<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. 8 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 10 / 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)
/ X / On May 1, 1994 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / On _______ 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 Objective 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 FUND
Supplement dated May 1, 1994
to the Prospectus dated May 1, 1994
The following is added after the first paragraph under the Class A Sales
Charge Table in "Class A Shares" on page 15:
In addition to paying dealers the regular commission for sales
of Class A shares stated in the sales charge table in "Class A
Shares," and the commission for sales of Class B shares
described in the first paragraph of "Class B Distribution and
Service Plan," below, the Distributor will pay the following
additional commission for shares of the Fund sold in "qualifying
transactions" from March 1, 1994, through May 31, 1994: (i)
1.00% of the offering price of Class A and/or Class B shares
sold by a representative of a broker or dealer at a branch not
in a "financial institution," such as a bank, savings and loan
association or credit union; and (ii) .50% of the offering price
of Class B shares, and the Distributor's entire retained
commission on Class A shares, sold by a sales representative of
a financial institution or by a representative of a broker or
dealer firm at a branch in a financial institution. "Qualifying
transactions" are sales by a registered representative of a
broker or dealer at a branch not in a financial institution of
$200,000 or more (calculated at offering price), and sales in
any amount by a sales representative of a financial institution
or registered representative of a broker or dealer at a branch
in a financial institution, of Class A and/or Class B shares of
any one or more of the following OppenheimerFunds: Oppenheimer
Tax-Free Bond Fund, Oppenheimer Insured Tax-Exempt Bond Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer California
Tax-Exempt Fund, Oppenheimer Pennsylvania Tax-Exempt Fund,
Oppenheimer Florida Tax-Exempt Fund, and Oppenheimer New Jersey
Tax-Exempt Fund. "Qualifying transactions" do not include sales
of Class A shares (1) at net asset value without sales charge,
(2) subject to a contingent deferred sales charge, or (3)
intended under a Letter of Intent.
May 1, 1994 PS790
<PAGE>
Oppenheimer California Tax-Exempt Bond Fund
Prospectus dated May 1, 1994.
Oppenheimer California Tax-Exempt Fund is a mutual fund that seeks
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. Under normal market conditions, the Fund invests
at least 80% of its assets in Municipal Securities and at least 65% of its
total assets in California Municipal Securities. However, in times of
unstable economic or market conditions, the Fund's investment manager may
deem it advisable to temporarily invest an unlimited amount of the Fund's
total assets in certain taxable instruments. The Fund also uses "hedging"
instruments, to seek to reduce the risks of market fluctuations that
affect the value of the securities the Fund holds. You should carefully
review the risks associated with an investment in the Fund. Please refer
to "Investment Policies and Strategies" for more information about the
types of securities the Fund invests in and the risks of investing in the
Fund.
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
May 1, 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
ABOUT THE FUND
Expenses
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class 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
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are reflected in the Fund's net asset value per share. As
a shareholder, you pay those 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 in the
Fund and your share of the Fund's operating expenses that you might expect
to bear indirectly. The calculations are 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(1) eliminated thereafter
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Exchange Fee $5.00(2) $5.00(2)
(1)If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares," below.
(2)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
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager") and other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal and other
expenses. The following numbers are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The "12b-1 Service and/or Distribution
Plan Fees" for Class A shares are the Service Plan Fees (which are a
maximum of 0.25% of average annual net assets of that class), and for
Class B shares are the Service Plan Fee (maximum of 0.25%) and the asset-
based sales charge of 0.75%. The actual expense numbers for each class of
shares in future years may be more or less, depending on a number of
factors, including the actual amount of the assets represented by each
class of shares.
Class A Class B
Shares Shares
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Management Fees 0.59% 0.59%
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12b-1 Service and/or
Distribution Plan Fees 0.25% 1.00%
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Other Expenses 0.13% 0.20%
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Total Fund Operating Expenses 0.97% 1.79%
-- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the chart above.
If you were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of each
period shown:
1 year 3 years 5 years 10 years(1)
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Class A Shares $57 $77 $ 99 $161
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Class B Shares $68 $86 $117 $169
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 $57 $77 $99 $161
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Class B Shares $18 $56 $97 $169
(1)The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. 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.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. This information has been audited by
KPMG Peat Marwick, the Fund's independent auditors, whose report on the
Fund's financial statements for the fiscal year ended December 31, 1993,
is included in the Statement of Additional Information. Class B shares
were publicly offered only during a portion of that period, commencing
May 1, 1993.
<PAGE>
<TABLE>
<CAPTION>
Class A Class B
Year Ended Period Ended
December 31, December 31,
1993 1992 1991 1990 1989 1988(2) 1993(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 10.35 $ 10.22 $ 9.86 $ 9.94 $ 9.58 $ 9.53 $10.72
Income from investment operations:
Net investment income .62 .61 .66 .67 .71 .09 .35
Net realized and unrealized gain
(loss) on investments .72 .20 .38 (.07) .37 .05 .34
Total income from investment
operations 1.34 .81 1.04 .60 1.08 .14 .69
Dividends and distributions to shareholders:
Dividends from net investment income (.65) (.60) (.62) (.68) (.70) (.09) (.36)
Distributions from net realized
gain on investments (.07) (.08) (.06) -- (.02) -- (.07)
Total dividends and distributions
to shareholders (.72) (.68) (.68) (.68) (.72) (.09) (.43)
Net asset value, end of period $ 10.97 $ 10.35 $ 10.22 $ 9.86 $ 9.94 $ 9.58 $10.98
Total Return, at Net Asset Value(3) 13.26% 8.28% 10.93% 6.38% 11.62% 1.43% 6.66%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $266,490 $204,349 $145,163 $92,514 $52,342 $5,825 $9,921
Average net assets (in thousands) $245,193 $174,055 $115,661 $72,879 $29,308 $2,377 $5,218
Number of shares outstanding at
end of period (in thousands) 24,290 19,738 14,200 9,386 5,268 608 904
Ratios to average net assets:
Net investment income 5.74% 6.07% 6.52% 6.80% 7.11% 5.95%(4) 4.57%(4)
Expenses, before voluntary
assumption by the Manager .97% 1.07% 1.05% 1.05% 1.09% 2.25%(4) 1.79%(4)
Expenses, net of voluntary
assumption by the Manager N/A N/A .73% .53% .16% -- (4) N/A
Portfolio turnover rate(5) 13.7% 26.8% 26.6% 14.5% 20.7% 0.0% 13.7%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
2. For the period from November 3, 1988 (commencement of operations) to
December 31, 1988.
3. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended December 31, 1993 were
$92,539,523 and $33,483,495, respectively.
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund's objective is to seek 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. The
Fund is not intended to be a complete investment program, and there is no
assurance that it will achieve its objective.
Investment Policies and Strategies
Under normal market conditions, the Fund attempts to invest 100% of
its total assets, and, as a matter of fundamental policy, to invest at
least 80% of its total assets, in Municipal Securities. In addition,
under normal market conditions, the Fund will invest at least 65% of its
total assets in California Municipal Securities.
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.
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.
-- Municipal Securities. Municipal Securities are municipal bonds
and municipal notes 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. California Municipal Securities are
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. No
independent investigation has been made by the Manager as to the users of
proceeds of bond offerings or the application of such proceeds.
"Municipal bonds" are Municipal Securities that have a maturity when
issued of one year or more and "municipal notes" are Municipal Securities
that have a maturity when issued of less than one year. The two principal
classifications of Municipal Securities are "general obligations" (secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest) and "revenue obligations" (payable only
from the revenues derived from a particular facility or class of
facilities, or specific excise tax or other revenue source). The Fund may
invest in municipal securities of both classifications.
-- 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."
-- Investments in Taxable Securities and Temporary Defensive
Investment Strategy. Under normal market conditions, the Fund may invest
up to 20% of its assets in taxable investments, including (i) certain
"Temporary Investments" (described immediately below); (ii) covered call
options and Hedging Instruments (described in "Covered Calls and Hedging"
below); (iii) repurchase agreements (explained below); and (iv) municipal
securities issued to benefit a private user ("Private Activity Municipal
Securities"), the interest from which may be subject to Federal
alternative minimum tax (see "Dividends, Distributions and Taxes," below,
and "Private Activity Municipal Securities" in the Additional
Statement).
For temporary defensive purposes, the Fund may invest up to 100% of
its total assets in "Temporary Investments," including: (i) obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities; (ii) corporate debt securities rated within the three
highest grades by Moody's or Standard & Poor's; (iii) commercial paper
rated "A-1" by Standard & Poor's or "Prime-1" by Moody's; and (iv)
certificates of deposit of domestic banks with assets of $1 billion or
more. The Fund may hold Temporary Investments pending the investment of
proceeds from the sale of Fund shares or portfolio securities, or to meet
anticipated redemptions.
-- Credit Risk and Interest Rate Risk. The values of Municipal
Securities will vary as a result of changing evaluations by rating
services and investors of the ability of the issuers of such securities
to meet interest and principal payments. Such values will also change in
response to changes in interest rates. Should interest rates rise, the
values of outstanding Municipal Securities will probably decline and (if
purchased at principal amount) would sell at a discount. 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.
-- Municipal Lease Obligations. The Fund may invest in certificates
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.
-- 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.
-- Inverse Floaters and Other Derivative Securities. 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" and are also generally known
as derivative securities. As short-term rates rise, inverse floaters
produce less current income. The Fund may also invest in municipal
securities for which the coupon payments are a function of an external
pricing mechanism embedded with the security, such as an interest rate
swap or cap or a municipal bond or swap index. These municipal securities
are also generally known as derivative securities. A risk of derivatives
securities is that their market value could be expected to vary to a much
greater extent than the market value of municipal securities with similar
credit quality, redemption provisions and maturities.
Inverse floaters with embedded caps may be appropriate if the Manager
has purchased inverse floaters in an attempt to maintain high current
yield and believes it has taken on more short-term interest rate risk than
it would like to bear. Embedded caps hedge a portion of the Fund's
exposure to rising short-term interest rates when interest rates exceed
the strike price. The risk is that if interest rates do not rise above
the strike price, then the cap - purchased at a certain cost - will never
provide additional cash flows and expires worthless.
-- Ratings of Municipal Securities. 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. Although such Municipal Securities are investment grade,
they 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 the issuers of
such securities 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.
-- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund generally will not engage in
the trading of securities for the purpose of realizing short-term gains,
but the Fund may sell securities as the Manager deems advisable to take
advantage of differentials in yield. The "Financial Highlights," above,
show the Fund's portfolio turnover rate during past fiscal years. While
short-term trading increases portfolio turnover, the Fund incurs little
or no brokerage costs because most of the Fund's portfolio transactions
are principal trades without brokerage commissions.
-- 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, the Fund uses certain investment techniques and strategies
in carrying out those policies. The Fund's investment policies and
practices are not "fundamental" unless the Prospectus or Statement of
Additional Information says that a particular policy is "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
vote of outstanding voting shares (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 without shareholder approval, although significant
changes will be described in amendments to this Prospectus.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
information about these practices, including limitations designed to
reduce some of the risks.
-- When-Issued and Delayed Delivery Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. "When-issued" or
"delayed delivery" refer to securities whose terms and indenture are
available and for which a market exists, but which are not available for
immediate delivery. The Fund does not intend to make such purchases for
speculative purposes. During the period between the purchase and
settlement, no payment is made for the security and no interest accrues
to the buyer from the investment. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involve a risk of loss if the value of the security declines
prior to the settlement date.
-- Repurchase Agreements. The Fund may enter into repurchase
agreements. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor of the
securities under a repurchase agreement fails to pay the resale price on
the delivery date, the Fund may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do so.
The Fund will not enter into a repurchase agreement which causes more than
10% of its net assets to be subject to repurchase agreements having a
maturity beyond seven days.
-- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of the Fund's investments. Investments may be
illiquid because of the absence of an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction
on its resale. 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 will not invest
more than 10% of its net assets in illiquid or restricted securities (that
limit may increase to 15% if certain state laws are changed or the Fund's
shares are no longer sold in those states). Certain restricted
securities, eligible for resale to qualified institutional purchasers, are
not subject to that limit.
-- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to certain types of
eligible borrowers approved by the Board of Trustees. Each loan must be
collateralized in accordance with applicable regulatory requirements.
After any loan, the value of the securities loaned must not exceed 25% of
the value of the Fund's net assets. There are some risks in connection
with securities lending. The Fund might experience a delay in receiving
additional collateral to secure a loan, or a delay in recovery of the
loaned securities. The Fund presently does not intend to engage in loans
of securities that will exceed 5% of the value of the Fund's total assets
in the coming year.
-- Non-diversification. The Fund is classified as a "non-
diversified" investment company under the Investment Company Act of 1940
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, 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.
-- Writing Covered Calls. The Fund may write (i.e., sell) call
options (calls) to raise cash for liquidity purposes (for example, to meet
redemptions requirements) or for defensive reasons. The Fund may write
calls only if certain conditions are met: (1) after writing any call, not
more than 25% of the Fund's total assets are subject to calls; (2) the
calls are listed on a domestic securities exchange or quoted on the
automatic quotation system of the National Association of Securities
Dealers, Inc. (NASDAQ); and (3) each call must be "covered" while it is
outstanding, that is, the Fund must own the securities on which the call
is written or it must own other securities that are acceptable for the
escrow arrangements required for calls. If a covered call written by the
Fund is exercised on a security that has increased in value, the Fund will
be required to sell the security at the call price and will not be able
to realize any profit on the security above the call price.
-- Hedging with Options and Futures Contracts. The Fund may buy and
sell options and futures contracts and engage in interest rate swap
transactions to try to manage its exposure to declining prices on its
portfolio securities or to establish a position in the securities market
as a temporary substitute for purchasing individual securities. Some of
these strategies, such as selling futures, buying puts and writing covered
calls, hedge the Fund's portfolio against price fluctuations. Other
hedging strategies, such as buying futures, writing puts and buying call
options, tend to increase the Fund's exposure to the market.
The Fund may purchase certain kinds of put and call options, Interest
Rate Futures and Municipal Bond Index Futures (described below), financial
futures and options on Interest Rate Futures and Municipal Bond Index
Futures. These are all referred to as "Hedging Instruments." The Fund
does not use Hedging Instruments for speculative purposes. The Hedging
Instruments the Fund may use are described below and in greater detail in
"Covered Calls and Hedging" in the Additional Statement.
The Fund may purchase put options ("puts") which relate to (1)
securities that the Fund owns, (2) Interest Rate Futures or Municipal Bond
Index Futures, whether or not the Fund owns the particular Future in its
portfolio, or (3) broadly-based municipal bond indices. Writing puts
requires the segregation of liquid assets to cover the put. The Fund will
not write a put if it will require more than 50% of the Fund's net assets
to be segregated to cover the put obligation. The Fund may purchase calls
only on debt securities, broadly-based municipal bond indices or Interest
Rate Futures on Municipal Bond Index Futures, or to terminate its
obligation on a call the Fund previously wrote. A call or put may not be
purchased if the value of all of the Fund's put and call options would
exceed 5% of the Fund's total assets. The Fund may buy and sell futures
contracts only if they relate to debt securities (referred to as Interest
Rate Futures) or to municipal bond indices (referred to as Municipal Bond
Index Futures"), as described in the Statement of Additional
Information.
Hedging instruments can be volatile investments and may involve
special risks. If the Manager uses a hedging instrument at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
Interest rate swaps are subject to credit risks (if the other party fails
to meet its obligations) and also to interest rate risks, because the Fund
could be obligated to pay more under its swap agreements than it receives
under them, as a result of interest rate changes. These risks and the
hedging strategies the Fund may use are described in greater detail in the
Statement of Additional Information.
Other Investment Restrictions. The Fund has other investment restrictions
that are fundamental policies.
Under these fundamental policies, the Fund cannot do any of the
following: (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 (see "Diversification" in the
Additional Statement"); 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 only at
the time the Fund purchases a security, and the Fund need not dispose of
a security merely because the Fund's assets have changed or the security
has increased in value relative to the size of the Fund. There are other
fundamental policies discussed in the Statement of Additional
Information.
How the Fund is Managed
Organization and History. The Fund is an open-end, non-diversified
management investment company organized as a Massachusetts business trust
in July, 1988.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the 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 shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. Each
class has its own dividends and distributions, and pays certain expenses
which may be different for different classes. 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 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 of more than $27
billion as of March 31, 1994, and with more than 1.8 million shareholder
accounts. The Manager is owned by Oppenheimer Acquisition Corp., a
holding company that is owned in part by senior officers of the Manager
and controlled by Massachusetts Mutual Life Insurance Company, a mutual
life insurance company.
-- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Fund) is Robert E. Patterson, a Senior Vice
President of the Manager. He has been responsible for the day-to-day
management of the Fund's portfolio since November, 1988. He also serves
as an officer and portfolio manager for other OppenheimerFunds.
-- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.60% 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 0.59% of average
annual net assets for Class A shares and 0.59% for Class B shares.
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 reduce the net asset value of
shares, and therefore are indirectly borne by shareholders through their
investment. More information about the investment advisory agreement and
the other expenses paid by the Fund is contained in the Statement of
Additional Information.
There is also information about the Fund's brokerage policies and
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, the Manager is permitted by the
investment advisory agreement to consider whether brokers have sold shares
of the Fund or any other funds for which the Manager 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 about their
accounts 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 useful to help you see how well your
investment has done and to compare it to other funds or market indices,
as we have done below.
It is important to understand that the Fund's yields and total
returns represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields are calculated is contained in the Statement of Additional
Information, which also contains information about indices and other ways
to measure and compare the Fund's performance. 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 those returns would be reduced if sales charges were deducted. When
total returns are shown for Class B shares, they reflect the effect of the
contingent deferred sales charge. They may also be shown based on the
change in net asset value, without considering the effect of the
contingent deferred sales charge.
-- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a
30-day period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the
absence of taxes. It is calculated by dividing that portion of the yield
that is tax-exempt by a factor equal to one minus the applicable tax rate.
The yield of each Class will differ because of the different expenses of
each Class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended 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 Municipal Securities the
Fund's performance is compared to the performance of the Lehman Brothers
Municipal Bond Index. The Lehman Brothers Municipal Bond Index is an
unmanaged index of a broad range of investment grade municipal bonds,
widely regarded as a measure of the performance of the general municipal
bond market.
Index performance reflects reinvestment of income but does not
consider the effect of capital gains or transaction costs, and none of the
data below shows the effect of taxes. Also, the Fund's performance data
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the 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%
- ---------------
*Reflects cumulative total return for the period from inception of the
class (5/1/93) and is not annualized.
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.
ABOUT YOUR 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 of the end of the calendar month of 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 consider whether the front-end sales
charge on Class A shares would result in higher net expenses after
redemption.
-- Are there differences in account features that matter to you?
Because some account features may not be available for Class 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 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.
-- 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.
-- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
-- At What Price Are Share Sold? 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.
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% 4.00%
- -------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.50% 3.63% 3.00%
- -------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.25%
- -------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.80%
- -------------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. 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. The Distributor sponsors 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 investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of 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) Automatic Withdrawal Plan
payments that are limited to no more than 12% of the original account
value annually, and (2) involuntary redemptions of shares by operation of
law or under the procedures set forth in the Fund's Declaration of Trust
or adopted by the Board of Trustees.
-- 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 redemptions
following the death or disability of the shareholder (as evidenced by a
determination of disability by the Social Security Administration).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described 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.
Because the Distributor's actual expenses in selling Class B shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class B shares, those expenses may be
carried over and paid in future years. At December 31, 1993, the end of
the Plan year, the Distributor had incurred unreimbursed expenses under
the Plan of $420,189 (equal to 4.24% of the Fund's net assets represented
by Class B shares on that date), which have been carried over into the
present Plan year. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the net asset-based
sales charge to the Distributor for certain expenses it incurred before
the Plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to
"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 please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
-- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The check is not payable to all shareholders listed on the account
statement
- The check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If
you are signing as a fiduciary or on behalf of a corporation, partnership
or other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held under a share
certificate by telephone.
- To redeem shares through a service representative, call
1-800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
-- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
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, or (4) the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges 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, 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.
-- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same address on the Fund's
records. However, each shareholder may call the Transfer Agent at 1-800-
525-7048 to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class
B shares from net investment income 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. However, the amount of dividends and distributions may
vary from time to time, depending upon market conditions, the composition
of the Fund's portfolio, and expenses borne by that Class. It is expected
that distributions paid with respect to Class A shares will generally be
higher than for Class B shares because expenses allocable to Class B
shares will generally be higher.
Capital Gains. Although the Fund does not seek capital gains, it may
realize capital gains on the sale of portfolio securities. If it does,
it may make distributions out of any net short-term or long-term capital
gains in December. 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.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. Dividends paid from short-term capital
gains are taxable as ordinary income. Dividends paid from net investment
income earned by the Fund on Municipal Securities will be excludable from
your gross income for Federal income tax purposes. A portion of the
dividends paid by the Fund may be an item of tax preference if you are
subject to alternative minimum tax. Distributions are subject to federal
income tax and may be subject to state or local taxes. Whether you
reinvest your distributions in additional shares or take them in cash, the
tax treatment is the same. Every year the Fund will send you and the IRS
a statement showing the amount of any taxable distribution you received
in the previous year as well as the amount of your tax-exempt income.
- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, you will pay the full price for the
shares and then receive a portion of the price back as a dividend or a
taxable capital gain.
- Taxes on transactions: Even though the Fund seeks tax-exempt
income for distribution to shareholders, you may have a capital gain or
loss when you sell or exchange your shares. A capital gain or loss is the
difference between the price you paid for the shares and the price you
receive when you sell them. Any capital gain is subject to capital gains
tax.
-- Returns of Capital. In certain instances, distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
advisor about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
Oppenheimer California Tax-Exempt Fund Prospectus
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer 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>
Oppenheimer California Tax-Exempt Bond Fund Prospectus and
Two World Trade Center New Account Application
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer 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>
Oppenheimer California Tax-Exempt Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated May 1, 1994
This Statement of Additional Information is not a Prospectus. This
document contains additional material about the Fund and supplements
information in the Prospectus dated May 1, 1994. It should be read
together with the Prospectus which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholders Services at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll free
number shown above.
Contents
Page
About the Fund . . . . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies. . . . . . . . . . . . . .
Investment Policies and Strategies . . . . . . . . . . .
Other Investment Techniques and Strategies . . . . . . .
Other Investment Restrictions. . . . . . . . . . . . . .
How the Fund is Managed. . . . . . . . . . . . . . . . . . .
Organization and History . . . . . . . . . . . . . . . .
Trustees and Officers of the Fund. . . . . . . . . . . .
The Manager and Its Affiliates . . . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . . . .
Distribution and Services Plans. . . . . . . . . . . . . . .
About Your Account . . . . . . . . . . . . . . . . . . . . .
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . .
How To Sell Shares . . . . . . . . . . . . . . . . . . . . .
How to Exchange Shares . . . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . . . .
Additional Information About the Fund. . . . . . . . . . . .
Financial Information About the Fund . . . . . . . . . . . .
Independent Auditors' Report . . . . . . . . . . . . . . . .
Financial Statements of the Fund . . . . . . . . . . . . . .
Appendix A: Equivalent Yield Chart . . . . . . . . . . . . .A-1
Appendix B: Municipal Bond Ratings . . . . . . . . . . . . .B-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
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.
-- 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 and Other Derivative Instruments. 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.
-- Inverse Floaters and Other Derivative Instruments. Investing in
inverse floaters that have interest rate caps might be part of a portfolio
strategy to try to maintain a high current yield for the Fund when the
Fund has invested in inverse floaters that expose the Fund to the risk of
short-term interest rate fluctuation. Embedded caps hedge a portion of
the Fund's exposure to rising interest rates. When interest rates exceed
the a pre-determined rate, the cap generates additional cash flows that
offset the decline in interest rates on the inverse floater, and the hedge
is successful. However, the Fund bears the risk that if interest rates
do not rise above the pre-determined rate, the cap (which is purchased for
additional cost) will not provide additional cash flows and will expire
worthless.
-- Municipal Lease Obligations. From time to time the Fund may
invest more than 5% of its net assets in municipal lease obligations that
the Manager has determined to be liquid under guidelines set by the Board
of Trustees. Those guidelines require the Manager to evaluate: (1) the
frequency of trades and price quotations for such securities; (2) the
number of dealers or other potential buyers willing to purchase or sell
such securities; (3) the availability of market-makers; and (4) the nature
of the trades for such securities. The Manager will also evaluate the
likelihood of a continuing market for such securities throughout the time
they are held by the Fund and the credit quality of the instrument.
Municipal leases may take the form of a lease or an installment purchase
contract issued by a state or local government authority to obtain funds
to acquire a wide variety of equipment and facilities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. 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.
-- 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.
-- 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.
-- Ratings of Municipal Securities. Moody's and S&P's ratings (see
Appendix A) represent their respective opinions of the quality of the
Municipal Securities they undertake to rate. However, such ratings are
general and are not absolute standards of quality. Consequently, Municipal
Securities with the same maturity, coupon and rating may have different
yields, while Municipal Securities of the same maturity and coupon with
different ratings may have the same yield. Investment in lower quality
securities may produce a higher yield than securities rated in the higher
rating categories described in the Prospectus (or judged by the Manager
to be of comparable quality). However, the added risk of lower quality
securities might not be consistent with a policy of preservation of
capital.
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 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, which added Article XIIIA
to the California Constitution. Article XIIIA 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 raise revenue to pay their bond
obligations. It is unknown whether additional revenue redistribution
legislation will be enacted in the future and whether, if enacted, such
legislation will 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. In 1988, California voters approved
an initiative known as Proposition 98, which in addition to amending
Article XIIIB, amended Article XVI to require a minimum level of funding
for public schools and community colleges. In 1992-93 and 1993-94, the
state budget met part of its commitment to education through $1.8 billion
in off-book loans. The legality of these loans was challenged in a
lawsuit by the California Teachers Association. A lower court in
California has ruled against the state, and under this decision the
schools would not be required to repay these loans. If upheld on appeal,
the ruling would increase the state's officially recognized 1993-94 year-
end deficit by $1.8 billion.
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 the State of California and California municipal issuers
to pay interest or repay principal on their obligations.
California has substantial size, wealth and a diverse economy. It
is the largest in population of the states, and accounts for 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. Although the
national economic recovery continued at a strong pace in the fourth
quarter of 1993, California is still experiencing the effects of a
recession. However, the Commission on State Finance predicts that the
California economy will stabilize and begin a modest economic recovery in
late 1994. 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.
Although the median home prices in the state have continued to
decline, home sales have increased sharply. Median home prices in
February 1994 were down 3.3% from February 1993, while home sales
increased 22.4% from a year earlier. Unemployment, however, has been
above the national average since 1990. In February 1994, unemployment in
California stood at 9.0% versus 6.5% for the nation. Overall, the state
has lost over 850,000 jobs since the spring of 1990, notwithstanding the
continued increase in the state's population. Employment is expected to
fall 0.3% in 1994. With a slow recovery, economic forecasts predict
annual growth in employment of 1.5% and 1.6% in 1995 and 1996,
respectively. Personal bankruptcy filings also continue to increase, as
statewide filings rose 17% in 1992.
These economic difficulties have exacerbated the budget imbalance
which has been evident since 1985-86. Since that time, the state has
recorded General Fund operating deficits in five of the past six fiscal
years. Many of these problems have been attributable to a great
population increase which has increased demand for educational and social
services at a pace far greater than the growth in revenues.
By June 30, 1993, the General Fund had an accumulated deficit, on a
budgeted basis, of approximately $2.8 billion. In addition, the deficit
over the previous three years had exhausted the state's available cash
reserves and resources. The Commission on State Finance estimated in its
December 1993 California Budget Outlook that revenues will fall short of
budget projections by $1.0 billion in fiscal year 1993-94, and that
expenditures will exceed budget projections by $700 million. The state
is expected to end the year with a deficit of $1.7 billion. Looking ahead
to 1994-95, Governor Wilson's budget proposal recognizes an operating
deficit of $2.8 billion which, when added to the 1993-94 operating
deficit, will lead to a cumulative funding gap of $4.5 billion by the end
of that fiscal year.
Because of the State of California's continuing budget problems, the
state's General Obligation bonds were downgraded in 1992 by Moody's from
Aa1 to Aa and by Standard & Poor's from AA to A+. In February 1994, both
ratings companies stated that they were concerned about the deficit.
While neither company lowered the state's credit rating, Standard & Poor's
changed it credit outlook from "stable" to "negative" and Moody's stated
that it is unlikely that California will balance its budget by 1995.
On January 17, 1994, Northridge, California experienced an earthquake
that registered 6.8 on the Richter scale, resulting in significant
property damage to private and public facilities throughout the Los
Angeles and Ventura Counties, and to parts of the Orange and San
Bernardino Counties. The total amount of damage is estimated to be
between $13 billion and $20 billion. In mid-February Congress approved
an earthquake relief package totaling about $8.6 billion, bringing total
federal support to $9.5 billion. The California legislature approved $2
billion in bond financing in mid-March for earthquake recovery costs and
seismic safety improvements. The bond issue will be placed on the June
1994 ballot and must be approved by a majority of California voters. The
Commission on State Finance believes that, although it may carry long-term
implications for the City of Los Angeles, the earthquake will not derail
the state's economic recovery.
In March 1994 the United States Supreme Court heard arguments on two
consolidated cases dealing with the constitutionality of California's
method of taxing multinational corporations. If the Court does not uphold
the state's method of taxation, the state could be liable for refunds of
$2.2 billion, the bulk of these refunds to be paid out in 1994-95.
Other Investment Techniques and Strategies
-- Repurchase Agreements. The Fund may acquire securities subject
to repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of portfolio securities. 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. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
-- Writing Covered Calls. As described in the Prospectus, the Fund
may write covered calls. 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.
The Fund may also write calls on Futures without owning a futures
contract or deliverable securities, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar value of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice as to
that Future put the Fund in a short futures position.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which
the Fund has written options 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 covering a call on the
expiration of the call or when the Fund enters into a closing purchase
transaction. Call writing affects the Fund's turnover rate and the
brokerage commissions it pays. Commissions are payable on writing or
purchasing a call.
Hedging with Options and Futures Contracts. The Fund may use hedging
instruments for the purposes described in the Prospectus. When hedging
to attempt to protect against declines in the market value of the Fund's
portfolio, 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.
In the future, the Fund may employ hedging instruments and strategies that
are not presently contemplated, but which may be developed, to the extent
such investment methods are consistent with the Fund's investment
objective and are legally permissible and disclosed in the Prospectus.
Additional Information about the covered calls and hedging instruments the
Fund may use is provided below.
- 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 and Covered Calls. 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.
- Risks of Hedging with Options and Futures. In addition to the
risks with respect to hedging discussed in the Prospectus and above, there
is a risk in using short hedging by (i) selling Interest Rate Futures and
Municipal Bond Index Futures or (ii) purchasing puts on municipal bond
indices or Futures to attempt to protect against declines in the value of
the Fund's securities. The risk is 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.
Other Investment Restrictions
The Fund's significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (1) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (2) 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 "Diversification," below) if
officers and Trustees or Directors of the Fund and the Manager
individually owning more than 1/2 of 1% 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.
-- Diversification. For purposes of diversification under the
Investment Company Act and investment 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 restriction (5) in the Prospectus, 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.
How the Fund is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. The address of each Trustee and officer is Two
World Trade Center, New York, New York 10048-0203, unless another address
is listed below. All of the Trustees are also trustees or directors of
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 (collectively,
the "New York-based OppenheimerFunds). Messrs. Spiro, Donohue, Bowen,
Zack, Bishop and Farrar respectively, hold the same offices with the other
New York-based OppenheimerFunds as with the Fund. As of March 29, 1994,
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 Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc. (health
care provider); formerly New York State Comptroller and a trustee,
New York State and Local Retirement Fund.
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.
Robert Bishop, Assistant Treasurer
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Resolution Trust
Corporation and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company,
before which he was a sales representative for Central Colorado
Planning.
[FN]
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager. They and the Trustees of the Fund who are affiliated
with the Manager (Mr. Galli and Mr. Spiro, who is both an officer and
Trustee) 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. Galli and
Mr. Spiro) as a group, and as members of one or more committees of the
Board, totalled $36,723. In addition, the Fund has adopted a retirement
plan that provides for payment to a retired 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 New York-based OppenheimerFunds 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 the plan. The accumulated liability for the Fund's projected
benefit obligations under the Plan was $_____________ as of December 31,
1993.
-- Major Shareholders. As of April 29, 1994, 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 Merrill Lynch
Pierce Fenner & Smith, P.O. Box 30561, New Brunswick, New Jersey 08989
which was the record owner of 1,340,147.695 Class A shares (approximately
5.15% of the Class A shares then outstanding).
The Manager and Its Affiliates. 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 two of whom (Messrs. Galli and Spiro) serve as Trustees
of the Fund.
-- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
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 advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
fees to certain Trustees, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and registration
costs, brokerage commissions, and non-recurring expenses, such as
litigation.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has voluntarily undertaken that the total expenses of the Fund in any
fiscal year (including the management fee, but excluding taxes, interest,
brokerage commissions, distribution plan payments and extraordinary
expenses such as litigation costs) shall not exceed the most stringent
expense limitation imposed under state law applicable to the Fund.
Currently, the most stringent state expense limitation is imposed by
California, and limits the Fund's 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 Manager reserves the right to change or eliminate the
undertaking at any time. Any assumption of the Fund's expenses under that
limitation 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 $1,467,574, respectively.
The advisory 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 advisory agreement permits the Manager to act as investment
adviser for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with 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.
-- The Distributor. Under its General Distributor's Agreement with
the Fund, 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, 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 Class A shares were $1,457,519, $1,863,832 and $1,831,469,
respectively, of which the Distributor and an affiliated broker-dealer
retained in the aggregate $275,001, $400,938 and $368,898 in those
respective years. Sales charges advanced to broker-dealers by the
Distributor on sales of the Fund's Class B shares totaled $396,363, of
which $21,941 was paid to an affiliated broker-dealer. For additional
information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Distribution and Service
Plans," below.
-- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are made by portfolio managers
of the Manager 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. When the Fund engages in an option
transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transaction in the securities to which the
option relates. When possible, concurrent orders to purchase or sell the
same security by more than one of the accounts managed by the Manager or
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.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "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.
-- Standardized Yields
- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Standardized Yield = 2 [(--- + 1) -]
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of that class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the 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 5.32% and 5.01%, respectively.
- Tax-Equivalent Yield. The Fund's "tax-equivalent yield" adjusts
the Fund's current yield, as calculated above, by a stated combined
Federal and state tax rate. The tax equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's
current yield (as calculated above) by one minus a stated income tax rate
and adding the result to the portion (if any) of the Fund's current yield
that is not tax exempt. The tax equivalent yield may be used to compare
the tax effects of income derived from the Fund with income from taxable
investments at the tax rates stated. Appendix B includes a tax equivalent
yield table, based on various effective tax brackets for individual
taxpayers. Such tax brackets are determined by a taxpayer's Federal and
state taxable income (the net 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 its Class A and Class
B shares for the 30-day period ended December 31, 1993, for a single
person in the California/Federal combined 46.24% tax bracket were 9.90%
and 9.32%, respectively.
- 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
---------------------------------------------------- divided by
Max. Offering Price of the Class (las day of period)
Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B 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 5.32% and 5.58% 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 4.77% when calculated at net
asset value.
-- Total Return Information
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV"), according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. 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:
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, payment of contingent
deferred sales charge of 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, as described in the
Prospectus. Total returns also assume that all dividends and capital
gains distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is redeemed
at the end of the period. The "average annual total returns" on an
investment in Class A shares of the Fund for the one and five year periods
ended December 31, 1993 and for the period from November 3, 1988
(commencement of operations) to December 31, 1993, were 7.88%, 9.00% and
9.00%, respectively. The cumulative "total return" on Class A shares for
the latter period was 56.04%. For the fiscal period from May 1, 1993,
through December 31, 1993, the cumulative total return on an investment
in Class B shares of the Fund was 1.66%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A or Class B shares.
Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent 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 November 3, 1988 (commencement of operations)
through December 31, 1993 were 13.26% and 63.82%, respectively. The
cumulative total return at net asset value on the Fund's Class B shares
for the period from May 3, 1993 (commencement of operations) through
December 31, 1993 was 6.66%.
-- Other Performance Comparisons. From time to time the Fund may
publish the ranking 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 is ranked against (1) all other funds,
excluding money market funds, and (ii) all other California municipal bond
funds. The Lipper performance rankings are based on total returns that
include the reinvestment of capital gains distributions and income
dividends but do not take sales charges or taxes into consideration. From
time to time the Fund may include in its advertisement and sales
literature performance information about the Fund cited in other
newspapers and periodicals such as The New York Times, which may include
performance quotations from other sources, including Lipper and
Morningstar.
From time to time the Fund may publish the ranking of 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, monthly in broad investment categories (equity, taxable bond,
municipal bond and hybrid) based upon the funds' 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). The top ten percent of the funds, series or classes in an investment
category receive five stars; 22.5% receive four stars; 35% receive three
stars; 22.5% receive two stars; and the bottom 10% receive one star.
Morningstar ranks the Fund in relation to other rated municipal bond
funds.
Investors may also wish to compare the Fund's Class A or Class B
return to the return on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary interest-
paying checking and savings accounts, and other forms of fixed or variable
time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed and will
fluctuate daily, while bank depository obligations may be insured by the
FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A and
Class B shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses allocated to a
particular class.
Distribution and Services Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class B shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor for all or a portion of its costs incurred in connection with
the distribution and/or servicing of the shares of that class as described
in the Prospectus. Each Plan has been approved by a vote of (i) the Board
of Trustees of the Fund, including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of voting on that Plan,
and (ii) the holders of a "majority" (as defined in the Investment Company
Act) of the shares of each class. For the Distribution and Service Plan
for the Class B shares, that vote was cast by the Manager as the sole
initial holder of Class B shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make to Recipients from their own
resources.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that 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. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on any such selection or nomination is approved by a
majority of such Independent Trustees.
Under the Plans, no payment will be made to any broker, dealer or
other financial institution under the Plan (each is referred to as a
"Recipient") in any quarter if the aggregate net asset value of all Fund
shares held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time by a
majority of the Fund's Independent Trustees. Initially, the Board of
Trustees has set the fee at the maximum rate allowed under the Plans and
set no minimum amount. For the fiscal year ended December 31, 1993,
payments under the Class A Plan totaled $601,564, all of which was paid
by the Distributor to Recipients, including $16,929 paid to an affiliate
of the Distributor. Payments made under the Class B Plan during the
period May 1, 1993 (commencement of operations) through December 31, 1993
totalled $34,469.
Any unreimbursed expenses incurred with respect to Class A shares for
any fiscal year by the Distributor may not be recovered in subsequent
years. Payments received by the Distributor under the Plan for Class A
shares will not be used to pay any interest expense, carrying charge, or
other financial costs, or allocation of overhead by the Distributor. The
Class B Plan allows the service fee payment to be paid by the Distributor
to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. 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 are subject to the limitations imposed by the Rules of Fair Practice
of Securities Dealers, Inc. on payments of asset-based sales charges and
service fees.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
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, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined each day
the New York Stock Exchange (the "NYSE") is open (a "regular business
day"), 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 total number of
shares of that class outstanding. The NYSE's most recent annual holiday
schedule states that it will close on New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. It may also close on other days. Dealers other than
NYSE members may conduct trading in Municipal Securities on certain days
on which the NYSE is closed (including weekends and holidays) or after
4:00 P.M. on a regular business day). Because the Fund's net asset values
will not be calculated on those days, the Fund's net asset value per share
may be significantly affected, on such days when shareholders may not
purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) long-term
debt securities, 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 60 days or less when purchased or which currently
have maturities of 60 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 Municipal Securities, when last sale information is
not generally available, such pricing procedures may include "matrix"
comparisons to the prices for comparable instruments on the basis of
quality, yield, maturity, and other special factors involved (such as the
tax-exempt status of the interest paid by Municipal Securities). The
Fund's Board of Trustees has authorized the Manager to employ a pricing
service, bank or broker-dealer experienced in such matters to price any
of the types of securities described above. The Trustees will monitor the
accuracy of such pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls, Interest Rate Futures and Municipal Bond Index Futures
are valued at the last sales 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 an option, 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 adjusted ("marked-to-
market") to reflect the current market value of the call.
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 New Jersey Tax-Exempt 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 contingent deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter 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.
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 the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, if the Board
of Trustees of the Fund determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash, the Fund may pay the
redemption proceeds 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 rules of the Securities and Exchange Commission. The Fund
has elected to be governed by Rule 18f-1 under the Investment Company Act,
pursuant to which the Fund is obligated to redeem shares solely in cash
up to the lesser of $250,000 or 1% of the net assets of the 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 selling
the securities for cash. The method of valuing securities used to make
redemptions in kind will be the same as the method the Fund uses to value
it portfolio securities described above under "Determination of Net Asset
Value Per Share" and such valuation will be made as of the time the
redemption price is determined.
-- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of such shares 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 in an account if the
aggregate net asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for permission to increase the investment, and other terms and conditions
so that the shares would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed, 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. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price 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 in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are 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 contingent deferred sales charge on such
withdrawals (except where the Class B contingent deferred sales charge 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.
The transfer agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. All of the
OppenheimerFunds offer Class A shares, but only the following other
OppenheimerFunds offer Class B shares:
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
Oppenheimer Discovery Fund
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 contingent
deferred sales charge); 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 contingent deferred sales
charge is imposed on exchanges of shares of either class purchased subject
to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months of the end
of the calendar month of the initial purchase of the exchanged Class A
shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus), and the Class B contingent deferred sales charge 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
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal 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.
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.
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. 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. 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 .
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.
A shareholder receiving a dividend from income earned by the Fund
from one or more of: (1) certain taxable temporary investments (such as
certificates of deposit, repurchase agreements, commercial paper and
obligations of the U.S. government, its agencies and instrumentalities);
(2) income from securities loans; (3) income or gains from options or
Futures; or (4) an excess of net short-term capital gain over net long-
term capital loss from the Fund, treats the dividend as a receipt of
either ordinary income or long-term capital gain in the computation of
gross income, regardless of whether the dividend is reinvested. The
Fund's dividends will not be eligible for the dividends-received deduction
for corporations. Shareholders receiving Social Security benefits should
be aware that exempt-interest dividends are a factor in determining
whether such benefits are subject to Federal income tax. Losses realized
by shareholders on the redemption of Fund shares within six months of
purchase (which period may be shortened by regulation) will be disallowed
for Federal income tax purposes to the extent of exempt-interest dividends
received on such shares.
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.
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, (1) the Fund will also be exempt from the California corporate income
and franchise taxes and (2) 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 corporate shareholders may be
includable in income subject to the California alternative minimum
tax.
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.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue as income each year a portion of the
discount at which the security was purchased even though the Fund receives
no interest payment in cash on the security during the year. As an
investment company, the Fund must pay out substantially all of its net
investment income each year or be subject to excise taxes, as described
above. Accordingly, when the Fund holds zero coupon securities, it may
be required to pay out as an income distribution each year an amount which
is greater than the total amount of cash interest the Fund actually
received during that year. Such distributions will be made from the cash
assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
shareholders should be aware that as of the date of this Statement of
Additional Information, not all of the OppenheimerFunds offer Class B
shares. The names of the funds that do as of the date of this document
can be obtained by referring to "How To Exchange Shares," above or by
calling the Distributor at 1-800-525-7048. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment 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/or distributions from certain of
the OppenheimerFunds may be invested in shares of this Fund on the same
basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities, collecting income on the portfolio securities
and handling the delivery of such securities to and from the Fund. The
Manager has represented to the Fund that the banking relationships between
the Manager and the Custodian have been and will continue to be unrelated
to and unaffected by the relationship between the Fund and the Custodian.
It will be the practice of the Fund to deal with the Custodian in a manner
uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders of
Oppenheimer California Tax-Exempt Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer California Tax-Exempt Fund as of December 31,
1993, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in
the five-year period then ended and the period from November 3, 1988
(commencement of operations) to December 31, 1988. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of December 31,
1993, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Oppenheimer California Tax-Exempt Fund as of December 31, 1993, the
results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then
ended and the period from November 3, 1988 (commencement of operations)
to December 31, 1988, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick
- ---------------------
KPMG Peat Marwick
Denver, Colorado
January 21, 1994
<PAGE>
Statement of Investments
December 31, 1993
<TABLE>
<CAPTION>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
<S> <C> <C> <C>
Municipal Bonds and Notes--99.8%
California--94.1%
Alameda County, California Certificates of
Participation, BIG Insured, Prerefunded, 7.25%, 6/1/09 Aaa/AAA $ 2,500,000 $ 2,991,237
Anaheim, California Public Financing Authority
Tax Allocation Revenue Bonds, Registered
Residual Interest Tax-Exempt Securities,
MBIA Insured, 10.07%, 12/28/18(1) Aaa/AAA 3,000,000 3,676,929
California Educational Facilities Authority
Revenue Bonds:
Pepperdine University, MBIA Insured, Prerefunded,
7.20%, 11/1/15 Aaa/AAA 1,000,000 1,191,682
Stanford University Project, Series J, 6%, 11/1/09 Aaa/AAA 2,205,000 2,355,857
California Health Facilities Financing Authority:
Revenue Bonds, Children's Hospital of Los Angeles,
Series A, 7.125%, 6/1/21 A1/A+ 1,000,000 1,121,305
Revenue Insured Bonds:
Henry Mayo Newhall Project, Series A, OSHPD
Insured, 8%, 10/1/18 NR/A+ 2,720,000 3,125,144
La Palma Hospital Medical Center, OSHPD
Insured, 7.10%, 2/1/13 NR/A+ 1,875,000 2,034,812
Unihealth America Project, Series A, AMBAC Insured:
Prerefunded, 7.625%, 10/1/15 Aaa/AAA 769,998 904,173
7.625%, 10/1/15 Aaa/AAA 5,002 5,804
California Housing Finance Agency
Revenue Bonds, Home Mortgage, Series C,
FHA Insured, 7.60%, 8/1/30 Aa/A+ 1,875,000 2,015,818
California Pollution Control Financing Authority,
Pacific Gas & Electric Co.:
Revenue Bonds, Series B, 8.875%, 1/1/10 A1/A 2,275,000 2,702,663
Revenue Refunding Bonds, Series A, 7.50%, 5/1/16 A1/A 1,450,000 1,583,272
California State Department of Water Resources
Revenue Bonds, Central Valley Water System
Project:
Series J-1, 6%, 12/1/20 Aa/AA 3,250,000 3,395,740
Series J-2, 6%, 12/1/20 Aa/AA 5,300,000 5,537,668
Series L, 5.50%, 12/1/23 Aa/AA 13,000,000 13,041,676
California State Franchise Tax Board Refunding
Certificates of Participation, 6.90%, 10/1/06 A1/A 1,000,000 1,114,208
California State General Obligation Bonds:
FSA Insured, 5.50%, 4/1/19 Aaa/AAA 5,500,000 5,559,289
6%, 10/1/15 Aa/A+/AA 3,150,000 3,312,807
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
California (continued)
California State Public Works Board Lease
Revenue Bonds:
Department of Corrections California State Prison,
Series B, MBIA Insured, 5.50%, 12/1/12 Aaa/AAA/A+ $4,600,000 $ 4,692,519
Regents of the University of California, Series A,
Prerefunded, 7%, 9/1/15 Aaa/AAA/AAA 2,500,000 2,941,815
Campbell, California Certificates of Participation,
Civic Center Project:
Prerefunded, 6.75%, 10/1/17 Aaa/A- 1,870,000 2,196,174
6.75%, 10/1/17 A/A- 1,130,000 1,271,067
Capistrano, California University School District
Community Facilities District Special Tax Bonds,
No. 87-1, 7.60%, 9/1/14 NR/NR 4,000,000 4,284,556
Cathedral City, California Improvement Bond Act
of 1915 Bonds, Limited Obligation Assessment
District No. 88-3, 7.85%, 9/2/11 NR/NR 1,980,000 2,042,287
Corona, California Certificates of Participation,
Series B, Prerefunded, 10%, 11/1/20 Aaa/AAA 8,175,000 11,607,035
Cucamonga County, California Water District
Facilities Refinancing Certificates of Participation,
FGIC Insured, 6.50%, 9/1/22 Aaa/AAA/AAA 4,000,000 4,360,348
Culver City, California Redevelopment Financing
Authority Revenue Bonds, Senior Lien Project
Loans, Series A, AMBAC Insured:
Prerefunded, 7.10%, 11/1/10 Aaa/AAA 925,000 1,082,393
7.10%, 11/1/10 Aaa/AAA 75,000 85,559
Escondido, California Joint Powers Financing
Authority Revenue Bonds, AMBAC Insured,
6.125%, 9/1/11 Aaa/AAA 3,500,000 3,763,963
Fresno, California Water System Revenue Bonds,
Series A, Prerefunded, 7.30%, 6/1/20 A/NR 2,500,000 2,879,090
Industry, California Improvement Bond Act of 1915
Bonds, Assessment District No. 91-1, 7.65%, 9/2/21 NR/NR 1,750,000 1,774,314
Intermodal Container Transfer Facility Joint Power
Authority California Revenue Refunding Bonds,
Southern Pacific Transportation Co., Series A,
7.70%, 11/1/14 Aa3/AA- 1,000,000 1,161,099
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
Statement of Investments (Continued)
California (continued)
La Quinta, California Redevelopment Agency
Refunding Tax Allocation Bonds, La Quinta
Redevelopment Project, MBIA Insured,
8.40%, 9/1/12 Aaa/AAA $1,000,000 $1,222,944
Los Angeles, California Community
Redevelopment Agency:
Community Redevelopment Financing Authority
Revenue Bonds, Grand Century
Qualified Redevelopment, Series A, 5.90%, 12/1/26 A/A 2,600,000 2,581,165
Refunding Tax Allocation Bonds, North Hollywood,
Series C, MBIA Insured, 7%, 7/1/15 Aaa/AAA 2,000,000 2,213,636
Los Angeles, California Convention and Exhibition
Center Authority Certificates of Participation,
AMBAC Insured, Prerefunded, 7%, 8/15/21 Aaa/AAA 1,000,000 1,175,634
Los Angeles, California Department of Water
and Power Electric Plant:
Revenue Bonds:
Second Issue 1991 Bonds, 6%, 6/1/12 Aa/AA 2,500,000 2,654,230
Second Issue 1991 Bonds, 6%, 6/1/13 Aa/AA 3,200,000 3,377,129
7.375%, 2/1/29 Aa/AA 8,000,000 9,247,720
Revenue Refunding Bonds, 5.375%, 9/1/23 Aa/AA 5,500,000 5,427,234
Los Angeles County, California Certificates
of Participation:
Correctional Facilities Project, MBIA Insured,
6.50%, 9/1/13 Aaa/AAA 4,600,000 5,050,156
6.50%, 3/1/10 A1/A 1,500,000 1,635,949
Los Angeles County, California Transport
Commission Sales Tax Revenue Bonds, Series A,
Prerefunded, 6.75%, 7/1/11 Aaa/A+/A+ 4,260,000 4,985,427
Metropolitan Water District, Southern California
Waterworks Revenue Bonds:
5%, 7/1/20 Aa/AA 7,750,000 7,357,617
8.027%, 10/30/20(1) Aa/AA 4,700,000 4,777,568
6%, 7/1/21 Aa/AA 9,250,000 9,640,655
Oakland, California Redevelopment Agency Tax
Allocation Refunding Bonds, MBIA Insured,
9.142%, 9/1/19(1) Aaa/AAA 4,300,000 4,697,104
Oakland, California Revenue Refunding Special
Edition Bonds, Series A, FGIC Insured, 7.60%, 8/1/21 Aaa/AAA/AAA 2,000,000 2,309,252
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
California (continued)
Orange County, California Community Facilities
District Special Tax Bonds:
No. 87-3 Mission Viejo, Series A, 8.05%, 8/15/08 A/NR $3,000,000 $3,468,141
No. 88-1 Aliso Viejo, Series A, 7.10%, 8/15/05 NR/NR 1,440,000 1,533,838
No. 88-1 Aliso Viejo, Series A, 7.35%, 8/15/18 NR/NR 8,000,000 8,515,000
Paramount, California Redevelopment
Agency Tax Allocation Revenue Refunding Bonds,
Redevelopment Project No. 1, Series A,
9.65%, 6/1/16 NR/AAA/BBB 6,000,000 6,653,723
Pittsburg, California Improvement Bond Act of 1915
Bonds, Assessment District 1990-01, 7.75%, 9/2/20 NR/NR 1,255,000 1,294,386
Rancho, California Water District Financing
Authority Revenue Refunding Bonds, AMBAC
Insured, 5%, 8/15/14 Aaa/AAA 3,750,000 3,627,188
Redding, California Electric System Revenue
Certificates of Participation, Registered Residual
Interest Certificates:
FGIC Insured, 8.348%, 6/1/19(1) Aaa/AAA/AAA 4,000,000 4,128,688
MBIA Insured, 9.968%, 7/8/22(1) Aaa/AAA 2,500,000 3,203,015
Riverside, California Kaiser Permanente Revenue
Bonds, Series A, 9%, 12/1/15 Aa2/AA 2,700,000 3,008,872
Riverside County, California Community Facilities
District Bonds, Special Tax No. 88-12, 7.55%, 9/1/17 NR/NR 3,000,000 3,246,003
Sacramento, California Municipal Utility District
Electric Revenue Refunding Bonds:
Series D, MBIA Insured, 5.25%, 11/15/20 Aaa/AAA/A- 2,500,000 2,460,912
FGIC Insured, 9.875%, 8/15/18(1) Aaa/AAA/AAA 5,500,000 6,323,680
Saddleback Community College District,
California Refunding Certificates of Participation,
BIG Insured, 7%, 8/1/19 Aaa/AAA 1,000,000 1,107,897
San Diego County, California Certificates
of Participation, Registered Residual Interest
Tax-Exempt Securities, MBIA Insured,
9.948%, 11/18/19(1) Aaa/AAA 2,000,000 2,303,468
San Diego County, California Water Authority
Water Revenue Certificates of Participation,
Series B, MBIA Insured, 9.78%, 4/8/21(1) Aaa/AAA 3,000,000 3,492,366
San Francisco, California City and County Airport
Commission International Airport Revenue
Refunding Bonds, Second Series, Issue I, AMBAC
Insured, 6.30%, 5/1/11 Aaa/AAA 4,385,000 4,789,612
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
Statement of Investments (Continued)
California (continued)
San Joaquin Hills, California Transportation
Corridor Agency Toll Road Revenue Bonds, Sr. Lien:
6.75%, 1/1/32 NR/NR/BBB $7,000,000 $ 7,224,867
5%, 1/1/33 NR/NR/BBB 8,000,000 6,545,079
San Jose, California Redevelopment Agency Tax
Allocation Bonds, Merged Area Redevelopment
Project, MBIA Insured, 5%, 8/1/20 Aaa/AAA/A 2,000,000 1,912,138
Southern California Home Financing Authority
Single Family Mortgage Revenue Bonds,
GNMA and FNMA Mortgage-Backed Securities,
Series A, 7.35%, 9/1/24 NR/AAA 1,930,000 2,041,741
Southern California Public Power Authority:
Revenue Bonds, San Juan Unit 3, Series A,
MBIA Insured, 5%, 1/1/20 Aaa/AAA 3,000,000 2,873,769
Revenue Refunding Bonds, 8.897%, 7/1/12(1) Aa/AA- 5,500,000 6,170,746
University of California Revenue Refunding Bonds:
Housing Systems Project, Group A, Series W,
AMBAC Insured, Prerefunded, 7.80%, 11/1/18 Aaa/AAA 1,000,000 1,134,643
Multiple Purpose Project, Series A, 6.875%, 9/1/16 A/A- 2,200,000 2,473,484
Victorville, California Special Tax Bonds,
Community Facilities District No. 90-1
(Western Addition), Series A, 8.30%, 9/1/16 NR/NR 2,250,000 2,446,971
260,145,950
U.S. Possessions--5.7%
Puerto Rico Commonwealth Public Improvement
General Obligation Bonds, YCNS, MBIA Insured,
8.784%, 7/1/08(1) Aaa/AAA 3,500,000 3,886,638
Puerto Rico Commonwealth Highway and
Transportation Authority Highway Revenue
Bonds, Series T, Prerefunded, 6.625%, 7/1/18 Baa1/AAA 5,000,000 5,593,555
Puerto Rico Electric Power Authority Revenue
Bonds, Series P, 7%, 7/1/21 Baa1/A- 4,000,000 4,585,743
Puerto Rico Housing Finance Corp. Single Family
Mortgage Revenue Bonds, Portfolio 1, Series B,
7.65%, 10/15/22 Aaa/AAA 1,430,000 1,511,518
15,577,454
Total Municipal Bonds and Notes (Cost $254,179,447) 275,723,404
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
Short-Term Tax-Exempt Obligations--0.2%
California Health Facility Finance Authority Revenue
Bonds, Huntington Memorial Hospital, 2.75%(2) $200,000 $ 200,000
Los Angeles, California Multifamily Housing Revenue
Bonds, Series K, 2.65%(2) 400,000 400,000
Total Short-Term Tax-Exempt Obligations (Cost
$600,000) 600,000
Total Investments, at Value (Cost $254,779,447) 100.0% 276,323,404
Other Assets Net of Liabilities -- 87,744
Net Assets 100.0% $276,411,148
<FN>
1. Represents the current interest rate for a variable rate security.
2. Floating or variable rate obligation maturing in more than one year. The interest rate, which is based on specific, or an
index of, market interest rates, is subject to change periodically and is the effective rate on December 31, 1993. A
demand feature allows the recovery of principal at any time, or at specified intervals not exceeding one year, on up
to 30 days' notice.
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Statement of Assets and Liabilities
December 31, 1993
<TABLE>
<S> <C>
Assets
Investments, at value (cost $254,779,447)--see accompanying statement $276,323,404
Cash 93,587
Receivables:
Interest 4,612,545
Shares of beneficial interest sold 698,928
Other 25,380
Total assets 281,753,844
Liabilities
Payables and other liabilities:
Investments purchased 3,629,167
Dividends 910,326
Shares of beneficial interest redeemed 392,136
Distribution assistance--Note 4 172,162
Other 238,905
Total liabilities 5,342,696
Net Assets $276,411,148
Composition of
Net Assets
Paid-in capital $255,096,679
Undistributed net investment income 275,259
Distributions in excess of net realized gain from investment transactions (504,747)
Net unrealized appreciation on investments--Note 3 21,543,957
Net assets $276,411,148
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of $266,489,739 and
24,289,750 shares of beneficial interest outstanding) $ 10.97
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $ 11.52
Class B Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $9,921,409 and 903,852 shares
of beneficial interest outstanding) $ 10.98
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Statement of Operations
For the Year Ended December 31, 1993
<TABLE>
<S> <C>
Investment Income
Interest $16,690,167
Expenses
Management fees--Note 4 1,467,574
Distribution assistance:
Class A--Note 4 601,564
Class B--Note 4 34,469
Transfer and shareholder servicing agent fees--Note 4 116,863
Shareholder reports 60,390
Legal and auditing fees 44,258
Trustees' fees and expenses 41,459
Custodian fees and expenses 36,097
Registration and filing fees:
Class A 15,858
Class B 3,439
Other 28,924
Total expenses 2,450,895
Net Investment Income 14,239,272
Realized and Unrealized
Gain on Investments
Net realized gain on investments 1,489,475
Net change in unrealized appreciation on investments:
Beginning of year 7,238,635
End of year--Note 3 21,543,957
Net change 14,305,322
Net realized and unrealized gain on investments 15,794,797
Net Increase in Net Assets Resulting From Operations $30,034,069
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992
<S> <C> <C>
Operations
Net investment income $ 14,239,272 $ 10,571,616
Net realized gain on investments 1,489,475 1,299,096
Net change in unrealized appreciation or depreciation
on investments 14,305,322 2,153,935
Net increase in net assets resulting from operations 30,034,069 14,024,647
Dividends and
Distributions to
Shareholders
Dividends from net investment income:
Class A ($.648 and $.602 per share, respectively) (14,653,931) (10,191,305)
Class B ($.361 per share) (163,836) --
Distributions from net realized gain on investments:
Class A ($.072 and $.0828 per share, respectively) (1,740,286) (1,490,935)
Class B ($.072 per share) (60,371) --
Beneficial Interest
Transactions
Net increase in net assets resulting from Class A
beneficial interest transactions--Note 2 48,808,693 56,843,610
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 9,837,578 --
Net Assets
Total increase 72,061,916 59,186,017
Beginning of year 204,349,232 145,163,215
End of year (including undistributed net investment
income of $275,259 and $853,754, respectively) $276,411,148 $204,349,232
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
Year Ended Period Ended
December 31, December 31,
1993 1992 1991 1990 1989 1988(2) 1993(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 10.35 $ 10.22 $ 9.86 $ 9.94 $ 9.58 $ 9.53 $10.72
Income from investment operations:
Net investment income .62 .61 .66 .67 .71 .09 .35
Net realized and unrealized gain
(loss) on investments .72 .20 .38 (.07) .37 .05 .34
Total income from investment
operations 1.34 .81 1.04 .60 1.08 .14 .69
Dividends and distributions to shareholders:
Dividends from net investment income (.65) (.60) (.62) (.68) (.70) (.09) (.36)
Distributions from net realized
gain on investments (.07) (.08) (.06) -- (.02) -- (.07)
Total dividends and distributions
to shareholders (.72) (.68) (.68) (.68) (.72) (.09) (.43)
Net asset value, end of period $ 10.97 $ 10.35 $ 10.22 $ 9.86 $ 9.94 $ 9.58 $10.98
Total Return, at Net Asset Value(3) 13.26% 8.28% 10.93% 6.38% 11.62% 1.43% 6.66%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $266,490 $204,349 $145,163 $92,514 $52,342 $5,825 $9,921
Average net assets (in thousands) $245,193 $174,055 $115,661 $72,879 $29,308 $2,377 $5,218
Number of shares outstanding at
end of period (in thousands) 24,290 19,738 14,200 9,386 5,268 608 904
Ratios to average net assets:
Net investment income 5.74% 6.07% 6.52% 6.80% 7.11% 5.95%(4) 4.57%(4)
Expenses, before voluntary
assumption by the Manager .97% 1.07% 1.05% 1.05% 1.09% 2.25%(4) 1.79%(4)
Expenses, net of voluntary
assumption by the Manager N/A N/A .73% .53% .16% -- (4) N/A
Portfolio turnover rate(5) 13.7% 26.8% 26.6% 14.5% 20.7% 0.0% 13.7%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. For the period from November 3, 1988 (commencement of operations) to December 31, 1988.
3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends
and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated
on the last business day of the fiscal period. Sales charges are not reflected in the total returns.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one
year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities)
for the year ended December 31, 1993 were $92,539,523 and $33,483,495, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Oppenheimer California Tax-Exempt Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Fund's investment advisor is Oppenheimer
Management Corporation (the Manager). The Fund offers both Class A and Class
B shares. Class A shares are sold with a front-end sales charge. Class B
shares may be subject to a contingent deferred sales charge. Both classes of
shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution plan, expenses directly
attributable to a particular class and exclusive voting rights with respect
to matters affecting a single class. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The following
is a summary of significant accounting policies consistently followed by the
Fund.
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York
time) on each trading day. Long-term debt securities are valued by a
portfolio pricing service approved by the Board of Trustees. Long-term debt
securities which cannot be valued by the approved portfolio pricing service
are valued by averaging the mean between the bid and asked prices obtained
from two active market makers in such securities. Short-term debt securities
having a remaining maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any premium
or discount. Securities for which market quotes are not readily available are
valued under procedures established by the Board of Trustees to determine
fair value in good faith.
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are
allocated daily to each class of shares based upon the relative proportion of
net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
Federal Income Taxes. The Fund intends to continue to comply with provisions
of the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income tax provision is required.
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service
and fees paid to each trustee during the years of service. During the year
ended December 31, 1993, a provision of $4,736 was made for the Fund's
projected benefit obligations, resulting in an accumulated liability of
$64,346. No payments have been made under the plan.
Distributions to Shareholders. The Fund intends to declare dividends
separately for Class A and Class B shares from net investment income each
regular business day and pay such dividends monthly. Distributions from net
realized gains on investments, if any, will be declared at least once each
year.
Other. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date). Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.
<PAGE>
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1993(1) Year Ended December 31, 1992
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Class A:
Sold 7,029,778 $ 75,603,080 7,250,089 $ 74,369,801
Dividends and distributions reinvested 913,845 9,891,046 709,437 7,284,671
Redeemed (3,391,817) (36,685,433) (2,421,535) (24,810,862)
Net increase 4,551,806 $ 48,808,693 5,537,991 $ 56,843,610
Class B:
Sold 916,412 $ 9,977,857 -- $ --
Dividends and distributions reinvested 12,695 139,138 -- --
Redeemed (25,255) (279,417) -- --
Net increase 903,852 $ 9,837,578 -- $ --
<FN>
1. For the year ended December 31, 1993 for Class A shares and for the period from May 1, 1993 (inception
of offering) to December 31, 1993 for Class B Shares.
</TABLE>
3. Unrealized Gains and Losses on Investments
At December 31, 1993, net unrealized appreciation on investments of $21,543,957
was composed of gross appreciation of $21,665,215, and gross depreciation of
$121,258.
4. Management Fees And Other Transactions With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .60%
on the first $200 million of net assets, .55% on the next $100 million, .50%
on the next $200 million, .45% on the next $250 million, .40% on the next
$250 million and .35% on net assets in excess of $1 billion. The Manager has
agreed to assume Fund expenses (with specified exceptions) in excess of the
regulatory limitation of the State of California.
For the year ended December 31, 1993, commissions (sales charges paid by
investors) on sales of Class A shares totaled $1,831,469, of which $368,898
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of
the Manager, as general distributor, and by an affiliated broker/dealer.
During the year ended December 31, 1993, OFDI received contingent deferred
sales charges of $5,046 upon redemption of Class B shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of
providing such services are allocated ratably to these companies.
Under separate approved plans of distribution, each class may expend up to
.25% of its net assets annually to reimburse OFDI for costs incurred in
distributing shares of the Fund, including amounts paid to brokers,
dealers, banks and other institutions. In addition, Class B shares are
subject to an asset-based sales charge of .75% of net assets annually, to
reimburse OFDI for sales commissions paid from its own resources
at the time of sale and associated financing costs. In the event of
termination or discontinuance of the Class B plan of distribution, the Fund
would be contractually obligated to pay OFDI for any expenses not
previously reimbursed or recovered through contingent deferred sales charges.
During the year ended December 31, 1993, OFDI paid $16,929 to an affiliated
broker/dealer as reimbursement for Class A distribution-related
expenses and retained $34,469 as reimbursement for Class B distribution-
related expenses and sales commissions.
<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,
1994, and California state individual income tax rates effective January
1, 1994 (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
Oppenheimer California Tax-Exempt Fund Yield of:
Joint Return Effective Tax Bracket3.0%3.5% 4.0% 4.5% 5.0% 5.5% 6.0%
But
Over Not OverFederalCal.CombinedIs Approximately Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 22,118$ 34,90615.00%4.00%18.40% 3.68% 4.29% 4.90%5.51% 6.13%6.74% 7.35%
$ 34,906$ 38,00015.00%6.00%20.10% 3.75% 4.38% 5.01% 5.63% 6.26%6.88% 7.51%
$ 38,000$ 48,45628.00%6.00%32.32% 4.43% 5.17% 5.91% 6.65% 7.39%8.13% 8.87%
$ 48,456$ 61,24028.00%8.00%33.76% 4.53% 5.28% 6.04% 6.79% 7.55%8.30% 9.06%
$ 61,240$ 91,85028.00%9.30%34.70% 4.59% 5.36% 6.13% 6.89% 7.66%8.42% 9.19%
$ 91,850$140,00031.00%9.30%37.42% 4.79% 5.59% 6.39% 7.19% 7.99%8.79% 9.59%
$140,000$212,38036.00%9.30%41.95% 5.17% 6.03% 6.89% 7.75% 8.61%8.47% 10.34%
$212,380$250,00036.00%10.00%42.40%5.21% 6.08% 6.94% 7.81% 8.68%9.55% 10.42%
$250,000$424,76039.60%10.00%45.64%5.52% 6.44% 7.36% 8.28% 9.20%10.12%11.04%
$424,760 39.60%11.00%46.24% 5.58% 6.51% 7.44% 8.37% 9.30%10.23%11.16%
Single Return:
But
Over Not Over
$ 17,453$ 22,75015.00%6.00%20.10% 3.75% 4.38% 5.01% 5.63% 6.26%6.88% 7.51%
$ 22,750$ 24,22828.00%6.00%32.32% 4.43% 5.17% 5.91% 6.65% 7.39%8.13% 8.87%
$ 24,228$ 30,62028.00%8.00%33.76% 4.53% 5.28% 6.04% 6.79% 7.55%8.30% 9.06%
$ 30,620$ 55,10028.00%9.30%34.70% 4.59% 5.36% 6.13% 6.89% 7.66%8.42% 9.19%
$ 55,100$106,19031.00%9.30%37.42% 4.79% 5.59% 6.39% 7.19% 7.99%8.79% 9.59%
$106,190$115,00031.00%10.00%37.90%4.83% 5.64% 6.44% 7.25% 8.05%8.86% 9.66%
$115,000$212,38036.00%10.00%42.40%5.21% 6.08% 6.94% 7.81% 8.68%9.55% 10.42%
$212,380$250,00036.00%11.00%43.04%5.27% 6.14% 7.02% 7.90% 8.78%9.66% 10.53%
$250,000 39.60%11.00%46.24% 5.58% 6.51% 7.44% 8.37% 9.30%10.23%11.16%
</TABLE>
<PAGE>
APPENDIX B
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
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): Filed
herewith.
(2) Independent Auditors' Report (See Part B): Filed herewith.
(3) Statement of Investments (See Part B): Filed herewith.
(4) Statement of Assets and Liabilities (See Part B): Filed
herewith.
(5) Statement of Operations (See Part B): Filed herewith.
(6) Statements of Changes in Net Assets (See Part B): Filed
herewith.
(7) Notes to Financial Statements (See Part B): Filed
herewith.
(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) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) Investment Letter dated 9/7/88 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 6/10/93: Filed herewith.
(ii) Distribution Plan and Agreement for Class B shares
under Rule 12b-1 dated 6/10/93: Filed
herewith.
(iii) Revised Distribution Plan and Agreement for Class
B shares under Rule 12b-1 dated 2/10/94: Filed
herewith.
(16) Performance Computation Schedule: Filed herewith.
-- Powers of Attorney, including certified Board resolutions:
Filed with Post-Effective Amendment No. 7 to Registration
Statement 3/1/94, and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Number of
Record Holders as
Title of Class of March 29, 1994
Class A Shares of Beneficial Interest 5,415
Class B Shares of Beneficial Interest 395
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) Not applicable.
(d) 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 certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York
on the 28th day of April, 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 April 28, 1994
Leon Levy
/s/ Donald W. Spiro* President, Principal
- -------------------- Executive Officer
Donald W. Spiro and Trustee April 28, 1994
/s/ George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting
Officer April 28, 1994
/s/ Leo Cherne* Trustee April 28, 1994
- ---------------
Leo Cherne
/s/ Edmund T. Delaney* Trustee April 28, 1994
- ----------------------
Edmund T. Delaney
/s/ Robert G. Galli* Trustee April 28, 1994
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee April 28, 1994
- ----------------------
Benjamin Lipstein
/s/ Kenneth A. Randall* Trustee April 28, 1994
- -----------------------
Kenneth A. Randall
/s/ Sidney M. Robbins* Trustee April 28, 1994
- ----------------------
Sidney M. Robbins
/s/ Russell S. Reynolds, Jr.* Trustee April 28, 1994
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee April 28, 1994
- --------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan* Trustee April 28, 1994
- --------------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter* Trustee April 28, 1994
- -----------------------
Clayton K. Yeutter
/s/ Edward V. Regan* Trustee April 28, 1994
- --------------------
Edward V. Regan
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER CALIFORNIA TAX-EXEMPT BOND
Registration No. 33-23566
Post-Effective Amendment No. 32
Index to Exhibits
Exhibit No. Description
24(b)(11) Independent Auditors' Consent
24(15)(i) Service Plan and Agreement for Class A Shares
dated 6/10/93
24(15)(ii) Distribution Plan and Agreement for Class B Shares
dated 6/10/93
24(15)(iii) Revised Distribution Plan and Agreement for Class B
Shares dated 2/10/94
24(b)(16) Performance Data Computation Schedule
<PAGE>
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer California Tax-Exempt Fund:
We consent to the use of our report dated January 21, 1994 included herein
and to the reference to our firm under the heading "Financial Highlights"
in the Prospectus.
/s/ KPMG Peat Marwick
---------------------
KPMG Peat Marwick
Denver, Colorado
April 25, 1994
<PAGE>
Exhibit 24(15)(i)
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND AND
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT dated the 10th day of June, 1993, by and
between OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND (the "Fund") and
OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class
A Shares described in the Fund's registration statement as of the date
this Plan takes effect, contemplated by and to comply with Article III,
Section 26 of the Rules of Fair Practice of the National Association of
Securities Dealers, pursuant to which the Fund will reimburse the
Distributor for a portion of its costs incurred in connection with the
personal service and the maintenance of shareholder accounts ("Accounts")
that hold Class A Shares (the "Shares") of such series and class of the
Fund. The Fund may be deemed to be acting as distributor of securities
of which it is the issuer, pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"), according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients," as
hereinafter defined, for rendering services and for the maintenance of
Accounts. Such Recipients are intended to have certain rights as third-
party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
financial institution which: (i) has rendered services in
connection with the personal service and maintenance of
Accounts; (ii) shall furnish the Distributor (on behalf of the
Fund) with such information as the Distributor shall reasonably
request to answer such questions as may arise concerning such
service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing,
a majority of the Fund's Board of Trustees (the "Board") who are
not "interested persons" (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation
of this Plan or in any agreements relating to this Plan (the
"Independent Trustees") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights
as a third party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii)
such customers, clients and/or accounts as to which such
Recipient is a fiduciary or custodian or co-fiduciary or co-
custodian (collectively, the "Customers"), but in no event shall
any such Shares be deemed owned by more than one Recipient for
purposes of this Plan. In the event that two entities would
otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books
shall be deemed the Recipient as to such Shares for purposes of
this Plan.
3. Payments for Distribution Assistance.
(a) Under the Plan, the Fund will make payments to the Distributor,
within forty-five (45) days of the end of each calendar quarter,
in the amount of the lesser of: (i) .0625% (.25% on an annual
basis) of the average during the calendar quarter of the
aggregate net asset value of the Shares computed as of the close
of each business day, or (ii) the Distributor's actual expenses
under the Plan for that quarter of the type approved by the
Board. The Distributor will use such fee received from the Fund
in its entirety to reimburse itself for payments to Recipients
and for its other expenditures and costs of the type approved
by the Board incurred in connection with the personal service
and maintenance of Accounts including, but not limited to, the
services described in the following paragraph. The Distributor
may make Plan payments to any "affiliated person" (as defined
in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients
in connection with the personal service and the maintenance of
Accounts may include, but shall not be limited to, the
following: answering routine inquiries from the Recipient's
customers concerning the Fund, providing such customers with
information on their investment in shares, assisting in the
establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment
options available, and providing such other information and
customer liaison services and the maintenance of Accounts as the
Distributor or the Fund may reasonably request. It may be
presumed that a Recipient has provided services qualifying for
compensation under the Plan if it has Qualified Holdings of
Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to
believe that, notwithstanding the level of Qualified Holdings,
a Recipient may not be rendering appropriate services, then the
Distributor, at the request of the Board, shall require the
Recipient to provide a written report or other information to
verify that said Recipient is providing appropriate services in
this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-
party beneficiary hereunder shall terminate.
Payments received by the Distributor from the Fund under the
Plan will not be used to pay any interest expense, carrying
charge or other financial costs, or allocation of overhead of
the Distributor, or for any other purpose other than for the
payments described in this Section 3. The amount payable to the
Distributor each quarter will be reduced to the extent that
reimbursement payments otherwise permissible under the Plan have
not been authorized by the Board of Trustees for that quarter.
Any unreimbursed expenses incurred for any quarter by the
Distributor may not be recovered in later periods.
(b) The Distributor shall make payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter,
at a rate not to exceed .0625% (.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset
value of the Shares computed as of the close of each business
day of Qualified Holdings (excluding Shares acquired in
reorganizations with investment companies for which Oppenheimer
Management Corporation or an affiliate acts as investment
adviser and which have not adopted a distribution plan at the
time of reorganization with the Fund). However, no such
payments shall be made to any Recipient for any such quarter in
which its Qualified Holdings do not equal or exceed, at the end
of such quarter, the minimum amount ("Minimum Qualified
Holdings"), if any, to be set from time to time by a majority
of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to
the Distributor or to any Recipient, but not to exceed the rate
set forth above, and/or increase or decrease the number of
shares constituting Minimum Qualified Holdings. The Distributor
shall notify all Recipients of the Minimum Qualified Holdings
and the rate of payments hereunder applicable to Recipients, and
shall provide each such Recipient with written notice within
thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in
a revised current prospectus shall be sufficient notice.
(c) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own
resources (which may include profits derived from the advisory
fee it receives from the Fund), or (ii) by the Distributor (a
subsidiary of OMC), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection or replacement of Independent Trustees and the nomination
of those persons to be Trustees of the Fund who are not "interested
persons" of the Fund shall be committed to the discretion of the
Independent Trustees. Nothing herein shall prevent the Independent
Trustees from soliciting the views or the involvement of others in such
selection or nomination if the final decision on any such selection and
nomination is approved by a majority of the incumbent Independent
Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, and the purposes
for which the payments were made. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year with respect to the personal service and
maintenance of Accounts in conjunction with the Board's annual review of
the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding Shares of the Class,
on not more than sixty days written notice to any other party to the
agreement; (ii) such agreement shall automatically terminate in the event
of its "assignment" (as defined in the 1940 Act); (iii) it shall go into
effect when approved by a vote of the Board and its Independent Trustees
cast in person at a meeting called for the purpose of voting on such
agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Independent Trustees cast in person at
a meeting called on June 10, 1993 for the purpose of voting on this Plan,
and takes effect as of July 1, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until December 31, 1993 and from
year to year thereafter or as the Board may otherwise determine only so
long as such continuance is specifically approved at least annually by the
Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated
at any time by vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities of the Class. This Plan may not be
amended to increase materially the amount of payments to be made without
approval of the Class A Shareholders, in the manner described above, and
all material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Shareholder and Trustee Liability Disclaimer. The Distributor
understands and agrees that the obligations of the Fund under this Plan
are not binding upon any shareholder or Trustee of the Fund personally,
but only the Fund and the Fund's property. The Distributor represents
that it has notice of the provisions of the Declaration of Trust of the
Fund disclaiming shareholder and Trustee liability for acts or obligations
of the Fund.
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
By: /s/ Robert G. Zack
--------------------------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
-----------------------------------
Katherine P. Feld
Vice President & Secretary
<PAGE>
Exhibit 24(b)(15)(ii)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
REVISED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the
10th day of June, 1993 by and between OPPENHEIMER CALIFORNIA TAX-EXEMPT
FUND (the "Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor for a
portion of its costs incurred in connection with the distribution of
Shares, and the personal service and maintenance of shareholder accounts
that hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule, according to
the terms of this Plan. The Distributor is authorized under the Plan to
pay "Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended
to have certain rights as third-party beneficiaries under this Plan. The
terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the
1940 Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., or
its successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the 1940 Act)
and who have no direct or indirect financial interest in the operation
of this Plan or in any agreements relating to this Plan (the
"Independent Trustees") may remove any broker, dealer, bank or other
institution as a Recipient, whereupon such entity's rights as a third-
party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within forty-
five (45) days of the end of each calendar quarter, in the aggregate
amount of 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of the Shares
computed as of the close of each business day (the "Service Fee"),
plus (ii) within ten (10) days of the end of each month, in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average
during the month of the aggregate net asset value of Shares computed
as of the close of each business day (the "Asset Based Sales Charge")
outstanding for six years or less (the "Maximum Holding Period").
Such Service Fee payments received from the Fund will compensate the
Distributor and Recipients for providing administrative support
services of the type approved by the Board with respect to Accounts.
Such Asset Based Sales Charge payments received from the Fund will
compensate the Distributor and Recipients for providing distribution
assistance in connection with the sales of Shares.
The administrative support services in connection with the Accounts
to be rendered by Recipients may include, but shall not be limited to,
the following: answering routine inquiries concerning the Fund,
assisting in the establishment and maintenance of accounts or sub-
accounts in the Fund and processing Share redemption transactions,
making the Fund's investment plans and dividend payment options
available, and providing such other information and services in
connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably
request.
The distribution assistance in connection with the sale of Shares
to be rendered by the Distributor and Recipients may include, but
shall not be limited to, the following: distributing sales literature
and prospectuses other than those furnished to current holders of the
Fund's Shares ("Shareholders"), and providing such other information
and services in connection with the distribution of Shares as the
Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it to
payments under the Plan. In the event that either the Distributor or
the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-party
beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum
period (the "Minimum Holding Period"), if any, to be set from time to
time by a majority of the Independent Trustees. Alternatively, the
Distributor may, at its sole option, make service fee payments
("Advance Service Fee Payments") to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate
not to exceed (i) 0.25% of the average during the calendar quarter of
the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified
Holdings sold by the Recipient during that quarter and owned
beneficially or of record by the Recipient or by its Customers, plus
(ii) 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of Shares computed
as of the close of each business day, constituting Qualified Holdings
owned beneficially or of record by the Recipient or by its Customers
for a period of more than one (1) year, subject to reduction or
chargeback so that the Advance Service Fee Payments do not exceed the
limits on payments to Recipients that are, or may be, imposed by
Article III, Section 26, of the NASD Rules of Fair Practice. In the
event Shares are redeemed less than one year after the date such
Shares were sold, the Recipient is obligated and will repay to the
Distributor on demand a pro rata portion of such Advance Service Fee
Payments, based on the ratio of the time such shares were held to one
(1) year. The Advance Service Fee Payments described in part (i) of
the preceding sentence may, at the Distributor's sole option, be made
more often than quarterly, and sooner than the end of the calendar
quarter. However, no such payments shall be made to any Recipient for
any such quarter in which its Qualified Holdings do not equal or
exceed, at the end of such quarter, the minimum amount ("Minimum
Qualified Holdings"), if any, to be set from time to time by a
majority of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time decrease and thereafter
adjust the rate of fees to be paid to the Distributor or to any
Recipient, but not to exceed the rate set forth above, and/or direct
the Distributor to increase or decrease the Maximum Holding Period,
the Minimum Holding Period or the Minimum Qualified Holdings. The
Distributor shall notify all Recipients of the Minimum Qualified
Holdings, Maximum Holding Period or Minimum Holding Period, if any,
and the rate of payments hereunder applicable to Recipients, and shall
provide each Recipient with written notice within thirty (30) days
after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a revised current prospectus shall
constitute sufficient notice. The Distributor may make Plan payments
to any "affiliated person" (as defined in the 1940 Act) of the
Distributor if such affiliated person qualifies as a Recipient.
(c) The Distributor is entitled to retain from the payments described
in Section 3(a) the aggregate amount of (i) the Service Fee on Shares
outstanding for less than the Minimum Holding Period plus (ii) the
Asset-Based Sales Charge on Shares outstanding for not more than the
Maximum Holding Period, in each case computed as of the close of each
business day during that period and subject to reduction or
elimination of such amounts under the limits to which the Distributor
is, or may become, subject under Article III, Section 26, of the NASD
Rules of Fair Practice. Such amount is collectively referred to as
the "Quarterly Limitation." The distribution assistance and
administrative support services in connection with the sale of Shares
to be rendered by the Distributor may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other institution that sell Shares, and\or paying such
persons Advance Service Fee Payments in advance of, and\or greater
than, the amount provided for in Section 3(a) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor
who support distribution of Shares by Recipients; (iii) paying of or
reimbursing the Distributor for interest and other borrowing costs on
unreimbursed Carry Forward Expenses (as hereafter defined) at the rate
paid by the Distributor or, if such amounts are financed by the
Distributor from its own resources or by an affiliate, at the rate of
1% per annum above the prime rate (which shall mean the most
preferential interest rate on corporate loans at large U.S. money
center commercial banks) then being reported in the Eastern edition of
the Wall Street Journal (or if such prime rate is no longer so
reported, such other rate as may be designated from time to time by
the Distributor with the approval of the Independent Trustees); (iv)
other direct distribution costs of the type approved by the Board,
including without limitation the costs of sales literature,
advertising and prospectuses (other than those furnished to current
Shareholders) and state "blue sky" registration expenses; and (v) any
service rendered by the Distributor that a Recipient may render
pursuant to part (a) of this Section 3. The Distributor's costs of
providing the above-mentioned services are hereinafter collectively
referred to as "Distribution and Service Costs." "Carry Forward
Expenses" are Distribution and Service Costs that are not paid in the
fiscal quarter in which they arise because they exceed the Quarterly
Limitation. In the event that the Board should have reason to believe
that the Distributor may not be rendering appropriate distribution
assistance or administrative support services in connection with the
sale of Shares, then the Distributor, at the request of the Board,
shall provide the Board with a written report or other information to
verify that the Distributor is providing appropriate services in this
regard.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first to interest on unreimbursed
Carry Forward Expenses, second to reduce any unreimbursed Carry
Forward Expenses, third to reduce Distribution and Service Costs
during that quarter, and fourth, to reduce the Asset Based Sales
Charge payments by the Fund to the Distributor in that quarter. Carry
Forward Expenses shall be carried forward by the Fund until payment
can be made under the Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC), from
its own resources, from Asset Based Sales Charge payments or from its
borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Fund
who are not "interested persons" of the Fund ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested Trustees from soliciting
the views or the involvement of others in such selection or nomination if
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing distribution expenditures properly attributable to
the Shares, including the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, the amount paid
to the Distributor and the Distribution and Service Costs and Carry
Forward Expenses for that period. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years
and not previously recovered with respect to the distribution of Shares
in conjunction with the Board's annual review of the continuation of the
Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called on June 10, 1993 for the purpose of voting on
this Plan, and takes effect as of that date, whereupon it replaces the
Fund's Distribution and Service Plan and Agreement dated July 1, 1993.
Unless terminated as hereinafter provided, it shall continue in effect
until December 31, 1993 and from year to year thereafter or as the Board
may otherwise determine only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such continuance. This Plan may not be amended to increase materially the
amount of payments to be made without approval of the Class B
Shareholders, in the manner described above, and all material amendments
must be approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class. Notwithstanding any such termination, the Distributor shall
be entitled to payment from the Fund of all Carry Forward Expenses
properly incurred in respect of Shares sold prior to the effective date
of such termination, and the Fund shall continue to make payment to the
Distributor in the amount the Distributor is entitled to retain under part
(c) of Section 3 hereof, until such time as the Distributor has been
reimbursed for all such amounts by the Fund and by retaining CDSC
payments.
8. Disclaimer of Shareholder Liability. The Distributor understands that
the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and
the Fund's property. The Distributor represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
and Trustee liability for acts or obligations of the Fund.
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
By: /s/ Robert G. Zack
---------------------------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
------------------------------------
Katherine P. Feld
Vice President & Secretary
<PAGE>
Exhibit 24(b)(15)(iii)
REVISED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
REVISED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated
this 10th day of February, 1994 by and between OPPENHEIMER CALIFORNIA TAX-
EXEMPT FUND (the "Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor for a
portion of its costs incurred in connection with the distribution of
Shares, and the personal service and maintenance of shareholder accounts
that hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule, according to
the terms of this Plan. The Distributor is authorized under the Plan to
pay "Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended
to have certain rights as third-party beneficiaries under this Plan. The
terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the
1940 Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., or
its successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the 1940 Act)
and who have no direct or indirect financial interest in the operation
of this Plan or in any agreements relating to this Plan (the
"Independent Trustees") may remove any broker, dealer, bank or other
institution as a Recipient, whereupon such entity's rights as a third-
party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within forty-
five (45) days of the end of each calendar quarter, in the aggregate
amount of 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of the Shares
computed as of the close of each business day (the "Service Fee"),
plus (ii) within ten (10) days of the end of each month, in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average
during the month of the aggregate net asset value of Shares computed
as of the close of each business day (the "Asset Based Sales Charge")
outstanding for six years or less (the "Maximum Holding Period").
Such Service Fee payments received from the Fund will compensate the
Distributor and Recipients for providing administrative support
services of the type approved by the Board with respect to Accounts.
Such Asset Based Sales Charge payments received from the Fund will
compensate the Distributor and Recipients for providing distribution
assistance in connection with the sales of Shares.
The administrative support services in connection with the Accounts
to be rendered by Recipients may include, but shall not be limited to,
the following: answering routine inquiries concerning the Fund,
assisting in the establishment and maintenance of accounts or sub-
accounts in the Fund and processing Share redemption transactions,
making the Fund's investment plans and dividend payment options
available, and providing such other information and services in
connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably
request.
The distribution assistance in connection with the sale of Shares
to be rendered by the Distributor and Recipients may include, but
shall not be limited to, the following: distributing sales literature
and prospectuses other than those furnished to current holders of the
Fund's Shares ("Shareholders"), and providing such other information
and services in connection with the distribution of Shares as the
Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it to
payments under the Plan. In the event that either the Distributor or
the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-party
beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum
period (the "Minimum Holding Period"), if any, to be set from time to
time by a majority of the Independent Trustees. Alternatively, the
Distributor may, at its sole option, make service fee payments
("Advance Service Fee Payments") to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate
not to exceed (i) 0.25% of the average during the calendar quarter of
the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified
Holdings sold by the Recipient during that quarter and owned
beneficially or of record by the Recipient or by its Customers, plus
(ii) 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of Shares computed
as of the close of each business day, constituting Qualified Holdings
owned beneficially or of record by the Recipient or by its Customers
for a period of more than one (1) year, subject to reduction or
chargeback so that the Advance Service Fee Payments do not exceed the
limits on payments to Recipients that are, or may be, imposed by
Article III, Section 26, of the NASD Rules of Fair Practice. In the
event Shares are redeemed less than one year after the date such
Shares were sold, the Recipient is obligated and will repay to the
Distributor on demand a pro rata portion of such Advance Service Fee
Payments, based on the ratio of the time such shares were held to one
(1) year. The Advance Service Fee Payments described in part (i) of
the preceding sentence may, at the Distributor's sole option, be made
more often than quarterly, and sooner than the end of the calendar
quarter. However, no such payments shall be made to any Recipient for
any such quarter in which its Qualified Holdings do not equal or
exceed, at the end of such quarter, the minimum amount ("Minimum
Qualified Holdings"), if any, to be set from time to time by a
majority of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time decrease and thereafter
adjust the rate of fees to be paid to the Distributor or to any
Recipient, but not to exceed the rate set forth above, and/or direct
the Distributor to increase or decrease the Maximum Holding Period,
the Minimum Holding Period or the Minimum Qualified Holdings. The
Distributor shall notify all Recipients of the Minimum Qualified
Holdings, Maximum Holding Period or Minimum Holding Period, if any,
and the rate of payments hereunder applicable to Recipients, and shall
provide each Recipient with written notice within thirty (30) days
after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a revised current prospectus shall
constitute sufficient notice. The Distributor may make Plan payments
to any "affiliated person" (as defined in the 1940 Act) of the
Distributor if such affiliated person qualifies as a Recipient.
(c) The Distributor is entitled to retain from the payments described
in Section 3(a) the aggregate amount of (i) the Service Fee on Shares
outstanding for less than the Minimum Holding Period plus (ii) the
Asset-Based Sales Charge on Shares outstanding for not more than the
Maximum Holding Period, in each case computed as of the close of each
business day during that period and subject to reduction or
elimination of such amounts under the limits to which the Distributor
is, or may become, subject under Article III, Section 26, of the NASD
Rules of Fair Practice. Such amount is collectively referred to as
the "Quarterly Limitation." The distribution assistance and
administrative support services in connection with the sale of Shares
to be rendered by the Distributor may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other institution that sell Shares, and\or paying such
persons Advance Service Fee Payments in advance of, and\or greater
than, the amount provided for in Section 3(a) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor
who support distribution of Shares by Recipients; (iii) paying of or
reimbursing the Distributor for interest and other borrowing costs on
unreimbursed Carry Forward Expenses (as hereafter defined) at the rate
paid by the Distributor or, if such amounts are financed by the
Distributor from its own resources or by an affiliate, at the rate of
1% per annum above the prime rate (which shall mean the most
preferential interest rate on corporate loans at large U.S. money
center commercial banks) then being reported in the Eastern edition of
the Wall Street Journal (or if such prime rate is no longer so
reported, such other rate as may be designated from time to time by
the Distributor with the approval of the Independent Trustees); (iv)
other direct distribution costs of the type approved by the Board,
including without limitation the costs of sales literature,
advertising and prospectuses (other than those furnished to current
Shareholders) and state "blue sky" registration expenses; and (v) any
service rendered by the Distributor that a Recipient may render
pursuant to part (a) of this Section 3. The Distributor's costs of
providing the above-mentioned services are hereinafter collectively
referred to as "Distribution and Service Costs." "Carry Forward
Expenses" are Distribution and Service Costs that are not paid in the
fiscal quarter in which they arise because they exceed the Quarterly
Limitation. In the event that the Board should have reason to believe
that the Distributor may not be rendering appropriate distribution
assistance or administrative support services in connection with the
sale of Shares, then the Distributor, at the request of the Board,
shall provide the Board with a written report or other information to
verify that the Distributor is providing appropriate services in this
regard.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first to interest on unreimbursed
Carry Forward Expenses, second to reduce any unreimbursed Carry
Forward Expenses, third to reduce Distribution and Service Costs
during that quarter, and fourth, to reduce the Asset Based Sales
Charge payments by the Fund to the Distributor in that quarter. Carry
Forward Expenses shall be carried forward by the Fund until payment
can be made under the Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC), from
its own resources, from Asset Based Sales Charge payments or from its
borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Fund
who are not "interested persons" of the Fund ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested Trustees from soliciting
the views or the involvement of others in such selection or nomination if
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing distribution expenditures properly attributable to
the Shares, including the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, the amount paid
to the Distributor and the Distribution and Service Costs and Carry
Forward Expenses for that period. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years
and not previously recovered with respect to the distribution of Shares
in conjunction with the Board's annual review of the continuation of the
Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called on February 10, 1994 for the purpose of voting
on this Plan, and takes effect as of that date, whereupon it replaces the
Fund's Distribution and Service Plan and Agreement dated June 10, 1993.
Unless terminated as hereinafter provided, it shall continue in effect
until December 31, 1994 and from year to year thereafter or as the Board
may otherwise determine only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such continuance. This Plan may not be amended to increase materially the
amount of payments to be made without approval of the Class B
Shareholders, in the manner described above, and all material amendments
must be approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class. In the event of such termination, the Board and its
Independent Trustees shall determine whether the Distributor is entitled
to payment form the Fund of all Carry Forward Expenses and related costs
properly incurred in respect of Shares sold prior to the effective date
of such termination, and whether the Fund shall continue to make payment
to the Distributor in the amount the Distributor is entitled to retain
under part (c) of Section 3 hereof, until such time as the Distributor has
been reimbursed for all such amounts by the Fund and by retaining CDSC
payments.
8. Disclaimer of Shareholder Liability. The Distributor understands that
the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and
the Fund's property. The Distributor represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
and Trustee liability for acts or obligations of the Fund.
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
By: /s/ Robert G. Zack
---------------------------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
-----------------------------------
Katherine P. Feld
Vice President & Secretary
<PAGE>
Oppenheimer California Tax-Exempt Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions for the past
10 years, which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
12/30/88 0.0857557 0.0000 9.580
01/27/89 0.0545000 0.0000 9.690
02/24/89 0.0545000 0.0000 9.550
03/23/89 0.0545000 0.0000 9.450
04/21/89 0.0545000 0.0000 9.600
05/19/89 0.0545000 0.0000 9.790
06/16/89 0.0545000 0.0000 9.840
07/14/89 0.0545000 0.0000 9.920
08/11/89 0.0545000 0.0000 9.840
09/08/89 0.0545000 0.0000 9.800
10/06/89 0.0545000 0.0000 9.810
11/03/89 0.0545000 0.0000 9.800
12/01/89 0.0545000 0.0000 9.940
12/29/89 0.0420000 0.0190 9.940
01/26/90 0.0545000 0.0000 9.730
02/23/90 0.0522000 0.0000 9.790
03/23/90 0.0522000 0.0000 9.800
04/20/90 0.0522000 0.0000 9.710
05/18/90 0.0522000 0.0000 9.750
06/15/90 0.0522000 0.0000 9.820
07/13/90 0.0522000 0.0000 9.860
08/10/90 0.0522000 0.0000 9.800
09/07/90 0.0522000 0.0000 9.650
10/05/90 0.0522000 0.0000 9.600
11/02/90 0.0559286 0.0000 9.780
11/30/90 0.0520778 0.0000 9.860
12/28/90 0.0505008 0.0000 9.850
01/25/91 0.0505000 0.0000 9.860
02/22/91 0.0505000 0.0000 9.920
03/22/91 0.0505000 0.0000 9.840
04/19/91 0.0505000 0.0000 9.910
05/17/91 0.0505000 0.0000 9.920
06/14/91 0.0505008 0.0000 9.820
07/12/91 0.0505008 0.0000 9.930
08/09/91 0.0505000 0.0000 10.020
09/06/91 0.0505000 0.0000 10.050
10/04/91 0.0505000 0.0000 10.140
11/01/91 0.0505000 0.0000 10.150
11/29/91 0.0504388 0.0000 10.070
12/27/91 0.0145400 0.0574 10.190
01/24/92 0.0498000 0.0000 10.190
02/21/92 0.0498000 0.0000 10.060
<PAGE>
Oppenheimer California Tax-Exempt Fund
April 13, 1994
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
03/20/92 0.0498000 0.0000 10.050
04/16/92 0.0498000 0.0000 10.160
05/15/92 0.0498000 0.0000 10.160
06/12/92 0.0498000 0.0000 10.200
07/10/92 0.0498000 0.0000 10.440
08/07/92 0.0498000 0.0000 10.530
09/04/92 0.0061778 0.0740 10.400
10/02/92 0.0480222 0.0000 10.330
10/30/92 0.0498000 0.0000 10.120
11/27/92 0.0498000 0.0000 10.300
12/24/92 0.0498008 0.0087856 10.350
01/22/93 0.0498008 0.0000 10.390
02/19/93 0.0498008 0.0000 10.610
03/19/93 0.0498008 0.0000 10.730
04/16/93 0.0498008 0.0000 10.710
05/14/93 0.0498008 0.0000 10.720
06/10/93 0.0541000 0.0000 10.720
07/09/93 0.0541000 0.0000 10.840
08/10/93 0.0541000 0.0000 10.840
09/10/93 0.0541000 0.0000 11.080
10/08/93 0.0541000 0.0000 11.090
11/10/93 0.0520800 0.0000 10.900
12/10/93 0.0504000 0.0721148 10.940
Class B Shares
05/14/93 0.0185529 0.0000 10.720
06/10/93 0.0453813 0.0000 10.730
07/09/93 0.0437429 0.0000 10.850
08/10/93 0.0459302 0.0000 10.850
09/10/93 0.0458056 0.0000 11.090
10/08/93 0.0470754 0.0000 11.100
11/10/93 0.0441107 0.0000 10.910
12/10/93 0.0424506 0.0721148 10.950
<PAGE>
Oppenheimer California Tax-Exempt Fund
April 13, 1994
Page 3
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93:
The formula for calculating average annual total return is as
follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,078.79 1 $1,538.48 .2
(---------) - 1 = 7.88% (---------) - 1 = 9.00%
$1,000 $1,000
Inception
$1,560.39 .1937
(---------) - 1 = 9.00%
$1,000
Examples at NAV:
One Year Five Year
$1,132.58 1 $1,615.20 .2
(---------) - 1 = 13.26% (---------) - 1 = 10.06%
$1,000 $1,000
Inception
$1,638.21 .1937
(---------) - 1= 10.03%
$1,000
Class B Shares
Example, assuming a maximum contingent deferred sales charge of
5.00% for the first year:
Inception
$1,016.60 1.5000
(---------) - 1 = 2.50%
$1,000
Example at NAV:
Inception
$1,066.60 1.5000
(---------) - 1 = 10.15%
$1,000
<PAGE>
Oppenheimer California Tax-Exempt Fund
April 13, 1994
Page 4
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93:
The formula for calculating cumulative total return is as follows:
ERV - P
------- = Cumulative Total Return
P
Class A Shares
Examples, assuming a maximum sales charge:
One Year Five Year
$1,078.79 - 1,000 $1,538.48 - 1,000
- ----------------- = 7.88% ----------------- = 53.85%
$1,000 $1,000
Inception
$1,560.39 - 1,000
- ----------------- = 56.04%
$1,000
Examples at NAV:
One Year Five Year
$1,132.58 - 1,000 $1,615.20 - 1,000
- ----------------- = 13.26% ----------------- = 61.52%
$1,000 $1,000
Inception
$1,638.21 - 1,000
- ----------------- = 63.82%
$1,000
Class B Shares
Inception (05/01/93)(at Maximum Contingent Deferred Sales Charge of
5.00%)
$1,016.60 - $1,000
-------------------- = 1.66%
$1,000
Inception (05/01/93)(at NAV)
$1,066.60 - $1,000
-------------------- = 6.66%
$1,000
<PAGE>
Oppenheimer California Tax-Exempt Fund
April 13, 1994
Page 5
3. STANDARDIZED YIELDS FOR THE 30-DAY PERIOD ENDED 04/30/93:
The Fund's standardized yield is calculated using the following
formula set forth in the SEC rules:
a - b 6
Standardized Yield = 2{(------- + 1) - 1}
cd or e
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding sales charge)
per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$1,431,916.38 - $209,841.64 6
2{(--------------------------- + 1) - 1} = 5.32%
24,206,760 x $11.52
Class B Shares
Example at NAV:
$ 49,938.51 - $ 11,629.85 6
2{(--------------------------- + 1) - 1} = 5.01%
843,730 x $10.98
<PAGE>
Oppenheimer California Tax-Exempt Fund
April 13, 1994
Page 6
4. TAX-EQUIVALENT STANDARDIZED YIELDS FOR THE 30-DAY PERIOD ENDED
04/30/93:
The Fund's tax-equivalent standardized yield is calculated using the
following formula:
a
----- + b = Tax-Equivalent Standardized Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the
portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Combined stated tax rate (e.g., federal and state income tax
rates
for an individual in the 39.6% federal tax bracket filing
singly).
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
.0532
----------- + 0 = 9.90%
1 - .4624
Class B Shares
Example at NAV:
.0501
----------- + 0 = 9.32%
1 - .4624
Combined Stated Tax Rate Formula
1 - {(1-d)(1-e)} = Combined Stated Tax Rate
The symbols above represent the following factors:
d = Stated federal tax rate (e.g., federal income tax rate for an
individual in the 39.6% federal tax bracket filing singly).
e = Stated California State tax rate (e.g., for an individual in the
39.6% federal and 11% state tax bracket filing singly).
Example: 1 - {(1 - .3960)(1 - .1100)} = 46.24%
<PAGE>
Oppenheimer California Tax-Exempt Fund
April 13, 1994
Page 7
5. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/93:
The Fund's dividend yields are calculated using the following
formula:
a/30 x 365
Dividend Yield = ----------
b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's Net Asset Value (excluding sales charge)per share
on the last day of the period.
Examples:
Class A Shares
Dividend Yield $.0503451/30 x 365
at Maximum Offer ------------------ = 5.32%
$11.52
Dividend Yield $.0503451/30 x 365
at Net Asset Value ------------------ = 5.58%
$10.97
Class B Shares
Dividend Yield $.0430066/30 x 365
at Net Asset Value ------------------ = 4.77%
$10.98
