhoneLink described below. To
exchange shares, you must meet several conditions:
-- Shares of the fund selected for exchange must be available for
sale in your state of residence
-- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
-- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
-- You must meet the minimum purchase requirements for the fund you
purchase by exchange
-- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same two classes of
shares. If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A, Class B and/or Class C shares, and a list
can be obtained by calling the Distributor at 1-800-525-7048. Please
refer to the Statement of Additional Information for more details about
this policy.
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 names and address. Shares held under certificates may not
be exchanged by telephone.
You can obtain a list of eligible OppenheimerFunds in the Statement
of Additional Information or by calling the Transfer Agent at 1-800-525-
7048. Exchanges of shares involve a redemption of the shares of the fund
you own and a purchase of shares of the other fund.
There are certain exchange policies you should be aware of:
-- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request by 4:00 P.M. that
is in proper form, but either fund may delay the purchase of shares of the
fund you are exchanging into if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the
receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the disposition of securities at a time or price
disadvantageous to the Fund.
-- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
-- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
-- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
-- Net Asset Value Per Share is determined for each class of shares
as of 4:00 P.M. each day The New York Stock Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number
of shares of that class that are outstanding. The Fund'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, short-term obligations for which market values
cannot be readily obtained, and call options and hedging instruments.
These procedures are described more completely in the Statement of
Additional Information.
-- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
-- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
-- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
-- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the Dealer performs any transaction
erroneously.
-- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. The Transfer Agent may
delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 15 days from the date the shares
were purchased. That delay may be avoided if you 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 $200 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 the Statement of Additional Information for
more details.
-- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
-- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class B shares.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class
B shares from net investment income each regular business day and pays
those dividends to shareholders monthly. Normally, dividends are paid on
or about the tenth business day every month, but the Board of Trustees can
change that date. Distributions may be made monthly from any net short-
term capital gains the Fund realizes in selling securities. It is
expected that distributions paid with respect to Class A shares will
generally be higher than for Class B shares because expenses allocable to
Class B shares will generally be higher.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. 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.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
-- Reinvest all distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
-- Reinvest capital gains only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or sent to
your bank account on AccountLink.
-- Receive all distributions in cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
-- Reinvest your distributions in another OppenheimerFunds account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
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 1993 were exempt from Federal and California
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. ____% of the Fund's dividends
(excluding distributions) paid during 1993 were a tax preference item for
shareholders subject to the alternative minimum tax. "Substantial users"
of facilities financed by Private Activity Municipal Securities and
Corporate shareholders should see "Private Activity Municipal Securities"
in the Additional Statement before purchasing shares.
A shareholder receiving a dividend from income earned by the Fund
from one or more of: (i) certain taxable investments, (ii) income from
securities loans, (iii) income or gains from Hedging Instruments, (iv) an
excess of net short-term capital gain over net long-term capital loss from
the Fund, and (v) discount from certain stripped tax-exempt obligations
or coupons treats the dividend as a receipt of either ordinary income or
long-term capital gains 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 or California 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.
In any year in which the Fund qualifies as a regulated investment
company under the Internal Revenue Code and is exempt from Federal income
tax, (i) the Fund will also be exempt from the California corporate income
and franchise taxes and (ii) the Fund will be qualified under California
law to pay certain exempt interest dividends which will be exempt from the
California personal income tax. Individual shareholders of the Fund will
generally not be subject to California personal income tax on exempt-
interest dividends received from the Fund to the extent such distributions
are attributable to interest on California Municipal Securities (and
qualifying obligations of the United States Government), provided that at
least 50% of the Fund's assets at the close of each quarter of its taxable
year are invested in such obligations. Distributions from the Fund
attributable to sources other than California Municipal Securities will
generally be taxable to such shareholders as ordinary income. In
addition, certain distributions to shareholders may be includable in
income subject to the California alternative minimum tax.
Appendix: Description of Ratings Categories
Municipal Bonds
Moody's Investor Services, Inc.. The four highest ratings of Moody's
Investors Service, Inc. ("Moody's") for Municipal Bonds are Aaa, Aa, A
and Baa. Municipal Bonds rated Aaa are judged to be of the "best
quality." The rating of 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 Bonds. The Aaa and Aa rated bonds comprise what are generally
known as "high grade bonds." Municipal Bonds 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 A rated bonds are considered adequate, but elements may be
present which suggest a susceptibility to impairment at some time in the
future. Municipal Bonds 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, respectively.
In addition to the alphabetic rating system described above,
Municipal Bonds rated by Moody's which have a demand feature that provides
the holder with the ability to periodically 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 Standard &
Poor's Corporation ("S&P") for Municipal Bonds are AAA (Prime), AA (High
Grade), A (Good Grade), and BBB (Medium Grade). Municipal Bonds rated AAA
are "obligations of the highest quality." The rating of AA is accorded
issues with investment characteristics "only slightly less marked than
those of the prime quality issues." The category of 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
obligations 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, 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.
Fitch. The four highest ratings of Fitch for Municipal Bonds are AAA, AA,
A, and BBB. Municipal Bonds rated AAA are judged to be of the "highest
credit quality." The rating of AA is assigned to bonds of "very high
credit quality." Municipal Bonds which are rated A by Fitch are
considered to be of "high credit quality." The rating of BBB is assigned
to bonds of "satisfactory credit quality." The A and BBB rated bonds are
more vulnerable to adverse changes in economic conditions than bonds with
higher ratings.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations rated
Aaa, Aa or A by Moody's, AAA, AA or A by S&P or F+1-, F-1, F-2 or F-1 by
Fitch. The Moody's corporate debt ratings shown do not differ materially
from those set forth above for Municipal Bonds. Corporate debt
obligations rated AAA by S&P are "highest grade obligations." Obligations
bearing the rating of AA also qualify as "high grade obligations" and "in
the majority of instances differ from AAA issues only in small degrees."
Corporate debt obligations rated A by S&P are regarded as "upper medium
grade" and have considerable investment strength, but are not entirely
free from adverse effects of changes in economic and trade conditions.
The Fitch ratings shown do not differ from those set forth below for tax-
exempt municipal notes.
Commercial Paper
The commercial paper ratings of A-1 by S&P, P-1 by Moody's, and F-1+
by Fitch are the highest commercial paper ratings of the respective
agencies. The issuer's earnings, quality of long-term debt, management
and industry position are among the factors considered in assigning such
ratings.
Tax-Exempt Municipal Notes
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 as large as notes rated "MIG." 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.
S&P's rating for Municipal Notes due in three years or less are SP-1
and SP-2. SP-1 describes issues with a very strong capacity to pay
principal and interest and compares with bonds rated A by S&P; if modified
by a plus sign, it compares with bonds rated AA or AAA by S&P. SP-2
describes issues with a satisfactory capacity to pay principal and
interest, and compares with bonds rated BBB by S&P.
Fitch's rating for Municipal Notes due in three years or less are F-
1+, F-1, F-2 and F-3. F-1+ describes notes with an exceptionally strong
credit quality and the strongest degree of assurance for timely payment.
F-1 describes notes with a very strong credit quality and assurance of
timely payment is only slightly less in degree than issues rated F-1+.
F-2 describes notes with a good credit quality and a satisfactory
assurance of timely payment, but the margin of safety is not as great for
issues assigned F-1+ or F-1 ratings. F-3 describes notes with a fair
credit quality and an adequate assurance of timely payment, but near-term
adverse changes could cause such securities to be rated below investment
grade.
<PAGE>
Investment Adviser Prospectus
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services OPPENHEIMER
P.O. Box 5270 California
Denver, Colorado 80217 Tax-Exempt Fund
1-800-525-7048
Effective May 1, 1994
Custodian of Portfolio Securities
Citibank, N.A.
One Citicorp Center
New York, New York 10154
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street
Denver, Colorado 80202
Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, 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 Additional Statement, and
if given or made, such information and
representations must not be relied upon as having
been authorized by the Fund, Oppenheimer
Management Corporation, Oppenheimer Funds
Distributor, Inc., or any affiliate thereof. This
Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the
securities offered hereby in any state to any
person to whom it is unlawful to make such offer
in such state.
[OppenheimerFunds Logo]
PR790 (5/94) <>Printed on recycled paper
<PAGE>
Investment Adviser Prospectus and
Oppenheimer Management Corporation New Account Application
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services OPPENHEIMER
P.O. Box 5270 California
Denver, Colorado 80217 Tax-Exempt Fund
1-800-525-7048
Effective May 1, 1994
Custodian of Portfolio Securities
Citibank, N.A.
One Citicorp Center
New York, New York 10154
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street
Denver, Colorado 80202
Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, 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 Additional Statement, and
if given or made, such information and
representations must not be relied upon as having
been authorized by the Fund, Oppenheimer
Management Corporation, Oppenheimer Funds
Distributor, Inc., or any affiliate thereof. This
Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the
securities offered hereby in any state to any
person to whom it is unlawful to make such offer
in such state.
[OppenheimerFunds Logo]
PR790 (5/94) <>Printed on recycled paper
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement contains more complete
information about the investment policies and the account features of
Oppenheimer California Tax-Exempt Fund (the "Fund") described in the
Fund's Prospectus dated April 29, 1994, and should be read together with
the Prospectus. A copy of the Prospectus may be obtained by writing to
Oppenheimer Shareholder Services (the "Transfer Agent"), P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll free
number shown above.
TABLE OF CONTENTS
Page
Investment Objective and Policies. . . . . . . . . . . . . . . . . .
Additional Investment Restrictions . . . . . . . . . . . . . . . . .
Trustees and Officers of the Fund. . . . . . . . . . . . . . . . . .
How the Fund is Managed. . . . . . . . . . . . . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . . . . . . . .
Your Investment Account. . . . . . . . . . . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . . . . . . .
Additional Information About the Fund. . . . . . . . . . . . . . . .
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . .
Financial Statements of the Fund . . . . . . . . . . . . . . . . . .
Appendix A: Tax-Equivalent Yields. . . . . . . . . . . . . . . . . . B-1
This Additional Statement is effective May 1, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in
the Prospectus. Supplemental information about those policies is set forth
below. Certain capitalized terms used in this Additional Statement are
defined in the Prospectus.
The Fund does not make investments with the objective of seeking
capital growth. However, the value of the securities held by the Fund may
be affected by changes in interest rates. Because the current value of
debt securities varies inversely with changes in prevailing interest
rates, if interest rates increase after a security is purchased, that
security would normally decline in value. Conversely, should interest
rates decrease after a security is purchased, normally its value would
rise. However, those fluctuations in value will not generally result in
realized gains or losses to the Fund since the Fund does not usually
intend to dispose of securities prior to their maturity. A debt security
held to maturity is redeemable by its issuer at full principal value plus
accrued interest. To a limited degree, the Fund may engage in short-term
trading to attempt to take advantage of short-term market variations, or
may dispose of a portfolio security prior to its maturity if, on the basis
of a revised credit evaluation of the issuer or other considerations, the
Fund believes such disposition advisable or it needs to generate cash to
satisfy redemptions. In such cases, the Fund may realize a capital gain
or loss. The annual rate of portfolio turnover is not expected to exceed
100%.
There are, of course, 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.
Municipal Securities. The types of Municipal Securities in which the Fund
may invest are described in the Prospectus under "The Fund and Its
Investment Policies." A discussion of the general characteristics of
types of Municipal Securities follows below.
Municipal Bonds. The principal classifications of long-term
municipal bonds are "general obligation" and "revenue" or "industrial
development" bonds. In California, municipal bonds may also be funded by
property taxes in specially created districts, (Mello-Roos or Special
Assessment Bonds), tax allocations based on increased property tax
assessments over a specified period (frequently for redevelopment
projects) or specified redevelopment area sales allocations.
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.
Mello-Roos Bonds. Bonds issued pursuant to the California Mello-Roos
Community Facilities Act ("Mello-Roos bonds") are used to finance
infrastructure projects (such as roads or sewage treatment plants) and are
primarily secured by real estate taxes levied on property located in the
same community as that project. Mello-Roos bond financing arose in
response to limitations contained in California's statutory limitations
on real property taxes (see "Special Investment Considerations --
California Municipal Securities" below), and do not constitute obligations
of a municipality. Timely payment of such bonds depends on the developer
or other property owners' ability to pay their real estate taxes which
could be adversely affected by a declining economy and/or real estate
market.
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 of 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.
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 sixty 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 liquid high-grade obligations 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.
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 less 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
Fund's investment advisor, 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
those quality standards. Floating rate or variable rate obligations which
do not provide for recovery of principal and interest within seven days
will be subject to the limitations applicable to illiquid securities
described in "The Fund and Its Investment Policies - Restricted and
Illiquid Securities" in the Prospectus. There is otherwise no limit on
the amount of the Fund's assets that may be invested in floating rate and
variable rate obligations.
Inverse Floaters. The Fund will invest in inverse floaters in the
expectation that they will provide higher expected tax-exempt yields than
are available for fixed-rate bonds having comparable credit ratings and
maturity. In certain instances, the holder of an inverse floater may have
an option to convert it into a fixed-rate bond pursuant to a "rate lock
option." Inverse floaters may produce relatively high current income,
reflecting the spread between short-term and long-term tax-exempt interest
rates. As long as the municipal yield curve remains relatively steep and
short-term rates remain relatively low, owners of inverse floaters will
continue to earn above-market interest rates because they are receiving
the higher long-term rates and have paid for bonds with lower short-term
rates. If the yield curve flattens and shifts upward, an inverse floater
will lose value more quickly than conventional long-term municipal bonds.
Municipal Lease Obligations. 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.
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.
Puts and Standby Commitments. When the Fund buys Municipal
Securities, it may obtain a standby commitment to repurchase the
securities that entitles it to achieve same-day settlement from the
purchaser and to receive an exercise price equal to the amortized cost of
the underlying security plus accrued interest, if any, at the time of
exercise. A put purchased in conjunction with a Municipal Security
enables the Fund to sell the underlying security within a specified period
of time at a fixed exercise price. The Fund may pay for a standby
commitment or put either separately in cash or by paying a higher price
for the securities acquired subject to the standby commitment or put. The
Fund will enter into these transactions only with banks and dealers which,
in the Manager's opinion, present minimal credit risks. The Fund's
ability to exercise a put or standby commitment will depend on the ability
of the bank or dealer to pay for the securities if the put or standby
commitment is exercised. If the bank or dealer should default on its
obligation, the Fund might not be able to recover all or a portion of any
loss sustained from having to sell the security elsewhere. Puts and
standby commitments are not transferrable by the Fund, and therefore
terminate if the Fund sells the underlying security to a third party. The
Fund intends to enter into these arrangements to facilitate portfolio
liquidity, although such arrangements may enable the Fund to sell a
security at a pre-arranged price which may be higher than the prevailing
market price at the time the put or standby commitment is exercised.
However, the Fund might refrain from exercising a put or standby
commitment if the exercise price is significantly higher than the
prevailing market price, to avoid imposing a loss on the seller which
could jeopardize the Fund's business relationships with the seller. Any
consideration paid by the Fund for the put or standby commitment (which
increases the cost of the security and reduces the yield otherwise
available from the security) will be reflected on the Fund's books as
unrealized depreciation while the put or standby commitment is held, and
a realized gain or loss when the put or commitment is exercised or
expires. Interest income received by the Fund from Municipal Securities
subject to puts or stand-by commitments may not qualify as tax exempt in
its hands if the terms of the put or stand-by commitment cause the Fund
not to be treated as the tax owner of the underlying Municipal Securities.
Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally did not change the tax treatment of bonds issued to
finance governmental operations. Thus, interest on obligations issued by
or on behalf of state or local governments, 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 and 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, the limitations as to the amount of private
activity bonds which each state may issue were reduced, 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 users, a 5% threshold is substituted for the 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 that may be used to make private
loans is limited to the lesser of 5% or $5 million of the proceeds. Thus,
certain issues of Municipal Securities could lose their tax-exempt status
retroactively if the issuer fails to meet certain requirements as to the
expenditure of the proceeds of that issue or use of the bond-financed
facility. The Fund makes no independent investigation of the users of
such bonds or their use of proceeds. If the Fund should hold a bond that
loses the 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 made tax-exempt interest from certain private activity bonds a tax
preference item for purposes of the alternative minimum tax on individuals
and corporations. 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 U.S.Treasury
is authorized to issue regulations implementing this provision. In
addition, corporate taxpayers subject to the alternative minimum tax may,
under some circumstances, have to include exempt-interest dividends in
calculating their alternative minimum taxable income in situations where
the "adjusted current earnings" of the corporation exceeds its alternative
minimum taxable income. 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 its total assets.
Changes in Ratings. Subsequent to its purchase by the Fund, a
Municipal Security may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Fund. Neither event
requires the Fund to sell the security, but the Manager will consider such
events in determining whether the Fund should continue to hold the
security. To the extent that ratings given by Moody's, Standard & Poor's,
or Fitch change as a result of changes in such organizations or their
rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the Fund's investment
policies.
Special Investment Considerations - California Municipal Securities. As
stated to in the Prospectus, the values of the Fund's California Municipal
Securities are highly sensitive to the fiscal stability of California and
its subdivisions, agencies, instrumentalities or authorities, which issue
the Municipal Securities in which the Trust concentrates its investments.
Certain amendments to the California State constitution, legislative
measures, executive orders, civil actions and voter initiatives in recent
years that could adversely affect the ability of California issuers to pay
interest and principal on Municipal Securities are described below. The
following constitutes only a brief summary, and is based on information
drawn from the relevant statutes and certain other publicly available
information. The Fund has not independently verified such information.
Changes in California constitutional and other laws during the last
several years have caused concerns about the ability of California state
and municipal issuers to obtain sufficient revenue to pay their bond
obligations. In 1978, California voters approved an amendment to the
California Constitution known as Proposition 13. Proposition 13 limits
ad valorem taxes on real property and restricts the ability of taxing
entities to increase real property taxes. However, legislation passed
subsequent to Proposition 13 provided for the redistribution of
California's General Fund surplus to local agencies, the reallocation of
revenues to local agencies and the assumption of certain local obligations
by the state so as to help California municipal issuers to raise revenue
to pay their board obligations. It is unknown whether additional revenue
redistribution legislation will be enacted in the future and whether, if
enacted, such legislation would provide sufficient revenue for such
California issuers to pay their obligations. The state is also subject
to another constitutional amendment, Article XIIIB, which may have an
adverse impact on California state and municipal issuers. Article XIIIB
restricts the state from spending certain appropriations in excess of an
appropriations limit imposed for each state and local government entity.
If revenues exceed such appropriations limit, such revenues must be
returned either as revisions in the tax rates or fee schedules. Because
of the uncertain impact of the aforementioned legislation, the possible
inconsistencies in the respective terms of the statutes and the
impossibility of predicting the level of future appropriations and
applicability of related statutes to such questions, it is not currently
possible to assess the impact of such legislation and policies on the long
term ability of California state and municipal issuers to pay interest or
repay principal on their obligations.
California has substantial size, wealth and a diverse economy.
California's economy is the eighth largest in the world and the state
ranks number one among the 50 states in manufacturing, foreign trade,
agriculture, construction, and tourism. It is the largest in population
of the states, and accounts for about 11% of the total national income and
about 13% of personal income in the U.S. Through the 1980s, the rate of
state population growth was more than twice that for the country.
Currently California's economy is experiencing the effects of a
recession. Substantial contraction in California's defense related
industries, overbuilding in commercial real estate, and consolidation and
decline in the state's financial services industry will likely produce
slower overall growth for several years.
During the past year, declining income, sales, and production
strained an already weak economy. The economy experienced its most
difficult year in more than a half a century. In California, the
recessionary trend was reinforced by sharp declines in defense-related
manufacturing and commercial office construction.
Home prices and sales have continued to decline. Median home prices
in July 1992 were 3.7% lower than a year earlier, compared with a national
decline of only 0.8%. Unemployment in California in February 1992 stood
at 8.7% versus 7.3% for the nation. March figures dropped in California
to 8.5% because of shrinkage in the labor force. The nation's rate
remained steady at 7.3%. 1991 figures have been revised to show 740,000
jobs (approximately 5%) lost from a labor force of approximately 15
million since the peak in June of 1990, notwithstanding the continued
increase in the state's population. In California, personal bankruptcy
filings rose 24% for the fiscal year ended June 1991 versus a 5% increase
in 1990. Statewide filings were up by 27% for the first six months of the
year ended June 30, 1992, while the national figures have peaked and are
starting to slow. This is attributable to the fact California was hit by
the recession after the rest of the nation. Employment numbers are not
expected to improve in the near term. The state's budget deficit also
looms large with regards to employment, with the probability of a hiring
freeze and layoffs. The government sector is California's largest
employer and little to no growth is expected. Employment grew by only
0.5% in 1990 and fell 1.0% in 1991. With a slow recovery, economic
forecasts have annual growth of employment at 2.0% for 1992 and 2.9% in
1993 and 1994.
In January 1992, Governor Wilson introduced a balanced budget plan
for fiscal year 1992-93. However, because of deteriorating economic
conditions both nationally and statewide, the budget plan became
increasingly unbalanced.
The state experienced a budget deficit for its 1991 fiscal year of
over $14 billion. In January 1992, the estimated deficit for the year
ended June 30, 1992, was $1.3 billion. By the May revision of the budget
plan, the estimated deficit had grown to $4 billion, with a budget year
funding gap of $10.7 billion. California entered its 1992-93 fiscal year
with no budget agreement. Accordingly, scrip (IOUs) had to be used to pay
the state's bills. As of September 2, 1992, the state had issued and
outstanding over $3 billion of such scrip. Effective July 1, the rating
on the state's outstanding debt obligations had been downgraded by both
major bond rating services. On September 2, 1992, 79 days after the
budget adoption deadline of June 15, and 64 days into the state's fiscal
year, the California legislature adopted, and the Governor signed a $57.6
billion state budget for 1992-93, along with certain accompanying enabling
legislation. With the budget in place, the state's largest banks returned
to accepting the state's IOUs. The banks had stopped accepting IOUs in
early August.
Repurchase Agreements. In a repurchase transaction, the Fund purchases a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank or the U.S. branch of a foreign bank with total
domestic assets of at least $1 billion or broker-dealer with net capital
of at least $50 million which has been designated a primary dealer in
government securities) for delivery on an agreed-on future date. 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 loan. Additionally, the Manager will continuously
monitor the collateral's value and will impose creditworthiness
requirements to confirm that the vendor is financially sound.
Loans of Portfolio Securities. The Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus, to attempt to
increase the Fund's income for liquidity purposes. Under applicable
regulatory requirements (which are subject to change), the loan collateral
must, on each business day, be at least equal to 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) or other
cash equivalents in which the Fund is permitted to invest. 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. The
Fund receives an amount 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, or (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 certain tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five days' notice or in
time to vote on any important matter. Income from securities loans is not
included in the exempt-interest dividends paid by the Fund.
Covered Calls and Hedging. As described in the Prospectus, the Fund may
write covered calls or employ one or more types of Hedging Instruments.
When hedging to attempt to protect against declines in the market value
of the Fund's portfolio, 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 Futures, (ii) buy puts, or (iii) write
covered calls on securities, Interest Rate Futures or Municipal Bond
Futures (as described in the Prospectus). When hedging to permit the
Fund to establish a position in the debt securities market as a temporary
substitute for purchasing particular debt securities (which the Fund will
normally purchase, and then terminate that hedging position), the Fund
may: (i) buy Interest Rate Futures or Municipal Bond Index Futures, or
(ii) buy calls on such Futures or on securities. The Fund's strategy of
hedging with Futures and options on Futures will be incidental to the
Fund's activities in the underlying cash market. Additional Information
about the covered calls and Hedging Instruments the Fund may use is
provided below.
Writing Covered Call Options. When the Fund writes a call on a
security, 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 nine 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
previously received on the call written is more or less than the price of
the call subsequently purchased. A profit may also be realized if the
call lapses unexercised, because the Fund retains the related investments
and the premium received. An option position may be closed out only on
a market which 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. If the Fund could not effect a closing purchase
transaction due to a lack of a market, it would have to hold the callable
securities until the call lapsed or was exercised.
Additional Information About Hedging Instruments and Their Use. 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, traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the calls or upon the
Fund's entering into a closing purchase transaction. Call writing affects
the Fund's turnover rate and the brokerage commissions it pays.
Commissions payable on writing or purchasing a call are normally higher
on a relative basis than on general securities transactions.
Interest Rate Futures. The Fund may buy and sell futures contracts
relating to debt securities ("Interest Rate Futures") and municipal bond
indices ("Municipal Bond Index Futures," discussed below). An Interest
Rate Future obligates the seller to deliver and the purchaser to take a
specific type of debt security or cash to settle the futures transaction,
or to enter into an offsetting contract. 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"). The initial margin 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 specified conditions. As the Future is marked to market 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. Prior
to the expiration of the Future, if the Fund elects to close out its
position by taking an opposite position, 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. Although
Interest Rate Futures by their terms call for settlement by the delivery
of debt securities, in most cases the obligation is fulfilled without such
delivery by entering into an offsetting transaction. All futures
transactions are effected through a clearinghouse associated with the
exchange on which the contracts are traded.
Municipal Bond Index Futures. Municipal Bond Index Futures are
similar to Interest Rate Futures except that settlement is made in cash.
No physical delivery is made of the underlying bonds in the index. 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 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.
Purchasing Calls and Puts. 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. 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 plus the transaction costs and premium paid for the call,
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 or put 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. Gain or loss depends on changes in the
index in question (and thus on price movements in the debt securities
market generally) rather than on price movements in individual futures
contracts.
When the Fund buys 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 enables
the Fund to protect itself during the put period against a decline in the
value of the underlying investment below the exercise price by selling
such 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 date
and the Fund will lose its premium payment and the right to sell the
underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
The Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise of calls written by the Fund may cause it to
sell underlying investments, thus increasing its turnover rate in a manner
beyond its control. The exercise by the Fund of puts may also cause the
sale of underlying investments, also causing turnover, since the
underlying investment might be sold for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a call or a put or sells a call. Premiums paid for options
are small in relation to the market value of the related investments and,
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could cause the Fund's net asset
value to be more sensitive to changes in the value of the underlying
investments.
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 party, the measure of that party'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."
Regulatory Aspects of Hedging Instruments. The use of Futures and
options thereon to attempt to protect against the market risk of a decline
in the value of portfolio securities is referred to as having a "short
futures position," and the use of such instruments to attempt to protect
against the market risk that portfolio securities are not fully included
in an increase in value of the market as a whole is referred to as having
a "long futures position." The Fund must operate within certain
restrictions as to its long and short positions in Futures and options
thereon under a rule ("CFTC Rule") adopted by the Commodity Futures
Trading Commission ("CFTC") under the Commodity Exchange Act (the "CEA"),
which excludes the Fund from registration with the CFTC as a "commodity
pool operator" (as defined under the CEA), if it complies with the CFTC
Rule. Under those restrictions, the Fund will not, as to any positions,
whether long, short or a combination thereof, enter into Futures contracts
and options thereon for which the aggregate initial margins and premiums
exceed 5% of the fair market value of its net assets, with certain
exclusions as defined in the CFTC Rule. Under the restrictions, the Fund
also must, as to its short positions, use Futures and options thereon
solely for bona fide hedging purposes within the meaning and intent of the
applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which 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 affiliated investment adviser. Position limits also apply to
Futures. An exchange may order the liquidation of positions found to be
in violation of these 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 investments
underlying such Future, less the margin deposit applicable to it.
Tax Aspects of Hedging Instruments. The Fund intends to qualify as
a "regulated investment company" under the Internal Revenue Code. One of
the tests for such qualification 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. Due to this limitation, 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) writing calls on investments held less than three months; (iii)
purchasing calls or puts which expire in less than three months; (iv)
effecting closing transactions with respect to calls or puts purchased
less than three months previously; and (v) exercising puts or calls held
by the Fund for less than three months.
Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Interest Rate Futures
and Municipal Bond Index Futures that the prices of such Futures 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 market 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 market 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 market could be reduced, thus producing
distortion. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation
by speculators in the futures market 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 debt 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 debt securities being hedged if
the historical volatility of the prices of such debt securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that when the Fund has used Hedging Instruments in a
short hedge, the market may advance and the value of the debt securities
held in the Fund's portfolio may decline. If this occurred, the Fund
would lose money on the Hedging Instruments and also experience a decline
in value of its debt 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
securities markets as a temporary substitute for the purchase of
particular debt securities (long hedging) by buying Interest Rate Futures,
Municipal Bond Index Futures and/or calls on such Futures or debt
securities, 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 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.
ADDITIONAL INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are set forth in the
Prospectus. The following investment restrictions, are also fundamental
policies, and together with the fundamental policies described in the
Prospectus, 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 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 a
shareholders meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, 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 Securities or other permitted securities secured by real estate
or interests therein; (2) purchase securities other than Hedging
Instruments on margin; however, the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities; (3) make short sales of securities; (4) underwrite securities
or invest in securities subject to restrictions on resale; (5) invest in
or hold securities of any "issuer" (see below) if officers and Trustees
or Directors of the Fund and the Manager individually owning more than .5%
of the securities of such issuer together own more than 5% of the
securities of such issuer; or (6) invest in securities of any other
investment company, except in connection with a merger with another
investment company.
Under restriction (5) above, the identification of the issuer of a
Municipal Security depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the
sole issuer. Similarly, in the case of an industrial development bond,
if that bond is backed only by the assets and revenues of the
nongovernmental user, then such nongovernmental user would be deemed the
sole issuer. However, if in either case the creating government or some
other entity guarantees a security, such a guarantee would be considered
a separate security and is to be treated as an issue of such government
or other agency.
In applying restrictions as to the Fund's investments, the Manager
will consider a nongovernmental user of facilities financed by industrial
development bonds as being in a particular industry, despite the fact that
such bonds are Municipal Securities as to which there is no industry
concentration limitation. Although this application of the restriction
is not technically a fundamental policy under the Investment Company Act,
it will not be changed without shareholder approval. The Manager has no
present intention of investing more than 25% of the total assets of the
Fund in securities the interest on which is paid from revenues of similar
types of projects or in industrial development bonds. Neither of these
are fundamental policies, and therefore either of them may be changed
without shareholder approval. Should any such change be made, the
Prospectus and/or this Additional Statement will be supplemented to
reflect the change.
TRUSTEES AND OFFICERS OF THE FUND
The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are set forth below. The
address of each, except as noted, is Two World Trade Center, New York, New
York 10048-0203. Except for Mr. Patterson, each serves in similar
capacities with Oppenheimer Fund, Oppenheimer Time Fund, Oppenheimer
Special Fund, Oppenheimer Global Fund, Oppenheimer Money Market Fund,
Inc., Oppenheimer U.S. Government Trust, Oppenheimer Gold & Special
Minerals Fund, Oppenheimer Discovery Fund, Oppenheimer Target Fund,
Oppenheimer Asset Allocation Fund, Oppenheimer Mortgage Income Fund,
Oppenheimer Global Bio-Tech Fund, Oppenheimer Global Environment Fund,
Oppenheimer Global Growth & Income Fund, Oppenheimer Tax-Free Bond Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer Pennsylvania Tax-Exempt
Fund, Oppenheimer Multi-Sector Income Trust and Oppenheimer Multi-
Government Trust. As of __________, the Trustees and officers of the Fund
in the aggregate owned less than 1% of the Fund's outstanding shares.
LEON LEVY, Chairman of the Board of Trustees
General Partner of Odyssey Partners, L.P. (investment partnership);
Chairman of Avatar Holdings Inc. (real estate development).
LEO CHERNE, Trustee
386 Park Avenue South, New York, New York 10016
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of The
Research Institute of America.
EDMUND T. DELANEY, Trustee
5 Gorham Road, Chester, Connecticut 06412
Attorney-at-law; formerly a member of the Connecticut State
Historical Commission and Counsel to Copp, Berall & Hempstead (a law
firm).
ROBERT G. GALLI, Trustee*
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC") the Manager's parent holding
company; formerly he held the following positions: a director of the
Manager and the Distributor, Vice President and a director of
HarbourView Asset Management Corporation ("HarbourView") and
Centennial Asset Management Corporation ("Centennial"), investment
adviser subsidiaries of the Manager, a director of Shareholder
Financial Services, Inc. ("SFSI") and Shareholder Services, Inc.
("SSI"), transfer agent subsidiaries of the Manager, an officer of
other OppenheimerFunds and Executive Vice President & General Counsel
of the Manager and the Distributor.
BENJAMIN LIPSTEIN, Trustee
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
ELIZABETH B. MOYNIHAN, Trustee
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the American Schools
of Oriental Research and of the Freer Gallery of Art, Smithsonian
Institution; a member of the Indo - U.S. Sub-Commission on Education
and Culture; a trustee of the Institute of Fine Arts, New York
University, and a trustee of the Preservation League of New York
State.
KENNETH A. RANDALL, Trustee
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Northeast Bancorp, Inc. (bank holding company),
Dominion Resources, Inc. (electric utility holding company), and
Kemper Corporation (insurance and financial services company);
formerly Chairman of the Board of ICL, Inc. (information systems).
EDWARD V. REGAN, Trustee
40 Park Avenue, New York, New York 10016
President of Jerome Levy Institute, Bard College; Member of the U.S.
Competitiveness Policy Council; formerly New York State Comptroller.
RUSSELL S. REYNOLDS, JR., Trustee
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Historical Society and Greenwich Hospital.
SIDNEY M. ROBBINS, Trustee
50 Overlook Road, Ossining, NY 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
and The Malaysia Fund, Inc. (closed-end investment companies); a
member of the Board of Advisors, Olympus Private Placement Fund,
L.P.; Professor Emeritus of Finance, Adelphi University.
DONALD W. SPIRO, President and Trustee*
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and Oppenheimer Fund Management, Inc. (the
"Distributor").
PAULINE TRIGERE, Trustee
550 Seventh Avenue, New York, NY 10018
Chairman and Chief Executive Officer of Trigere, Inc., (design and
sale of women's fashions).
CLAYTON K. YEUTTER, Trustee
1325 Merrie Ridge Road, McLean, Virginia 22101
Of counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Inc. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), FMC
Corp. (chemicals and machinery), Lindsay Manufacturing Co. and Texas
Instruments, Inc. (electronics); formerly (in descending
chronological order) Deputy Chairman, Bush/Quayle Presidential
Campaign, Counsellor to the President (Bush) for Domestic Policy,
Chairman of the Republican National Committee, Secretary of the U.S.
Department of Agriculture, and U.S. Trade Representative, Executive
Office of the President.
ROBERT E. PATTERSON, Vice President and Portfolio Manager
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
ANDREW J. DONOHUE, Secretary
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, partner in Kraft & McManimon (a law firm), an officer
of First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser),
director and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
GEORGE C. BOWEN, Treasurer
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, Secretary and Treasurer of SSI and SFSI;
an officer of other OppenheimerFunds; formerly Senior Vice
President/Comptroller and Secretary of OAMC.
ROBERT G. ZACK, Assistant Secretary
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI; an officer of other
OppenheimerFunds.
LYNN M. COLUCCY, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Vice President and Assistant Treasurer of the Manager; an officer of
other OppenheimerFunds; formerly Vice President/Director of Internal
Audit of the Manager.
- -----------------
[FN]
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Remuneration of Trustees. The officers of the Fund, including Mr. Spiro,
are affiliated with the Manager and receive no salary or fee from the
Fund. During the Fund's fiscal year ended December 31, 1993, the
remuneration (including expense reimbursements) paid to all Trustees of
the Fund (excluding Mr. Spiro) as a group, and as members of one or more
committees, totalled $________. In addition, the Fund has adopted a
retirement plan that provides for payment to a retired independent Trustee
of up to 80% of the average compensation paid during that Trustee's five
years of service in which the highest compensation was received. A
Trustee must serve in that capacity for any of the funds listed above for
at least 15 years to be eligible for the maximum payment. No Trustee has
retired since the adoption of the plan and no payments have been made by
the Fund under it. During the fiscal year ended December 31, 1993, the
Fund accrued $______ for projected benefit obligations under the Plan.
Major Shareholders. As of ___________, the only person who owned of
record or was known by the Fund to own beneficially 5% or more of the
Fund's outstanding Class A or Class B shares was
____________________________________________ which was the record owner
of ____________ shares (______% of the shares then outstanding).
HOW THE FUND IS MANAGED
The Manager is owned by Oppenheimer Acquisition Corp., 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 may also serve as officers of the Fund, and one of whom (Mr.
Spiro) serves as a Trustee of the Fund.
The investment advisory agreement between the Manager and the Fund
(the "Agreement") 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 administration for the Fund, including the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and the 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
Agreement or by the Distributor are paid by the Fund. The 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, such as litigation.
The Agreement contains no expense limitation. However, independently
of the Agreement, the Manager has voluntarily undertaken that the total
expenses of the Fund in any fiscal year exclusive of taxes, interest,
brokerage fees and extraordinary expenses such as litigation costs shall
not exceed (and the Manager undertakes to reduce the Fund's management fee
in the amount by which such expenses shall exceed) the most stringent
state regulatory limitation applicable to the Fund. That limitation,
imposed by California, limits expenses (with specific exclusions) to 2.5%
of the first $30 million of average annual net assets, 2% of the next $70
million, and 1.5% of average annual net assets in excess of $100 million.
The payment of the management fee will be reduced monthly so that there
will not be any accrued but unpaid liability under that expense assumption
undertaking. The Manager reserves the right to change or eliminate that
undertaking at any time. Any assumption of the Fund's expenses under that
undertaking would lower the Fund's overall expense ratio and increase its
total return during any period in which expenses are limited. Prior to
November 1, 1993, independently of the Agreement, the Manager had
undertaken to assume the Fund's expenses (exclusive of any non-recurring
expenses, such as litigation) to the extent required to maintain the
Fund's dividend rate at $.0498 per share every 28 days. Effective
November 1, 1993, the Manager terminated this undertaking. For the fiscal
year ended December 31, 1991, the management fee payable by the Fund to
the Manager would have been $693,924, absent the Manager's assumption of
Fund expenses. The Manager assumed Fund expenses in the amount of
$359,854 in 1991. The management fee was reduced by the amount of the
expense assumption, and the net paid to the Manager was $334,070 in 1991.
For the fiscal years ended December 31, 1992 and 1993, there were no
assumption of expenses, and the management fees were $1,044,275 and
$_______________, respectively.
The Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations
thereunder, the Manager is not liable for any loss sustained by reason of
any investment of Fund assets made with due care and in good faith. The
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 one or more additional companies for which it may act as
investment adviser or general distributor. 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 name may be withdrawn.
Portfolio Transactions. Portfolio decisions are made by portfolio
managers under the supervision of the Manager's executive officers. As
most purchases made by the Fund are principal transactions at net prices,
the Fund incurs little or no brokerage costs. The Fund usually deals
directly with the selling or purchasing principal or market maker without
incurring charges for the services of a broker on its behalf unless it is
determined that better price or execution may be obtained by utilizing the
services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter,
and purchases from dealers include a spread between the bid and asked
price. The Fund seeks to obtain prompt execution of orders at the most
favorable net price.
BROKERAGE POLICIES OF THE FUND
If a broker is used for the Fund's portfolio transactions, the
Agreement contains provisions relating to the selection of brokers,
dealers and futures commission merchants (collectively referred to as
"brokers") for the Fund's futures, put and call transactions. The Manager
is authorized by the Agreement to employ brokers as may, in its best
judgment based on all relevant factors, implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
but is expected to minimize the commissions paid to the extent consistent
with the interest and policies of the Fund.
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
transactions in the securities to which the option relates. Where
possible, concurrent orders to purchase or sell the same security by more
than one of the accounts managed by the Manager or its 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.
Under the Agreement, the Manager is authorized to select brokers
other than affiliates which provide brokerage and/or research services for
the Fund and/or the other accounts over which the Manager or its
affiliates have investment discretion. The commissions paid to such
brokers may be higher than another qualified broker would have charged if
a good faith determination is made by the Manager that the commission is
reasonable and fair in relation to the services provided. There is no
formula under which any of the brokers selected by the Manager are
entitled to the allocation of a particular amount of commissions. Subject
to the foregoing considerations, the Manager may also consider the
willingness of particular broker-dealers to sell shares of the Fund and
other funds advised by the Manager and its affiliates as a factor in their
selection.
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 for the commissions of these 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, issuers 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. It serves to broaden the scope and supplement the research
activities of the Manager, to make available additional views for
consideration and comparisons, and to enable the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio
or being considered for purchase. 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 and the
independent Trustees of the Fund annually review information furnished by
the Manager relative to the commissions paid to brokers furnishing such
services in an effort to ascertain that the amount of such commissions was
reasonably related to the value or benefit of such services.
YOUR INVESTMENT ACCOUNT
How the Fund Determines Net Asset Value Per Share. The net asset values
per share of Class A and Class B shares of the Fund are determined each
day the New York Stock Exchange (the "NYSE") is open, as of 4:00 P.M., New
York time, that day 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's most recent annual holiday schedule states that
it will close New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day; the
Exchange may also close on other days. Dealers other than NYSE members
may conduct trading in Municipal Securities on certain days on which the
NYSE is closed (e.g., Good Friday), so that securities of the same type
held by the Fund may be traded, and the net asset values per share of
Class A and Class B shares of the Fund may be significantly affected, on
such days when shareholders will not have the ability to purchase or
redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term
debt securities and short-term debt securities having a 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 or obtained from active market makers in the security on the basis
of reasonable inquiry; (ii) short-term debt securities having a remaining
maturity of less than sixty days when purchased or which currently have
maturities of sixty days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (iii) securities
or assets for which market quotations are not readily available are valued
at their fair value as determined in good faith under procedures
established by and under the general supervision and responsibility of the
Fund's Board of Trustees. In the case of U.S. Government Securities and
Municipal Securities having a maturity of more than sixty days, such
pricing procedures may include "matrix" comparisons to the prices for
comparable debt instruments on the basis of quality, yield, maturity, and
other special factors involved (such as the tax-exempt status of the
interest paid by Municipal Securities). The Trustees will monitor the
accuracy of pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
The Fund values puts, calls, Interest Rate Futures and Municipal Bond
Index Futures at the last sales price on the principal exchange on which
they are traded. 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 a call, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset,
and an equivalent deferred credit is included in the liability section.
The deferred credit is "marked-to-market" to reflect the current market
value of the call. If a call written by the Fund expires or if the Fund
enters into a closing purchase transaction, the Fund has a gain or loss
from the sale of the underlying securities and the proceeds are increased
by the premium originally received. If a call written by the Fund is
exercised, the proceeds are increased by the premium originally received.
If a put held by the Fund is exercised by it, the amount the Fund receives
on its sale of the related investment is reduced by the amount of the
premium paid by the Fund.
Alternative Sales Arrangements - Class A and Class B Shares. The
Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold
shares and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-based
sales charge with respect to Class B shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or
other person entitled to receive compensation for selling Fund shares may
receive different compensation with respect to one class of shares than
the other. The Distributor will not accept any order for $1 million or
more of Class B shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will be
more advantageous for that investor to purchase Class A shares of the Fund
instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of Matured Class B shares to Class A shares 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 Matured 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 Matured
Class B shares would occur while such suspension remained in effect.
Although Matured Class B shares could then be exchanged for Class A shares
on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a
taxable event for the holder, and absent such exchange, Class B shares
might continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Additional Statements and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses,
(vi) share issuance costs, (vii) organization and start-up costs, (viii)
interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are directly
attributable to a class are allocated equally to each outstanding share
within that class. Such expenses include (i) Distribution 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.
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 such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
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 of expenses realized by the Distributor and dealers making such
sales. In the instances discussed in the Prospectus in which no sales
charge is imposed, that policy has been adopted because the Distributor
or dealer or broker incurs little or no selling expenses in such
circumstances. The term "immediate family" refers to one's spouse,
children, grandchildren, parents, grandparents, parents-in-law, siblings,
a spouse's siblings and a sibling's spouse.
-- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-Distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Government Securities Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Bio-Tech Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Tax-Exempt Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a CDSC).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter to obtain the reduced sales charge rate (as set forth in the
Prospectus) applicable to purchases of shares in that amount (the
"intended amount"). Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of shares
in the intended amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended 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 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 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 total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended 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 amount specified in the Letter shall be held in
escrow by the Transfer Agent. For example, if the intended amount
specified under the Letter 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 total minimum investment 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 amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer, the
Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of the Letter) do not include
any shares sold without a front-end sales charge or without being subject
to a Class A contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Redemptions. Information on how to redeem shares of the Fund is stated
in the Prospectus. The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. If, however, the Board of
Trustees determines that it would be detrimental to the best interests of
the remaining shareholders of the Fund to make payment wholly or partly
in cash, the redemption price may be paid in whole or in part by a
distribution in kind of securities from the portfolio of the Fund in lieu
of cash in conformity with applicable SEC rules. The Fund has elected to
be governed by Rule 18f-1 under the Investment Company Act, pursuant to
which it is obligated to redeem shares of the Fund solely in cash up to
the lesser of $250,000 or 1% of the net assets of that Fund during any 90-
day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage or other costs in converting
the assets to cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing portfolio
securities described under "Determination of Net Asset Value Per Share,"
and such valuation will be made as of the same time the redemption price
is determined.
The Fund's Board of Trustees has the right to cause the redemption
of shares held in any account if the aggregate net asset value of such
shares (taken at cost or value as determined by the Board) is less than
$200 or such lesser amount as the Board may fix. The Board of Trustees
will not cause the involuntary redemption of shares held in an account
unless the value of the shares has fallen below $200 for reasons other
than 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 for permission to increase the investment so
that the shares would not be involuntarily redeemed.
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 Tax-Exempt Cash Reserves or
Oppenheimer Cash Reserves to use those accounts for monthly automatic
purchases of shares of up to four other Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds.
An application should be obtained from the Transfer Agent, completed and
returned, and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained 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 Fund
shares (for example, when checks submitted to purchased shares are
returned 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 difference in net asset value times the
number of shares in the purchase order. The investor is responsible for
that loss. If the investor fails to compensate the Fund for the loss, the
Distributor will do so. The Fund may reimburse the Distributor for that
amount by redeeming shares from any account registered in that investor's
name or 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.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed, in Class A shares of the Fund or any
of the other OppenheimerFunds into which shares of the Fund are
exchangeable as described below, at the net asset value next computed
after receipt by the Transfer Agent of the reinvestment order. The
shareholder must ask the Distributor for such privilege at the time of
reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the OppenheimerFunds within
90 days of payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the amount of the
sales charge paid. That would reduce the loss or increase the gain
recognized from the redemption. 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. Shareholders owning shares of both classes must specify
whether they intend to transfer Class A or Class B shares. Shares are not
subject to the payment of a CDSC of either class at the time of transfer
(by absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the CDSC, 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 in an account are
transferred, and not all shares in the account would be subject to a CDSC
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
CDSC 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 will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required documents, with signature(s) guaranteed as
described above.
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 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). Required minimum distributions from OppenheimerFunds-sponsored
retirement plans may not be arranged on this basis. 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 the 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
purchases while participating in an Automatic Withdrawal Plan. Class B
shareholders should not establish withdrawal plans, because of the
imposition of the Class B CDSC on such withdrawals (except where the Class
B CDSC is waived as described in "Class B Contingent Deferred Sales
Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "Exchange Privilege"
in the Prospectus and "How to Exchange Shares" 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 thereafter 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
such plans should not be considered as a yield or income on your
investment. It may not be desirable to purchases additional Class A
shares while making automatic withdrawals because of the sales charges
that apply to purchases when made. Accordingly, a shareholder normally
may not maintain an Automatic Withdrawal Plan while simultaneously making
regular purchases of Class A shares.
The transfer agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (the date selected for receipt is an approximate
date), 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. The list of OppenheimerFunds to which exchanges
of shares may be made (subject to restrictions in the Prospectus and in
this Statement of Additional Information) is contained in "Reduced Sales
Charges," above.
Class A shares of OppenheimerFunds may be exchanged for shares of any
Money Market Fund; shares of any Money Market Fund purchased without a
sales charge may be exchanged for shares of OppenheimerFunds offered with
a sales charge upon payment of the sales charge (or, if applicable, may
be used to purchase shares of OppenheimerFunds subject to a CDSC); and
shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the OppenheimerFunds or from any unit investment trust
for which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
OppenheimerFunds. No CDSC is imposed on exchanges of shares of either
class purchased subject to a CDSC. However, when Class A shares acquired
by exchange of Class A shares purchased subject to a Class A CDSC 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 CDSC is imposed on
the redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus), and the Class B CDSC is imposed on Class B shares redeemed
within six years of the initial purchase of the exchanged Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or 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 Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or 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
request from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal 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
transaction.
Exchanges of Class B Shares. As stated in the Prospectus, shares of
a particular class of OppenheimerFunds having more than one class of
shares may be exchanged only for shares of the same class of another of
the OppenheimerFunds. All of the OppenheimerFunds (except Oppenheimer
Strategic Diversified Income Fund) offer Class A shares; if the shares of
a fund offering one class are not denominated with a class designation in
the Prospectus, they are considered "Class A" shares. Only the following
other OppenheimerFunds offer Class B shares as of the date of this
Statement of Additional Information (this list may change from time to
time, and to obtain a current list, please call the Transfer Agent at 1-
800-525-7048):
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Government Securities Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only available by
exchange)
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
The Transfer Agent. Oppenheimer Shareholder Services, as transfer agent,
is responsible for maintaining the Fund's shareholder registry and
shareholder accounting records, and for shareholder servicing and
administrative functions. For information about your account, call the
toll-free number or write to the address of the Transfer Agent on the
front cover.
PERFORMANCE OF THE FUND
As described in the Prospectus, from time to time the "standardized
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 yields and total
returns are calculated for each class and the components of those
calculations is set forth below.
Yield and total return information may be useful to investors in
reviewing the Fund's performance. The Fund's advertisement of its
performance must, under applicable SEC rules, include the average annual
total returns for each class of shares of the Fund for the 1, 5 and 10-
year period (or the life of the class, if less) as of the most recently
ended calendar quarter. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its yield and total return are not
guaranteed and normally will fluctuate on a daily basis. When redeemed,
an investor's shares may be worth more or less than their original cost.
Yield and total return for any given past period are not a prediction or
representation by the Fund of future yields or rates of return on its
shares. The yield and total returns of the Class A and Class B shares of
the Fund are affected by portfolio quality, portfolio maturity, the type
of investments the Fund holds and its operating expenses.
Standardized Yields. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is calculated
using the following formula set forth in rules adopted by the Securities
and Exchange Commission that apply to all funds that quote yields:
(a-b) 6
Standardized Yield = 2 [(--- + 1) - 1]
(cd )
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the 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 standardized 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 upon 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 December 31, 1993, the standardized yields for the
Fund's Class A and Class B shares were ____% and ____%, respectively.
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 amounts subject to Federal and state income taxes after
deductions and exemptions). The tax equivalent yield table assumes 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 (after
expense assumptions by the Manager) for the 30-day period ended
December 31, 1993, for a single person in the California/Federal combined
_____% tax bracket was ____%.
Dividend Yield and Distribution Return. From time to time the Fund may
quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A or Class B share dividends derived
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class)
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)
divided by Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares, the maximum offering price
is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time similar yield or distribution return 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 December 31, 1993,
were ____% and ____% when calculated at maximum offering price and at net
asset value, respectively. The dividend yield on Class B shares for the
30-day period ended December 31, 1993, was ____% when calculated at net
asset value.
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"), according to the following formula:
l/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The cumulative "total return" calculation measures the change in
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. 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 discussed below). For Class B shares, the payment of the
applicable contingent deferred sales charge (5.0% for the first year, 4.0%
for the second year, 3.0% for the third and fourth years, 2.0% in the
fifth year, 1.0% in the sixth year and none thereafter) is applied to the
investment result for the time period shown (unless the total return is
shown at net asset value, as described below). 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 "average annual
total returns" on an investment in Class A shares of the Fund for the one
year period ended December 31, 1993 and for the period from ____________
(commencement of operations) to December 31, 1993, were ____% and ____%,
respectively. The cumulative "total return" on Class A shares for the
latter period was _____%. For the fiscal period from _____________,
through December 31, 1993, the average annual total return and the
cumulative total return on an investment in Class B shares of the Fund
were ______% and _____%, respectively.
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. It 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 sales charges) and takes into consideration the
reinvestment of dividends and capital gains distributions. The cumulative
"total returns at net asset value" on the Fund's Class A shares for the
fiscal year ended December 31, 1993, and for the period from ____________
to December 31, 1993 were _____% and _____%, respectively. The cumulative
total return at net asset value on the Fund's Class B shares for the
fiscal period from ____________ through December 31, 1993 was _______%.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of the performance of its Class A or Class B shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent
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's classes is ranked against (i)
all other funds, excluding money market funds, and (ii) all other general
bond funds. The Lipper performance rankings are based on total return
that includes the reinvestment of capital gains distributions and income
dividends but does not take sales charges or taxes into consideration.
The Fund's performance may also be compared to the performance of the
Lipper General Bond Fund Index, which is a net asset value weighted index
of general bond funds compiled by Lipper. It is calculated with
adjustments for income dividends and capital gains distributions as of the
ex-dividend date.
From time to time the Fund may publish the ranking of the performance
of its Class A or Class B shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including the
Fund, based upon each fund's three, five and ten-year average annual total
returns (when available) and a risk adjustment factor that reflects Fund
performance relative to three-month U.S. Treasury bill monthly returns.
Such returns are adjusted for fees and sales loads. There are five
ranking categories with a corresponding number of stars: highest (5),
above average (4), neutral (3), below average (2) and lowest (1).
Morningstar ranks the Class A and Class B shares of the Fund in relation
to other taxable bond funds.
When comparing yield, total return and investment risk of an
investment in Class A or Class B shares of the Fund with other
investments, investors should understand that certain other investments
have different risk characteristics than an investment in shares of the
Fund. An investment in the Fund is not insured; its yield and total
return are not guaranteed and normally will fluctuate on a daily basis.
Yields and total return for any given period will not be an indication or
representation by the Fund of future yields or rates of return on its
shares. The yields and returns of the Class A and Class B shares of the
Fund are affected by portfolio quality, portfolio maturity, type of
investments held and operating expenses. When comparing the yields,
returns and investment risks of an investment in Class A or Class B shares
of the Fund with those of other investments, investors should understand
that certain other investment alternatives such as certificates of
deposit, U.S. Government Securities, money market instruments or bank
accounts provide fixed yields, and also that bank accounts may be insured
and U.S. Government securities may be guaranteed. 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.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class B shares of the Fund under Rule
12b-1 of the Investment Company Act, pursuant to which the Fund will
reimburse the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class.
Each Plan shall unless terminated as described below, continue in
effect from year to year but only so long as such continuance is
specifically approved at least annually by the Fund's Board of Trustees
including its Independent Trustees by a vote cast in person at a meeting
called for that purpose. Either Plan may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" of the Fund's outstanding shares of the respective
class. Neither Plan may be amended to increase materially the amount of
payments to be made unless such amendment is approved by shareholders of
the respective class, who vote exclusively on approval or amendment of the
Plan for that class. All material amendments must be approved by the
Board and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to its Board of Trustees at least
quarterly for its review on the amount of all payments made pursuant to
each Plan and the identity of each Recipient that received any such
payment. 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 of any such selection
or nomination is approved by a majority of the Independent Trustees. The
report for the Class B Plan shall also include the distribution costs for
that quarter, and such costs for previous fiscal periods that are carried
forward, as explained in the Prospectus and below. Those reports,
including the allocations on which they are based, will be subject to the
review and approval of the Independent Trustees in the exercise of their
fiduciary duty.
Under the Plans, no payment will be made by the Distributor to any
Recipient if the aggregate net asset value of the Fund shares held by it
or its customers is less than the minimum amount, if any, set from time
to time by the "Independent Trustees" (defined below). During the fiscal
year ended December 31, 1993, reimbursement payments under the Class A
Plan by the Fund to the Distributor totaled $________, all of which
represented payments by the Distributor to Recipients, including
$_________ to an affiliate of the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net assets of the Class
B shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class B shares are redeemed
during the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B
Plan allows for the carry-forward of distribution expenses, to be
recovered from asset-based sales charges in subsequent fiscal periods, as
described in the Prospectus. For the fiscal period from ___________
through December 31, 1993, payments under the Class B plan totaled
_____________.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Fund believes that under current applicable accounting standards,
its obligations under the Class B Plan for payments in future period of
the asset-based sales charge is not required to be recognized as a
liability. In the event that applicable accounting standards at some time
in the future should be deemed to require that obligation to be recognized
as a liability, this could result in a decrease in the net asset value per
share of Class B shares. Were this to occur, such decrease would affect
all Class B shares regardless of how long such shares were held.
Furthermore, Class B shareholders would continue to remain subject to the
Class B CDSC.
The asset-based sales charge paid to the Distributor by the Fund
under the Class B Plan is intended to allow the Distributor to recoup the
cost of sales commissions paid to authorized brokers and dealers at the
time of sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in connection
with the distribution of Class B shares: (i) financing the advance of the
service fee payment to Recipients under the Class B Plan, (ii)
compensation and expenses of personnel employed by the Distributor to
support distribution of Class B shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those furnished to
current shareholders) and state "blue sky" registration fees.
The Glass-Steagall Act and other applicable laws and regulations,
among other things, generally prohibit Federally-chartered or supervised
banks from engaging in the business of underwriting, selling or
distributing securities as principals. It is the understanding of the
Manager and the Distributor that the Glass-Steagall Act and other
applicable laws and regulations do not preclude a bank from performing the
services required of a Recipient. However, judicial or administrative
decisions or interpretations of such laws, as well as changes in either
Federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent
certain banks from continuing to perform all or a part of those services.
If a bank were so prohibited, shareholders of the Fund who were clients
of such bank would be permitted to remain as shareholders, and if a bank
could no longer provide those service functions, alternate means for
continuing the servicing of such shareholders would be sought. In such
event, shareholders serviced by such bank might no longer be able to avail
themselves of any automatic investment or other services then being
provided by such bank. It is not expected that shareholders would suffer
any adverse financial consequences as a result of any of those
occurrences. The Board of Trustees will consider appropriate
modifications to the Fund's operations, including discontinuance of
payments under the Plan to such institutions, in the event of any future
change in such laws or regulations which may adversely affect the ability
of such institutions to provide these services. In addition, certain
banks and financial institutions may be required to register as dealers
under state law.
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, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as 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. Dividends will be declared on shares repurchased
by a dealer or broker for four business days following the trade date
(i.e., to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares
of the same class in the 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.
Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends (generally dividends from domestic
corporations) which the Fund derives from its portfolio investments held
for a minimum period, usually 46 days. A corporate shareholder will not
be eligible for the deduction on dividends paid on shares held by that
shareholder for 45 days or less. To the extent the Fund's dividends are
derived from its gross income from option premiums, interest income or
short-term capital gains from the sale of securities, or dividends from
foreign corporations, its dividends will not qualify for the deduction.
It is expected that for the most part the Fund's dividends will not
qualify, because of the nature of the investments held by the Fund in its
portfolio.
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 and Class B
Shares," 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 shares are expected to be lower as a result of the asset-based
sales charge on Class B shares, and Class B dividends will also differ in
amount as a consequence of any difference in net asset value between Class
A and Class B shares.
Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
Hedging Instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset value of Class A and Class B shares will be
reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when paid
by the Fund are considered "dividends." The Fund may make a supplemental
distribution of capital gains and ordinary income following the end of its
fiscal year. Any long-term capital gains distributions will be identified
separately when paid and when tax information is distributed by the Fund.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies,
shareholders may have a non-taxable return of capital, which will be
identified in notices to shareholders. There is no fixed dividend rate
(although the Fund may have a targeted dividend rate for Class A shares)
and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
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 and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
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.
Distributions by the Fund from investment income and long-term and
short-term capital gains will generally not be excludable from taxable
income in determining the California corporate franchise or income tax for
corporate shareholders of the Fund. Based upon a California court
decision and statements by the California Franchise Tax Board, it is
possible that shareholders subject to the California corporation income
tax may be allowed to exclude certain of the Fund's exempt-interest
dividends from income. Certain distributions may also be includable in
income subject to the corporate alternative minimum tax.
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 funds listed in the Prospectus as "Eligible Funds" at
net asset value without sales charge. Class B shareholders should be
aware that as of the date of this Additional Statement, only a limited
number of Eligible Funds offer Class B shares. To elect this option, a
shareholder must notify the Transfer Agent in writing and either must have
an existing account in the fund selected for investment or must obtain a
prospectus for that fund and an application from the Distributor to
establish an account. The investment will be made at the net asset value
per share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and distributions from other Eligible
Funds may be invested in shares of this Fund on the same basis.
ADDITIONAL INFORMATION ABOUT THE FUND
Information about the Fund's Declaration of Trust and Business Structure.
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 their
holders to one vote per share (and a proportional vote for a fractional
share) on matters submitted to their vote at shareholder meetings. Only
shareholders of a particular class vote on matters affecting only that
class. The Trustees may divide or combine the shares of a class into a
greater or lesser number of shares without thereby changing the
proportionate beneficial interest in the Fund. Shares do not have
cumulative voting rights or preemptive or subscription rights.
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 highly unlikely and is limited
to the relatively remote circumstances in which the Fund would be unable
to meet its obligations. 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 a defense of any claim made against any
shareholder for any act or obligation of the Fund and satisfy any judgment
thereon. Any person doing business with the Fund, and any shareholder of
the Fund, agrees under the Fund's Declaration of Trust to look solely to
the assets of the Fund for satisfaction of any claim or demand that may
arise out of any dealings with the Fund, and the Trustees shall have no
personal liability to any such person, to the extent permitted by law.
It is not contemplated that regular annual meetings of shareholders
will be held. 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 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 in the aggregate shares of the Fund valued at $25,000 or
more or holding 1% or more of the Fund's outstanding shares, whichever is
less, that they wish to communicate with other shareholders to request a
meeting to remove a Trustee, the Trustees will then either give the
applicants access to the Fund's shareholder list, mail their communication
to all other shareholders at the applicants' expense, or take alternative
action as set forth in Section 16(c) of the Investment Company Act.
Information About the Custodian of the Fund's Portfolio Securities. The
Custodian of the assets of the Fund is Citibank, N.A. The Custodian's
responsibilities include safeguarding and controlling the Fund's portfolio
securities, collecting income on the portfolio securities and handling the
delivery of such securities to and from the Fund. The Manager and its
affiliates have banking relationships with the Custodian. 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. The Fund's cash balances with the Custodian in excess of
$100,000 are not protected by Federal deposit insurance. Such uninsured
balances may at times be substantial.
The 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 Plans
of Distribution, 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 1991, 1992 and 1993, the aggregate sales charges on sales of the
Fund's shares were $1,457,519, $1,863,832 and $_________, respectively,
of which the Distributor and an affiliated broker-dealer retained $275,001
in the aggregate in 1991, $400,938 in 1992 and $__________ in 1993.
Independent Auditors. The independent auditors of the Fund examine the
Fund's financial statements and perform other related audit services.
They also serve as auditors for the Manager and certain other investment
companies advised by the Manager and its affiliates.
<PAGE>
APPENDIX A
TAX-EQUIVALENT YIELDS
The equivalent yield tables below compare tax-free income with taxable
income under Federal individual income tax rates effective January 1,
1993, and California state individual income tax rates effective January
1, 1993 (California tax brackets are adjusted for inflation sometime
between June 1 and August 1 of the current year). "Combined Taxable
Income" refers to the net amount subject to Federal and California income
taxes 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, and
that state tax payments are currently deductible for Federal tax purposes
and that the investor is not subject to Federal or state alternative
minimum tax. 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>
Combine Taxable Income
A Tax-Exempt Yield of:
Joint Return Effective Tax Bracket 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0%
But
Over Not Over FederalCal. Combined Is Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 21,578 $ 34,054 15% 4.00% 18.40% 3.68% 4.29% 4.90% 5.51% 6.13% 6.74% 7.35%
$ 34,054 $ 36,900 15% 6.00% 20.10% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88% 7.51%
$ 36,900 $ 47,274 28% 6.00% 32.32% 4.43% 5.17% 5.91% 6.65% 7.39% 8.13% 8.87%
$ 47,274 $ 59,746 28% 8.00% 33.76% 4.53% 5.28% 6.04% 6.79% 7.55% 8.30% 9.06%
$ 59,746 $ 89,150 28% 9.30% 34.70% 4.59% 5.36% 6.13% 6.89% 7.66% 8.42% 9.19%
$ 89,150 $207,200 31% 9.30% 37.42% 4.79% 5.59% 6.39% 7.19% 7.99% 8.79% 9.59%
$207,200 $414,400 31% 10.00% 37.90% 4.83% 5.64% 6.44% 7.25% 8.05% 8.86% 9.66%
$414,400 31% 11.00% 38.59% 4.89% 5.70% 6.51% 7.33% 8.14% 8.96% 9.77%
Single return:
But
Over Not Over
$ 17,027 $ 22,100 15% 6.00% 20.10% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88% 7.51%
$ 22,100 $ 23,637 28% 6.00% 32.32% 4.34% 5.17% 5.91% 6.65% 7.39% 8.13% 8.87%
$ 23,637 $ 29,873 28% 8.00% 33.76% 4.53% 5.28% 6.04% 6.79% 7.55% 8.30% 9.06%
$ 29,873 $ 53,500 28% 9.30% 34.70% 4.59% 5.36% 6.13% 6.89% 7.66% 8.42% 9.19%
$ 53,500 $103,600 31% 9.30% 37.42% 4.79% 5.59% 6.39% 7.19% 7.99% 8.79% 9.59%
$103,600 $207,200 31% 10.00% 37.90% 4.83% 5.64% 6.44% 7.25% 8.05% 8.86% 9.66%
$207,200 31% 11.00% 38.59% 4.89% 5.70% 6.51% 7.33% 8.14% 8.96% 9.77%
</TABLE>
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick
707 Seventeenth Street
Denver, Colorado 80202
Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
<PAGE>
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Condensed Financial Information (See Part A): To
be filed by amendment.
(2) Independent Auditors' Report (See Part B): To be
filed by amendment.
(3) Statement of Investments (See Part B): To be filed
by amendment.
(4) Statement of Assets and Liabilities (See Part B):
To be filed by amendment.
(5) Statement of Operations (See Part B): To be filed
by amendment.
(6) Statements of Changes in Net Assets (See Part B):
To be filed by amendment.
(7) Notes to Financial Statements (See Part B): To be
filed by amendment.
(8) Independent Auditors' Consent: To be filed by
amendment.
(b) Exhibits
(1) Amended and Restated Declaration of Trust dated
April 23, 1993: Filed with Post-Effective
Amendment No. 6 to Registrant's Registration
Statement, 4/28/93, and incorporated herein by
reference.
(2) By-Laws of the Registrant: Filed with Pre-
Effective Amendment No. 1 to Registrant's
Registration Statement, 10/7/88, and incorporated
herein by reference.
(3) Not applicable
(4) (i) Specimen Class A Share Certificate: Filed
with Post-Effective Amendment No. 6 to
Registrant's Registration Statement, 4/28/93,
and incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Filed
with Post-Effective Amendment No. 6 to
Registrant's Registration Statement, 4/28/93,
and incorporated herein by reference.
(5) Investment Advisory Agreement dated 10/22/90
between the Registrant and Oppenheimer Management
Corporation: Filed with Post-Effective Amendment
No. 3 to Registrant's Registration Statement,
2/28/91 and incorporated herein by reference.
(6) (a) General Distributor's Agreement dated
12/10/92 between the Registrant and
Oppenheimer Fund Management, Inc.: Filed
with Post-Effective Amendment No. 6 to
Registrant's Registration Statement, 4/28/93,
and incorporated herein by reference.
(b) Prototype Oppenheimer Fund Management, Inc.
Dealer Agreement: Filed with Post-Effective
Amendment No. 12 to the Registration
Statement of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92,
and incorporated herein by reference.
(c) Prototype Oppenheimer Fund Management, Inc.
Agency Agreement: Filed with Post-Effective
Amendment No. 12 to the Registration
Statement of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92,
and incorporated herein by reference.
(d) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities
dated 10/1/86: Filed with Post-Effective
Amendment No. 25 of Oppenheimer Special Fund
(Reg. No. 2-45272), 11/1/86 and incorporated
herein by reference.
(e) Prototype Oppenheimer Fund Management, Inc.
Broker Agreement: Filed with Post-Effective
Amendment No. 12 to the Registration
Statement of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92,
and incorporated herein by reference.
(7) Retirement Plan for Non-Interested Trustees or
Directors (adopted 6/7/90): Filed with Post-
Effective Amendment No. 97 of Oppenheimer Fund
(Reg. No. 2-14586), and incorporated herein by
reference.
(8) Custodian Agreement dated 11/1/88: Filed with Pre-
Effective Amendment No. 2 to Registrant's
Registration Statement, 10/31/88, and incorporated
herein by reference.
(9) Not applicable
(10) Opinion and Consent of Counsel dated 10/6/88:
Filed with Pre-Effective Amendment No. 1 to
Registrant's Registration Statement, 10/7/88, and
incorporated herein by reference.
(11) Not applicable.
(12) Not applicable.
(13) Investment Letter from Oppenheimer Management
Corporation to Registrant: Filed with Pre-
Effective Amendment No. 1 to Registrant's
Registration Statement, 10/7/88, and incorporated
herein by reference.
(14) Not applicable.
(15) (i) Service Plan and Agreement for Class A shares
under Rule 12b-1 of the Investment Company
Act of 1940 dated 2/10/93: Filed with Post-
Effective Amendment No. 6 to Registrant's
Registration Statement, 4/28/93, and
incorporated herein by reference.
(ii) Distribution Plan and Agreement for Class B
shares under Rule 12b-1 dated 2/10/93: Filed
with Post-Effective Amendment No. 6 to
Registrant's Registration Statement, 4/28/93,
and incorporated herein by reference.
(16) Performance Computation Schedule: To be filed by
amendment.
-- Powers of Attorney, including certified Board
resolutions: Filed herewith.
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 February 18, 1994
Class A Shares of Beneficial Interest 5,396
Class B Shares of Beneficial Interest 336
Item 27. Indemnification
Reference is made to paragraphs (c) through (f) of Section 12
of Article SEVENTH of Registrant's Declaration of Trust filed as
Exhibit 24(b)(1)(i) to this Registration Statement and incorporated
herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid
by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such trustee, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment
adviser of the Registrant; it and certain affiliates act in the
same capacity for other registered investment companies as
described in Parts A and B of this Registration Statement.
(b) For information as to the business, profession, vocation
or
employment of a substantial nature of each of the directors and
officers of Oppenheimer Management Corporation, reference is made
to Parts A and B of this Registration Statement and to the
registration on Form ADV filed by Oppenheimer Management
Corporation under the Investment Advisers Act of 1940, which is
incorporated herein by reference.
Item 29. Principal Underwriter
(a) Oppenheimer Funds Distributor, Inc. is the principal
underwriter of Registrant's shares. It is also the principal
underwriter of certain other open-end registered investment
companies for which Oppenheimer Management Corporation is the
investment adviser, as described in Parts A and B of this
Registration Statement.
(b) The information contained in the registration on Form BD
of Oppenheimer Funds Distributor, Inc., filed under the Securities
Exchange Act of 1934, is incorporated herein by reference.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained Registrant pursuant to Section 31(a) of the Investment
Company Act and rules promulgated thereunder are in possession of
Oppenheimer Management Corporation, at its offices at 3410 South
Galena Street, Denver, Colorado 80231.
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of a Trustee
or Trustees when requested to do so by the holders of at least 10%
of Registrant's outstanding shares and in connection with such
meeting to in conformity with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to shareholder
communications.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant 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 28th day of February, 1994.
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
By: /s/ Donald W. Spiro*
----------------------------------------
Donald W. Spiro, President
Attest:
/s/ Andrew J. Donohue*
- ----------------------------
Andrew J. Donohue, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Leon Levy* Chairman of the
- -------------- Board of Trustees February 28, 1994
Leon Levy
/s/ Donald W. Spiro* President, Principal
- -------------------- Executive Officer
Donald W. Spiro and Trustee February 28, 1994
/s/ George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting
Officer February 28, 1994
/s/ Leo Cherne* Trustee February 28, 1994
- ---------------
Leo Cherne
/s/ Edmund T. Delaney* Trustee February 28, 1994
- ----------------------
Edmund T. Delaney
/s/ Robert G. Galli* Trustee February 28, 1994
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee February 28, 1994
- ----------------------
Benjamin Lipstein
/s/ Kenneth A. Randall* Trustee February 28, 1994
- -----------------------
Kenneth A. Randall
/s/ Sidney M. Robbins* Trustee February 28, 1994
- ----------------------
Sidney M. Robbins
/s/ Russell S. Reynolds, Jr.* Trustee February 28, 1994
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee February 28, 1994
- --------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan* Trustee February 28, 1994
- --------------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter* Trustee February 28, 1994
- -----------------------
Clayton K. Yeutter
/s/ Edward V. Regan* Trustee February 28, 1994
- --------------------
Edward V. Regan
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
OPPENHEIMER DISCOVERY FUND
OPPENHEIMER GLOBAL BIO-TECH FUND
OPPENHEIMER GLOBAL ENVIRONMENT FUND
OPPENHEIMER GLOBAL FUND
OPPENHEIMER GLOBAL GROWTH & INCOME FUND
OPPENHEIMER GOLD & SPECIAL MINERALS FUND
OPPENHEIMER MONEY MARKET FUND, INC.
OPPENHEIMER MORTGAGE INCOME FUND
OPPENHEIMER MULTI-GOVERNMENT TRUST
OPPENHEIMER MULTI-SECTOR INCOME TRUST
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
OPPENHEIMER FUND
OPPENHEIMER PENNSYLVANIA TAX-EXEMPT FUND
OPPENHEIMER SPECIAL FUND
OPPENHEIMER TARGET FUND
OPPENHEIMER TAX-FREE BOND FUND
OPPENHEIMER TIME FUND
OPPENHEIMER U.S. GOVERNMENT TRUST
CERTIFIED RESOLUTIONS OF THE BOARDS
June 10, 1993
At a meeting of the Boards for the above referenced funds (the
"Funds") held on June 10, 1993, the members thereof by unanimous vote of
those present adopted and approved the following resolutions:
"RESOLVED, that Robert G. Galli, Andrew J. Donohue or Robert G.
Zack, and each of them, be, and the same hereby is, appointed the
attorney-in-fact and agent of Donald W. Spiro, as President of the Funds,
Robert G. Galli, as Secretary of the Funds, and George C. Bowen, as
Treasurer of the Funds (Principal Financial and Accounting Officer), with
full power of substitution and resubstitution, to sign on the behalf of
such officers of each of the Funds any and all Registration Statements
(including any post-effective amendments to such Registration Statements)
under the Securities Act of 1933 and 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; and be it further
RESOLVED, that Robert G. Galli, Andrew J. Donohue or Robert G.
Zack, and each of them, hereby is authorized, empowered and directed, in
the name and on behalf of the Funds, to take such additional action and
to execute and deliver such additional documents and instruments as any
of them may deem necessary or appropriate to implement the provisions of
the foregoing resolution, the authority for the taking of such action and
the execution and delivery of such documents and instruments of such
documents and instruments to be conclusively evidenced thereby."
In witness whereof, the undersigned has hereunto set his hand this
26th day of July, 1993.
/s/ ROBERT G. ZACK
- -------------------------------------
Robert G. Zack
Assistant Secretary
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ LEON LEVY
---------------------------------
Leon Levy
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ DONALD W. SPIRO
--------------------------
Donald W. Spiro
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ LEO CHERNE
---------------------------
Leo Cherne
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ EDMUND T. DELANEY
-------------------------------
Edmund T. Delaney
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ BENJAMIN LIPSTEIN
---------------------------------
Benjamin Lipstein
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ KENNETH A. RANDALL
-------------------------------------
Kenneth A. Randall
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ SIDNEY M. ROBBINS
------------------------------
Sidney M. Robbins
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ RUSSELL S. REYNOLDS, JR.
-----------------------------------
Russell S. Reynolds, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 12th day of June, 1993.
/S/ PAULINE TRIGERE
-----------------------------
Pauline Trigere
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ ELIZABETH B. MOYNIHAN
-----------------------------------
Elizabeth B. Moynihan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ CLAYTON YEUTTER
-------------------------------
Clayton Yeutter
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his capacity as the
Treasurer (Principal Financial and Accounting Officer) of OPPENHEIMER
CALIFORNIA TAX-EXEMPT FUND, a Massachusetts business trust (the "Fund"),
to sign on his 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 he 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 13th day of July, 1993.
/S/ GEORGE BOWEN
----------------------------
George Bowen
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his capacity as the
President of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND, a Massachusetts
business trust (the "Fund"), to sign on his 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 he 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 13th day of July, 1993.
/S/ DONALD W. SPIRO
-----------------------------
Donald W. Spiro
<PAGE>
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, his true
and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his capacity as the Secretary of
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND, a Massachusetts business trust
(the "Fund"), to sign on his 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 he 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 13th day of July, 1993.
/S/ ROBERT G. GALLI
-----------------------------
Robert G. Galli
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert G. Galli, Andrew J. Donohue or Robert G. Zack, and each
of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his
or her capacities as a trustee of OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND,
a Massachusetts business trust (the "Fund"), to sign on his (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 he or 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 10th day of June, 1993.
/S/ EDWARD V. REGAN
-------------------------------
Edward V. Regan
