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. 14 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 / X /
Amendment No. 15 / X /
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
- -------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
- ------------------------------------------------------------------
(Address of Principal Executive Offices)
212-323-0200
- -------------------------------------------------------------------
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
- -------------------------------------------------------------------
(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 October 31, 1996, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On ---------------, pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On _______ pursuant to paragraph (a)(2) of Rule 485.
- ------------------------------------------------------------------
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, 1995, was filed on
February 28, 1996.
<PAGE>
FORM N-1A
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Front Cover Page
2 Expenses; Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed--
Organization and History; Investment Objective and
Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 How the Fund is Managed--Organization and History; The
Transfer Agent; Dividends, Capital Gains and
Taxes;
Investment Objectives and Policies-Portfolio Turnover
7 Shareholder Account Rules and Policies; How to Buy
Shares; How to Exchange Shares; Special Investor
Services; Service Plan for Class A shares;
Distribution and Service Plan for Class B Shares;
Distribution and Service Plan for Class C Shares;
How to Sell Shares
8 How to Sell 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; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed; Trustees and Officers of the
Fund
15 How the Fund is Managed; Major Shareholders
16 How the Fund is Managed; Distribution and Service
Plans
17 Brokerage Policies of the Fund
18 Additional Information about the Fund
19 Your Investment Account-How to Buy Shares; How to Sell
Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the
Fund
22 Performance of the Fund
23 Financial Statements
- ----------------
*Not applicable or negative answer.
<PAGE>
Oppenheimer
California Municipal Fund
Prospectus dated October 31, 1996
Oppenheimer California Municipal 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
refer to "Investment Risks" for a discussion of the risks of
investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the October 31, 1996 Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated into this
Prospectus by reference (which means that it is legally part of
this Prospectus).
(Logo) OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any
other agency, and involve investment risks including the possible
loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix: Special Sales Charge Arrangements for
Certain Persons
<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 subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges and account transaction
charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the
Fund's business operating expenses that you will bear indirectly.
The numbers below are based on the Fund's expenses during its
fiscal year ended December 31, 1995 and for the fiscal period
January 1, 1996 to July 31, 1996 (the Fund's new fiscal year end).
- Shareholder Transaction Expenses are charges you pay when you
buy or sell shares of the Fund. Please refer to "About Your
Account," from pages ___ through ___ for an explanation of how and
when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales 4.75% None None
Charge on Purchases
(as a % of offering price)
- --------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the 1% if
Charge (as a % of the first year, shares are
lower of the original declining to redeemed within
offering price or 1% in the 12 months
redemption proceeds) sixth year of purchase(2)
and eliminated
thereafter(2)
- -------------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- -------------------------------------------------------------------------
Exchange Fee None None None
</TABLE>
[FN]
____________________
(1) If you invest $1 million or more in Class A shares, you may
have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month in
which you purchased those shares. See "How to Buy Shares - Buying
Class A Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares," below for more information on the
contingent deferred sales charges.
- Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses in operating its business.
For example, the Fund pays management fees to its investment
adviser, OppenheimerFunds, Inc. (referred to in this Prospectus as
the "Manager"). The rates of the Manager's fees are set forth in
"How the Fund is Managed," below. The Fund has other regular
expenses for services, such as transfer agent fees, custodial fees
paid to the bank that holds the Fund's portfolio securities, audit
fees and legal expenses. Those expenses are detailed in the Fund's
Financial Statements in the Statement of Additional Information.
Annual Fund Operating Expenses as a
Percentage of Average Net Assets
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Management Fees 0.58% 0.58% 0.58%
- ------------------------------------------------------------------------
12b-1 Plan Fees 0.25% 1.00% 1.00%
- -------------------------------------------------------------------
Other Expenses 0.12% 0.14% 0.14%
- -------------------------------------------------------------------
Total Fund Operating Expenses 0.95% 1.72% 1.72%
</TABLE>
The numbers in the table above are based upon the Fund's
expenses in its fiscal year ended December 31, 1995. These amounts
are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan
Fees for Class A shares are Service Plan Fees (the maximum fee is
0.25% of average annual net assets of that class), and for Class B
and Class C shares are the Distribution and Service Plan Fees (the
service fee is 0.25% of average annual net assets of that class)
and the asset-based sales charge of 0.75%. These plans are
described in greater detail in "How to Buy Shares," below.
The actual expenses for each class of shares in future years
may be more or less than the numbers in the chart, depending on a
number of factors, including changes in the actual value of the
Fund's assets represented by each class of shares. Class C shares
were not publicly offered before November 1, 1995. Therefore, the
Annual Fund Operating Expenses for Class C shares are estimates
based on expenses that would have been payable if Class C shares
had been outstanding during the entire fiscal year.
- 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 Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3,
5 and 10 years:
1 year 3 years 5 years 10 years*
- --------------------------------------------------------------
Class A Shares $57 $76 $98 $159
Class B Shares $67 $84 $113 $164
Class C Shares $27 $54 $ 93 $203
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
- --------------------------------------------------------------
Class A Shares $57 $76 $98 $159
Class B Shares $17 $54 $93 $164
Class C Shares $17 $54 $93 $203
* In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into
Class A shares after 6 years. Because of the effect of the asset-
based sales charge and contingent deferred sales charge, long-term
Class B and Class C shareholders could pay the economic equivalent
of more than the maximum front-end sales charge allowed under
applicable regulations. For Class B shareholders, the automatic
conversion of Class B shares to Class A shares is designed to
minimize the likelihood that this will occur. Please refer to "How
to Buy Shares - Buying Class B Shares" for more information.
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 may be more or less
than those shown.
Annual Fund Operating Expenses as a
Percentage of Average Net Assets
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- ---------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.58% 0.58% 0.58%
- ---------------------------------------------------------------
12b-1 Plan Fees 0.25% 1.00% 1.00%
- ---------------------------------------------------------------
Other Expenses 0.14% 0.16% 0.22%
- ---------------------------------------------------------------
Total Fund Operating Expenses 0.97% 1.74% 1.80%
</TABLE>
The numbers in the table above are based upon the Fund's
expenses for the fiscal period January 1, 1996 to July 31, 1996
(the Fund's new fiscal year). These amounts are shown as a
percentage of the average net assets of each class of the Fund's
shares for that year. The 12b-1 Distribution Plan Fees for Class A
shares are Service Plan Fees (the maximum fee is 0.25% of average
annual net assets of that class), and for Class B and Class C
shares are the Distribution and Service Plan Fees (the service fee
is 0.25% of average annual net assets of that class) and the asset-
based sales charge of 0.75%. These plans are described in greater
detail in "How to Buy Shares," below.
The actual expenses for each class of shares in future years
may be more or less than the numbers in the chart, depending on a
number of factors, including changes in the actual value of the
Fund's assets represented by each class of shares.
- 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 Annual Fund Operating Expenses table above. If you were to
redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3,
5 and 10 years:
1 year 3 years 5 years 10 years*
- ----------------------------------------------------------------
Class A Shares $57 $77 $99 $161
Class B Shares $68 $85 $114 $166
Class C Shares $28 $57 $97 $212
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
- ----------------------------------------------------------------
Class A Shares $57 $77 $99 $161
Class B Shares $18 $55 $94 $166
Class C Shares $18 $57 $97 $212
* In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into
Class A shares after 6 years. Because of the effect of the asset-
based sales charge and contingent deferred sales charge, long-term
Class B and Class C shareholders could pay the economic equivalent
of more than the maximum front-end sales charge allowed under
applicable regulations. For Class B shareholders, the automatic
conversion of Class B shares to Class A shares is designed to
minimize the likelihood that this will occur. Please refer to "How
to Buy Shares - Buying Class B Shares" for more information.
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 may be more or less
than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized
below, with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund's
investment objective is to seek 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.
- What Does the Fund Invest In? To seek its objective, the
Fund primarily invests in municipal securities the interest from
which is exempt from Federal and California individual income tax.
The Fund may also use hedging instruments and certain derivative
investments to try to manage investment risks. These investments
are more fully explained in "Investment Objective and Policies"
starting on page __.
- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc. Prior to January 5, 1996,
OppenheimerFunds, Inc. was known as Oppenheimer Management
Corporation. The Manager (including a subsidiary) manages
investment company portfolios having over $55 billion in assets at
September 30, 1996. The Manager is paid an advisory fee by the
Fund, based on its net assets. The Fund's portfolio manager, who
is employed by the Manager, is Jerry Webman. He is primarily
responsible for the selection of the Fund's securities. The Fund's
Board of Trustees, elected by shareholders, oversees the investment
adviser and the portfolio manager. Please refer to "How the Fund
is Managed," starting on page ___ for more information about the
Manager and its fees.
- How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in municipal bonds are subject to
changes in their value from a number of factors such as changes in
general bond market movements, the change in value of particular
bonds because of an event affecting the issuer, or changes in
interest rates that can affect bond prices. These changes affect
the value of the Fund's investments and its price per share. The
fact that the Fund concentrates it investments in California
Municipal Securities or the Fund's ability to invest in a single
issuer or limited number of issuers entails greater risk than an
investment in a diversified investment company.
The Fund may invest in "inverse floater" variable rate bonds,
a type of derivative investment whose yields move in the opposite
direction as short-term interest rates change. In the
OppenheimerFunds spectrum, the Fund is generally more conservative
than high yield bond funds, but more aggressive than money market
funds. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the
Fund's objectives and your shares may be worth more or less than
their original cost when you redeem them. Please refer to
"Investment Risks" starting on page for a more complete
discussion.
- How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through the Distributor by completing an Application or by
using an Automatic Investment Plan under AccountLink. Please refer
to "How To Buy Shares" on page ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. All three classes have the same investment
portfolio but different expenses. Class A shares are offered with
a front-end sales charge, starting at 4.75%, and reduced for larger
purchases. Class B shares and Class C shares are offered without
a front-end sales charge, but may be subject to a contingent
deferred sales charge if redeemed within 6 years or 12 months,
respectively, of purchase. There are also annual asset-based sales
charges on Class B and Class C shares. Please review "How To Buy
Shares" starting on page ___ for more details, including a
discussion about factors you and your financial advisor should
consider in determining which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or
by telephone call to the Transfer Agent on any business day, or
through your dealer, or by writing a check against your Fund
account (available for Class A shares only). Please refer to "How
To Sell Shares" on page ___. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to
Exchange Shares" on page ____.
- How Has the Fund Performed? The Fund measures its
performance by quoting its yield, tax-equivalent yield, average
annual total return and cumulative total return, which measure
historical performance. Those yields and returns can be compared
to the yields and returns (over similar periods) of other funds.
Of course, other funds may have different objectives, investments,
and levels of risk. The Fund's performance can also be compared to
a broad market index, which we have done on page ___. Please
remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense
ratios and other data based on the Fund's average net assets. This
information has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors, whose reports on the Fund's financial
statements for the fiscal year ended December 31, 1995 and for the
fiscal period January 1, 1996 to July 31, 1996 (the Fund's new
fiscal year end), is included in the Statement of Additional
Information. Class C shares were only offered during a portion of
the period commencing on November 1, 1995.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------
Seven
Months
Ended
July 31, Year Ended December 31,
1996(2) 1995 1994 1993 1992 1991
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.69 $ 9.45 $10.97 $10.35 $10.22 $ 9.86
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .58 .60 .62 .61 .66
Net realized and unrealized
gain (loss) (.30) 1.25 (1.51) .72 .20 .38
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations .03 1.83 (.91) 1.34 .81 1.04
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.33) (.58) (.61) (.65) (.60) (.62)
Dividends in excess of net
investment income -- (.01) -- -- -- --
Distributions from net realized gain -- -- -- (.07) (.08) (.06)
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.33) (.59) (.61) (.72) (.68) (.68)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.39 $10.69 $ 9.45 $10.97 $10.35 $10.22
====== ====== ====== ====== ====== ======
======================================================================================================================
Total Return, at Net Asset
Value(4) 0.34% 19.76% (8.49)% 13.26% 8.28% 10.93%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $286,033 $285,307 $219,682 $266,490 $204,349 $145,163
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $279,796 $250,188 $248,850 $245,193 $174,055 $115,661
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.53%(5) 5.64% 5.99% 5.74% 6.07% 6.52%
Expenses, before voluntary
assumption by the Manager 0.97%(5) 0.95% 0.96% 0.97% 1.07% 1.05%
Expenses, net of voluntary
assumption by the Manager N/A N/A N/A N/A N/A 0.73%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 14.0% 23.0% 21.9% 13.7% 26.8% 26.6%
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Class B Class C
--------------------------------------- ----------------
Seven Seven
Months Months Period
Ended Ended Ended
July 31, Year Ended December 31, July 31, Dec. 31,
1996(2) 1995 1994 1993(3) 1996(2) 1995(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.69 $ 9.44 $10.98 $10.72 $10.68 $10.46
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 .51 .54 .35 .27 .08
Net realized and unrealized
gain (loss) (.30) 1.25 (1.55) .34 (.30) .22
------ ------- ------- ------ ------ ------
Total income (loss) from
investment operations (.02) 1.76 (1.01) .69 (.03) .30
- -----------------------------------------------------------------------------------------------------------
Dividends and distributionsto shareholders:
Dividends from net investment
income (.28) (.50) (.53) (.36) (.27) (.07)
Dividends in excess of net
investment income -- (.01) -- -- -- (.01)
Distributions from net realized gain -- -- -- (.07) -- --
------ ------- ------- ------ ------ ------
Total dividends and distributions
to shareholders (.28) (.51) (.53) (.43) (.27) (.08)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.39 $10.69 $ 9.44 $10.98 $10.38 $10.68
====== ======= ======= ====== ====== ======
===========================================================================================================
Total Return, at Net Asset
Value(4) (0.12)% 18.97% (9.39)% 6.66% (0.19)% 2.90%
===========================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $52,038 $41,224 $20,224 $9,921 $2,171 $125
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $46,422 $29,918 $16,552 $5,218 $1,156 $ 91
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.74%(5) 4.82% 5.17% 4.57%(5) 4.54%(5) 4.56%(5)
Expenses, before voluntary
assumption by the Manager 1.74%(5) 1.72% 1.73% 1.79%(5) 1.80%(5) 1.68%(5)
Expenses, net of voluntary
assumption by the Manager N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 14.0% 23.0% 21.9% 13.7% 14.0% 23.0%
</TABLE>
(END RESTUBBED TABLE)
1. For the period from November 1, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended July 31, 1996 were $63,536,324 and $45,046,400, respectively.
<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 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 when held by an individual.
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.
Although exempt-interest dividends will not be subject to federal
income tax for Fund shareholders, a portion of such dividends which
is derived from interest on certain "private activity" bonds may be
an item of tax preference if you are subject to the federal
alternative minimum tax. Any net interest income on taxable
investments and repurchase agreements will be taxable as ordinary
income, and any capital gains will be taxable as capital gains,
when distributed to shareholders.
- 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 investment
policies. The Fund's investment policies and practices are not
"fundamental" unless this Prospectus or the Statement of Additional
Information says that a particular policy is "fundamental." The
Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting
shares. The term "majority" is defined in the Investment Company
Act to be a particular percentage of outstanding voting shares (and
this term is explained in the Statement of Additional Information).
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus.
- Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." The Fund ordinarily does
not engage in the trading of securities for the purpose of
realizing short-term gains, but the Fund may sell securities as the
Manager deems advisable to take advantage of differentials in yield
to accomplish the Fund's investment objective. The "Financial
Highlights," above, show the Fund's portfolio turnover rate during
the past fiscal years. While short-term trading increases
portfolio turnover and may increase the Fund's transaction costs,
the Fund incurs little or no brokerage costs because most of the
Fund's portfolio transactions are principal trades without
brokerage commissions.
Investment Risks.
All investments carry risks to some degree, whether they are
risks that market prices of the investment will fluctuate (this is
known as "market risk") or that the underlying issuer will
experience financial difficulties and may default on its obligation
under a fixed-income investment to pay interest and repay principal
(this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that
the Fund may hold are described below. They affect the value of
the Fund's investments, its investment performance, and the prices
of its shares. These risks collectively form the risk profile of
the Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for
investors who are investing for the long term. It is not intended
for investors seeking assured income. While the Manager tries to
reduce risks by diversifying investments, by carefully researching
securities before they are purchased, and in some cases by using
hedging techniques, changes in overall market prices can occur at
any time, and because the income earned on securities is subject to
change, there is no assurance that the Fund will achieve its
investment objective. When you redeem your shares, they may be
worth more or less than what you paid for them.
- 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 Statement of Additional Information under "Special Investment
Considerations - California Municipal Securities."
- Interest Rate Risks. In addition to credit risks, described
below, Municipal Securities are subject to changes in value due to
changes in prevailing interest rates. When prevailing interest
rates fall, the values of outstanding Municipal Securities
generally rise and (if purchased at principal amount) would sell at
a premium. Conversely, when interest rates rise, the values of
outstanding Municipal Securities generally decline and (if
purchased at principal amount) would sell at a discount. The
magnitude of these fluctuations will be greater when the average
duration of the portfolio is longer.
- Credit Risks. Municipal Securities are also subject to
credit risks. Credit risk relates to the ability of the issuer of
a Municipal Security to make interest or principal payments on the
security as they become due. The economic and other factors that
can affect that ability are summarized in the Statement of
Additional Information under "Special Investment Considerations-
California Municipal Securities." While the Manager may rely to
some extent on credit ratings by nationally recognized rating
agencies, such as Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's") or Fitch Investors Service,
Inc. ("Fitch"), in evaluating the credit risk of securities
selected for the Fund's portfolio, it may also use its own research
and analysis. However, many factors affect an issuer's ability to
make timely payments, and there can be no assurance that the credit
risks of a particular security will not change over time.
- There are special risks in investing in derivative
investments. The risks of investing in derivative investments
include not only the ability of the issuer of the derivative
investment to pay the amount due on the maturity of the investment,
but also the risk that the underlying security or investment might
not perform the way the Manager expected it to perform. That can
mean that the Fund will realize less income than expected. Another
risk of investing in derivative investments is that their market
value could be expected to vary to a much greater extent than the
market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions
and maturities.
- 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 that more than
90% of its earnings are distributed to shareholders. Among the
requirements for such qualification are that at the end of each
fiscal quarter: (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.
- Hedging instruments can be volatile investments and may
involve special risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different from what is required for normal portfolio management. 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. Such losses might
cause previously distributed short-term capital gains to be re-
characterized as a non-taxable return of capital to shareholders.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the
Fund is exercised on an investment that has increased in value, the
Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has
increased in value above the call price. Interest rate swaps are
subject to credit risks (if the other party fails to meet its
obligations) and also to interest rate risks. 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 are
described in greater detail in the Statement of Additional
Information.
Investment Techniques and Strategies
The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The
Statement of Additional Information contains more information about
these practices, including limitations on their use that are
designed to reduce some of the risks.
- Municipal Securities. Municipal Securities are municipal
bonds, municipal notes and municipal commercial paper, certificates
of participation and other debt obligations issued by or on behalf
of the State of California, other states and the District of
Columbia, their political subdivisions or any commonwealth,
territory or possession of the United States, or their respective
agencies, instrumentalities or authorities, the interest from 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 Municipal Securities, 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.
- 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
"Hedging" below); (iii) repurchase agreements (explained below).
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, S&P, Fitch or another
nationally recognized rating agency; (iii) commercial paper rated
"A-1" by S&P, "Prime-1" by Moody's, "F-1" by Fitch or a comparable
rating by another nationally recognized rating agency; 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.
- Municipal Lease Obligations. The Fund may invest in
certificates of participation which are tax-exempt obligations that
evidence the holder's right to share in lease, installment loan or
other financing payments by a public entity. Projects financed
with certificates of participation generally are not subject to
state constitutional debt limitations or other statutory
requirements that may be applicable to Municipal Securities.
Payments by the public entity on the obligation underlying the
certificates are derived from available revenue sources; such
revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to
the certificates are not guaranteed. While some municipal lease
securities may be deemed to be "illiquid" securities (the purchase
of which would be limited as described below in "Illiquid and
Restricted Securities"), from time to time the Fund may invest more
than 5% of its net assets in municipal lease obligations that the
Manager has determined to be liquid under guidelines set by the
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 adjusted at stated
periodic intervals. Floating rates are automatically adjusted
according to a specified market rate for such investments, such as
the percentage of the prime rate of a bank, or the 91-day U.S.
Treasury Bill rate. Such obligations may be secured by bank
letters of credit or other credit support arrangements.
- Inverse Floaters and Other Derivative Investments. The Fund
may invest in variable rate bonds known as "inverse floaters."
These bonds pay interest at a rate that varies as the yields
generally available on short-term tax-exempt bonds change.
However, the yields on inverse floaters move in the opposite
direction of yields on short-term bonds in response to market
changes. When the yields on short-term tax-exempt bonds go up, the
interest rate on the inverse floater goes down. When the yields on
short-term tax-exempt bonds go down, the interest rate on the
inverse floater goes up. As interest rates rise, inverse floaters
produce less current income. Inverse floaters are a type of
"derivative security," which is a specially designed investment
whose performance is linked to the performance of another security
or investment. Some inverse floaters have a "cap" whereby if
interest rates rise above the "cap," the security pays additional
interest income. If rates do not rise above the "cap," the Fund
will have paid an additional amount for a feature that proves
worthless. The Fund anticipates that it would invest no more than
10% of its total assets in inverse floaters. The Fund may also
invest in municipal derivative securities that pay interest that
depends on an external pricing mechanism. Examples of external
pricing mechanisms are interest rate swaps, municipal bond indices
or swap indices.
- Ratings of Municipal Securities; Special Risks of Lower-
Rated Municipal Securities. No more than 25% of the Fund's total
assets will be invested in Municipal Securities that at the time of
purchase are not "investment grade." "Investment grade" are those
rated within the four highest rating categories of Moody's, S&P,
Fitch or another nationally recognized rating agency. If the
securities are not rated, the Manager will determine the equivalent
rating category for the purposes of this limitation. Municipal
securities that are "pre-refunded" generally are collateralized by
U.S. government securities placed in an escrow account, causing
such pre-refunded issue to have essentially the same low risks of
default as a triple-A rated security. (See Appendix A to the
Statement of Additional Information for a description of those
ratings). A reduction of the rating of a security after its
purchase by the Fund will not require the Fund to dispose of such
security.
Lower-grade Municipal Securities (sometimes called "municipal
junk bonds") may be subject to greater market fluctuations and are
subject to greater risks of loss of income and principal than
higher-rated Municipal Securities, and may be considered to have
some speculative characteristics. Securities that are or 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. There may be less of a market for
lower-grade Municipal Securities and therefore they may be harder
to sell at an acceptable price. These risks mean that the Fund may
not achieve the expected income from lower-grade Municipal
Securities, and that the Fund's income and net asset value per
share may be affected by declines in value of these securities.
However, the Fund's limitations on investments in non-investment
grade Municipal Securities may reduce some of these risks.
Other Investment Techniques and Strategies. The Fund may also use
the investment techniques and strategies described below. These
techniques involve certain risks. The Statement of Additional
Information contains more information about these practices,
including limitations on their use that may help 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.
These terms refer to securities that have been created 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. There may be a risk of
loss if the value of the security declines prior to the settlement
date.
- Puts and Stand-By Commitments. The Fund may acquire "stand-
by commitments" or "puts" with respect to municipal obligations
held in its portfolio. Under a stand-by commitment or put option,
the Fund would have the right to sell specified securities at a
specific price on demand to the issuing broker-dealer or bank. The
Fund will acquire stand-by commitments or puts solely to facilitate
portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. 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. Repurchase agreements
having a maturity beyond seven days are subject to the limitation
on investments by the Fund in illiquid or restricted securities.
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.
- 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 or which cannot be publicly
sold until it is registered under the Securities Act of 1933. The
Fund will not invest more than 10% of its net assets in illiquid or
restricted securities (the Board may increase that limit to 15%.
The Fund's percentage limitation on these investments does not
apply to certain restricted securities that are eligible for resale
to qualified institutional buyers. The Manager monitors holdings
of illiquid securities on an ongoing basis and at times the Fund
may be required to sell some holdings to maintain adequate
liquidity.
- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to brokers,
dealers and other financial institutions. The Fund must receive
collateral for a loan. These loans are limited to not more than 25%
of the value of the Fund's total assets and are subject to other
conditions described in the Statement of Additional Information.
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.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and
options on futures and broadly-based municipal bond indices, or
enter into interest rate swap agreements. These are referred to as
"hedging instruments." The Fund does not use hedging instruments
for speculative purposes, and has limits on the use of them,
described below. The hedging instruments the Fund may use are
described below and in greater detail in "Other Investment
Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options and futures for a number of
purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may
decline, or to establish a position in the securities market as a
temporary substitute for purchasing individual securities. It may
do so to try to manage its exposure to changing interest rates.
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 and call
options, tend to increase the Fund's exposure to the securities
market. Writing covered call options may also provide income to
the Fund for liquidity purposes, for defensive reasons, or to raise
cash to distribute to shareholders.
- Futures. The Fund may buy and sell futures contracts that
relate to (1) municipal bond indices (these are referred to as
Municipal Bond Index Futures) and (2) interest rates (these are
referred to as Interest Rate Futures). The Fund may buy and sell
futures contracts in an attempt to benefit from any performance of
the future purchased relative to the performance of the future
sold. These types of futures are further described in "Hedging" in
the Statement of Additional Information.
- Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).
The Fund may buy calls only on debt securities, broadly-based
municipal bond indices, Municipal Bond Index Futures and Interest
Rate Futures, or to terminate its obligation on a call the Fund
previously wrote. The Fund may write (that is, sell) covered call
options. When the Fund writes a call, it receives cash (called a
premium). The call gives the buyer the ability to buy the
investment on which the call was written from the Fund at the call
price during the period in which the call may be exercised. If the
value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the
Fund keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on an
investment gives the Fund the right to sell the investment at a set
price to a seller of a put on that investment. The Fund can buy
only those puts that relate to (1) securities that the Fund owns,
(2) municipal bond indices, and (3) Interest Rate Futures and
Municipal Bond Index Futures whether or not the Fund owns the
particular Future in its portfolio. The Fund may not sell a put
other than a put that it previously purchased.
The Fund may buy and sell puts and calls only if certain
conditions are met: (1) after the Fund writes a call, not more
than 25% of the Fund's total assets may be subject to calls; (2)
calls the Fund buys or sells must be listed on a domestic
securities or commodities exchange or quoted on the Automated
Quotation System (NASDAQ) of The Nasdaq Stock Market, Inc., or
traded in the over-the-counter market; (3) each call the Fund
writes must be "covered" while it is outstanding (that means the
Fund must own the investment on which the call was written); (4)
the Fund may write calls on Futures contracts it owns, but these
calls must be covered by securities or other liquid assets the Fund
owns and segregates to enable it to satisfy its obligations if the
call is exercised; and (5) a call or put option may not be
purchased if the value of all of the Fund's put and call options
would exceed 5% of the Fund's total assets.
- Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation
to pay interest on a security. For example, they may swap a right
to receive floating rate payments for fixed rate payments. The
Fund enters into swaps only on securities it owns. The Fund may
not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets (such as cash
or U.S. Government securities) to cover any amounts it could owe
under swaps that exceed the amounts it is entitled to receive, and
it will adjust that amount daily, as needed. Income from interest
rate swaps may be taxable.
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:
- invest in securities or any other investment other than
Municipal Securities, the taxable securities and Hedging
Instruments described in "Investment Objective and Policies"
above;
- 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";
- 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);
- 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;
- concentrate investments to the extent of more than 25% of
its total assets in any industry (see "Diversification" in the
Statement of Additional Information); however, there is no
limitation as to investment in Municipal Securities, U.S.
Government obligations or California Municipal Securities; or
- buy or sell futures contracts other than Interest Rate
Futures or Municipal Bond Index Futures.
Unless the prospectus states that a percentage restriction
applies continuously, it applies only at the time the Fund makes an
investment, and the Fund need not sell securities to meet the
percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in "Investment Restrictions" 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 will not normally hold annual meetings of
its shareholders, 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 this Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions, and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. Only
shares of a particular class vote as a class on matters that affect
that class alone. Shares are freely transferrable. Please refer to
"How the Fund is Managed" in the Statement of Additional
Information on voting of shares.
The Manager and Its Affiliates. The Fund is managed by the
Manager, OppenheimerFunds, Inc., which is responsible for selecting
the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established
by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Agreement sets
forth the fees paid by the Fund to the Manager, and describes the
expenses that the Fund is responsible to pay to conduct its
business.
The Manager has operated as an investment adviser since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $55 billion as of September 30, 1996, and with more than 3
million shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.
- Portfolio Manager. The portfolio manager of the Fund is
Jerry Webman, Senior Vice President of the Manager. Mr. Webman is
the person principally responsible for the day-to-day management of
the Fund's portfolio. He has had this responsibility since April,
1996. Mr. Webman also serves as an officer and portfolio manager
for other Oppenheimer funds. Previously, Mr. Webman was an officer
and analyst with Prudential Mutual Funds.
- 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 aggregate 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 over $1
billion. The Fund's management fee for its last fiscal year was
0.58% of average annual net assets for each of Class A, Class B and
Class C shares.
The Fund pays expenses related to its daily operations, such
as custodian fees, Trustees' fees, transfer agency fees, legal fees
and auditing costs. Those expenses are paid out of the Fund's
assets and are not paid directly by shareholders. However, those
expenses reduce the net asset value of shares, and therefore are
indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other
expenses paid by the Fund is contained in the Statement of
Additional Information.
There is also information about the Fund's brokerage policies
and practices in "Brokerage Policies of the Fund" in the Statement
of Additional Information. That section discusses how brokers and
dealers are selected for the Fund's portfolio transactions.
Because the Fund purchases most of its portfolio securities
directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time,
however, it may use brokers when buying portfolio securities. When
deciding which brokers to use, the Manager is permitted by the
Investment Advisory Agreement to consider whether brokers have sold
shares of the Fund or any other funds for which the Manager serves
as investment adviser.
- The Distributor. The Fund's shares are sold through dealers
and brokers that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the
Fund's Distributor. The Distributor also distributes the shares of
other "Oppenheimer funds" and is sub-distributor for funds managed
by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for other
Oppenheimer funds. Shareholders should direct inquiries about
their accounts to the Transfer Agent at the address and toll-free
number shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return," "average annual total return," "standardized
yield," "dividend yield," "yield" and "tax-equivalent yield" to
illustrate its performance. The performance of each class of
shares is shown 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. These returns and yields
measure the performance of a hypothetical account in the Fund over
various periods, and do not show the performance of each
shareholder's account (which will vary if dividends are received in
cash, or shares are sold or purchased). The Fund's performance may
help you see how well your Fund has done over time and to compare
it to other funds or to a market index.
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
over time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
- Total Returns. There are different types of "total returns"
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally the
current maximum initial sales charge has been deducted. When total
returns are shown for Class B or Class C shares, normally the
contingent deferred sales charge that applies to the period for
which total return is shown has been deducted. However, total
returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would
be less if sales charges were deducted.
- Yield. Each class of shares calculates its yield by
dividing the annualized net investment income per share from the
portfolio during a 30-day period by the maximum offering price on
the last day of the period. The 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 and Class C shares do
not reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the
Manager of the Fund's performance during its last fiscal year ended
July 31, 1996, followed by a graphical comparison of the Fund's
performance to an appropriate broad-based market index.
- Management's Discussion of Performance. During the Fund's
fiscal year ended July 31, 1996, the Fund's performance was
affected by several economic and market factors. A major factor in
the Fund's performance was the portfolio manager's emphasis on pre-
refunded bonds, with shorter effective maturities which performed
well compared to other longer maturity municipal bonds. Another
factor was the small percentage owned of municipal bonds trading at
a discount. Discount bonds tend to be more volatile than bonds
trading at par or a premium. Holdings in long-term municipal bonds
underperformed other municipal bond sectors. Weighting in this
sector over the past six months has been lowered.
- Comparing the Fund's Performance to the Market. The graphs
below show the performance of a hypothetical $10,000 investment in
each class of shares of the Fund from the inception of the class
held through July 31, 1996. In each case, all dividends and
capital gains distributions were reinvested in additional shares.
The graphs reflect the deduction of the 4.75% maximum initial sales
charge on Class A shares, the applicable 3% contingent deferred
sales charge for Class B shares, and the 1% contingent deferred
sales charge on Class C shares during the first year.
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. Moreover, the index performance 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 Investments in:
Oppenheimer California
Municipal Fund (Class A) and Lehman
Brothers Municipal Bond Index
(Graph with Class A shares of the Fund)
Avg Annual Total Return of the Fund at 7/31/961
A Shares 1 Year 5 Year Life of Class
2.04% 6.28% 7.22%
Comparison of Change
In Value of $10,000
Hypothetical Investments in:
Oppenheimer California
Municipal Fund (Class B) and Lehman
Brothers Municipal Bond Index
(Graph with Class B shares of the Fund)
Average Annual Total Return of the Fund at 7/31/962
B Shares 1 Year Life of Class
1.31% 3.80%
Comparison of Change
In Value of $10,000
Hypothetical Investments in:
Oppenheimer California
Municipal Fund (Class C) and Lehman
Brothers Municipal Bond Index
(Graph with Class C shares of the Fund)
Cumulative Total Return of the Fund at 7/31/963
C Shares Life of Class
1.71%
Total returns and the ending account value in the graphs show
change in share value and include reinvestment of all dividends and
capital gains distributions. The Fund's fiscal year has changed
from 12/31 to 7/31.
1. Class A returns are shown net of the applicable 4.75% maximum
initial sales charge. The inception date of the Fund (Class A
shares) was 11/3/88.
2. Class B shares of the Fund were first publicly offered on
5/1/93. The average annual total returns reflect reinvestment of
all dividends and capital gains distributions and are shown net of
the applicable 5% and 3% contingent deferred sales charges
respectively for the 1-year period and life-of-class. The ending
account value in the graph is net of the applicable 3% sales
charge.
3. Class C shares of the Fund were first publicly offered on
November 1, 1995. The life of the class is shown net of the
applicable 1% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an
initial sales charge (on investments up to $1 million). If you
purchase Class A shares as part of an investment of at least $1
million in shares of one or more Oppenheimer funds, you will not
pay an initial sales charge, but if you sell any of those shares
within 18 months of buying them, you may pay a contingent deferred
sales charge. The amount of that sales charge will vary depending
on the amount you invested. Sales charge rates are described in
"Buying Class A Shares," below.
- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
six years of buying them, you will normally pay a contingent
deferred sales charge. That sales charge varies depending on how
long you own your shares, as described in "Buying Class B Shares,"
below
- Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
12 months of buying them, you will normally pay a contingent
deferred sales charge of 1%, as described in "Buying Class C
Shares," below.
Which Class of Shares Should You Choose? Once you decide that
the Fund is an appropriate investment for you, the decisions as to
which class of shares is best suited to your needs depends on a
number of factors which you should discuss with your financial
advisor. The Fund's operating costs that apply to a class of
shares and the effect of the different types of sales charges on
your investment will vary your investment results over time. The
most important factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should
consider another class of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class, and
considered the effect of the annual asset-based sales charge on
Class B and Class C expenses (which, like all expenses, will affect
your investment return). For the sake of comparison, we have
assumed that there is a 10% rate of appreciation in the investment
each year. Of course, the actual performance of your investment
cannot be predicted and will vary, based on the Fund's actual
investment returns, and the operating expenses borne by each class
of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors
to consider in purchasing a particular class of shares assumes that
you will purchase only one class of shares, and not a combination
of shares of different classes.
- How Long Do You Expect To Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares
for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.
However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A shares might be more advantageous than Class C
shares (as well as Class B shares) for investments of more than
$100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or
more), Class A shares may become more advantageous than Class C
shares (and B shares). If investing $500,000 or more, Class A
shares may be more advantageous as your investment horizon
approaches 3 years or more.
And for investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how
long you intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders of $500,000 or
more of Class B shares, or $1 million or more of Class C shares,
from a single investor.
- Investing for the Longer Term. If you are investing for the
longer-term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or C shares, as discussed above, because of the effect of
the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed performance return stated
above, and therefore, you should analyze your options carefully.
- Are There Differences In Account Features That Matter To
You? Because some account features may not be available to Class B
or Class C shareholders or other features (such as Automatic
Withdrawal Plans) may not be advisable (because of the effect of
the contingent deferred sales charge) for Class B or Class C
shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy.
Share certificates are not available for Class B and Class C
shares, and if you are considering using your shares as collateral
for a loan, that may be a factor to consider. Also, checkwriting
privileges are not available for Class B or Class C shares.
Additionally, the dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne
solely by that class, such as the asset-based sales charge, as
described below and in the Statement of Additional Information.
- How Does It Affect Payments To My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class of shares than for selling
another class. It is important that investors understand that the
purpose of the Class B and Class C contingent deferred sales charge
and asset-based sales charges is the same as the purpose of the
front-end sales charge on sales of Class A shares, that is, to
compensate the Distributor for commissions it pays to dealers and
financial institutions for selling 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 Oppenheimer
funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer
Agent), or by reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the Oppenheimer funds AccountLink service.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure it is
appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can
use AccountLink to link your Fund account with an account at a U.S.
bank or other financial institution that is an Automated Clearing
House (ACH) member. You can then transmit funds electronically to
purchase shares, to send redemption proceeds and to have the
Transfer Agent transmit dividends and distributions.
Shares are purchased for your account on the regular business
day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions
automatically, under an Asset Builder Plan, described below, or by
telephone instructions using OppenheimerFunds PhoneLink, also
described below. You should request AccountLink privileges on the
application or dealer settlement instructions used to establish
your account. Please refer to "AccountLink" below for more
details.
- Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the
Application and in the Statement of Additional Information.
- At What Price Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally
4:00 P.M., New York time but may be earlier on some days (all
references to time in this Prospectus mean "New York time"). The
net asset value of each class of shares is determined as of that
time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, the dealer must receive
your order by the close of The New York Stock Exchange on a regular
business day and transmit it to the Distributor so that it is
received before the Distributor's close of business that day, which
is normally 5:00 P.M. The Distributor, in its sole discretion,
may reject any purchase order for the Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A
in this prospectus sets forth conditions for the waiver of or
exemption from, sales charges or the special sales charge rates
that apply to purchases of shares of the Fund (including purchases
by exchange) by a person who was a shareholder of one of the former
Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their
offering price, which is normally net asset value plus an initial
sales charge. However, in some cases, described below, purchases
are not subject to an initial sales charge, and the offering price
will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you
invest, the Fund receives the net asset value to invest for your
account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and
brokers are as follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Percentage as Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- ------------------ ------------- ------------- -------------
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.98% 4.00%
- ---------------------------------------------------------------------------
$50,000 or more but
less 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%
- ---------------------------------------------------------------------------
</TABLE>
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds aggregating $1 million or more. The
Distributor pays dealers of record commissions on those 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 purchases over
$5 million. That commission will be paid only on the amount of
those purchases in excess of $1 million that were not previously
subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales
charge") may be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of the lesser of (1) the aggregate net
asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gain distributions) or (2)
the original offering price (which is the original net asset value)
of the redeemed shares. However, the Class A contingent deferred
sales charge will not exceed the aggregate amount of the
commissions the Distributor paid to your dealer on all Class A
shares of all Oppenheimer funds you purchased subject to the Class
A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the sales charge will apply.
- Special Arrangements with Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:
- Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of
Class A shares. You can also include Class A and Class B shares of
Oppenheimer funds you previously purchased subject to an initial or
contingent deferred sales charge to reduce the sales charge rate
for current purchases of Class A shares, provided that you still
hold your investment in one of the Oppenheimer funds. The value of
those shares will be based on the greater of the amount you paid
for the shares or their current value (at offering price). The
Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to
current purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase
Class A shares or Class A and Class B shares of the Fund and other
Oppenheimer funds during a 13-month period, you can reduce the
sales charge rate that applies to your purchases of Class A shares.
The total amount of your intended purchases of both Class A and
Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. This can include
purchases made up to 90 days before the date of the Letter. More
information is contained in the Application and in "Reduced Sales
Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges
are not imposed in the circumstances described below. There is an
explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates;
- registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses)
of dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children);
- dealers, brokers, banks, or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker, bank, or
adviser for the purchase or sale of Fund shares);
- directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
- accounts for which Oppenheimer Capital is the investment
adviser (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts; or
- any unit investment trust that has entered into an
appropriate agreement with the Distributor.
Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales
charges:
- shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
- shares purchased and paid for with the proceeds of shares
redeemed in the past 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
- shares purchased with the proceeds of maturing principal of
units of any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below); or
- if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees in writing to accept the
dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (and no further
commission will be payable if the shares are redeemed within 18
months of purchase).
- Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor for a
portion of its costs incurred in connection with the personal
service and maintenance of shareholder 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 service
providers or their 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.
Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or
the original offering price (which is the original net asset
value). The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net
asset value over the initial purchase price. The Class B contingent
deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3)
shares held the longest during the 6-year period. The contingent
deferred sales charge is not imposed in the circumstances described
below in "Waivers of Class B and Class C Sales Charges."
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:
<TABLE>
<CAPTION>
Years Since Beginning of Contingent Deferred Sales Charge
Month in Which Purchase On Redemptions in that Year
Order Was Accepted (As % of Amount Subject to Charge)
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of
the month in which the purchase was made.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B
shareholders of the asset-based sales charge that applies to Class
B shares under the Class B Distribution and Service Plan, described
below. The conversion is based on the relative net asset value of
the two classes, and no sales load or other charge is imposed. When
Class B shares convert, any other Class B shares that were acquired
by the reinvestment of dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature
is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A, Class B and Class C
Shares" in the Statement of Additional Information.
- Waivers of Class B Sales Charges. The Class B contingent
deferred sales charge will not apply to shares purchased in certain
types of transactions, nor will it apply to shares redeemed in
certain circumstances, as described below under "Buying Class C
Shares - Waivers of Class B and Class C Sales Charges."
- 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 distributing Class B shares and
servicing accounts. This Plan is described below under "Buying
Class C Shares - Distribution and Service Plans for Class B and
Class C Shares."
Buying Class C Shares. Class C shares are sold at net asset
value per share without an initial sales charge. However, if the
Class C shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based
on the lesser of the net asset value of the redeemed shares at the
time of redemption or the original offering price (which is the
original net asset value). The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The
Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 12 months, and (3)
shares held the longest during the 12-month period.
- Waivers of Class B and Class C Sales Charges. The Class B
and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions nor will it
apply to Class B and Class C shares redeemed in certain
circumstances as described below. The reasons for this policy are
in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and
Class C contingent deferred sales charges will be waived for
redemption of shares in the following cases:
- redemption from accounts following the death or disability
of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is
also the sole beneficiary (the death or disability must have
occurred after the account was established, and for disability you
must provide evidence of a determination of disability by the
Social Security Administration); or
- shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; or
- shares issued in plans of reorganization to which the Fund
is a party.
- Distribution and Service Plans for Class B and Class C
Shares. The Fund has adopted Distribution and Service Plans for
Class B and Class C shares to compensate the Distributor for its
services and costs in distributing Class B and C shares and
servicing accounts. Under the Plans, 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 and on Class C
shares. The Distributor also receives a service fee of 0.25% per
year under each plan.
Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective class.
The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
C shares. Those services are similar to those provided under the
Class A Service Plan, described above. The Distributor pays the
0.25% service fees to dealers in advance for the first year after
Class B or Class C shares have been sold by the dealer. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B
or C shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund
pays the asset-based sales charge to the Distributor for its
services rendered in distributing Class B and Class C shares.
Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions,
service fees and other costs of distributing and selling Class B
and Class C shares.
The Distributor currently pays sales commission of 3.75% of
the purchase price of Class B shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sales of Class B shares is therefore 4.00% of the
purchase price. The Distributor retains the Class B asset-based
sales charge.
The Distributor currently pays sales commissions of 0.75% of
the purchase price of Class C shares to dealers from its own
resources at the time of sale. Including the advance of the
service fee, the total amount paid by the Distributor to the dealer
at the time of sale of Class C shares is therefore 1.00% of the
purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares
that have been outstanding for a year or more.
The Distributor's actual expenses in selling Class B and C
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 Plans for Class B and C
shares. At December 31, 1995, the end of the Class B and Class C
Plan year, the Distributor had incurred unreimbursed expenses under
the Class B Plan of $1,573,295 (equal to 3.82% of the Fund's net
assets represented by Class B shares on that date), and
unreimbursed expenses under the Class C Plan of $4,120 (equal to
3.31% of the Fund's net assets represented by Class C shares on
that date) which have been carried over into the present Plan year.
If either Plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the Plan
was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchases of shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application
you use to buy shares, or on your dealer's settlement instructions
if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent.
AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those
privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-
guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer fund account
you have already established by calling the special PhoneLink
number. Please refer to "How to Exchange Shares," below, for
details.
- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several
plans that enable you to sell shares automatically or exchange them
to another Oppenheimer fund account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth
$5,000 or more, you can establish an Automatic Withdrawal Plan to
receive payments of at least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent
automatically to your bank account on AccountLink. You may even
set up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Application and Statement of
Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer
Agent to automatically exchange an amount you establish in advance
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each Oppenheimer fund account is
$25. These exchanges are subject to the terms of the Exchange
Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A
or B shares of the Fund, you have up to 6 months to reinvest all or
part of the redemption proceeds in Class A shares of the Fund or
other Oppenheimer funds without paying a sales charge. This
privilege applies only to Class A shares that you purchased subject
to an initial sales charge and to Class A or Class B shares on
which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. 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 by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing, by using the Fund's checkwriting privilege or by
telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have
questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death
of the owner, please call the Transfer Agent first, at 1-800-525-
7048, for assistance.
- Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):
- You wish to redeem more than $50,000 worth of shares and
receive a check
- The redemption check is not payable to all shareholders
listed on the account statement
- The redemption check is not sent to the address of record on
your account statement
- Shares are being transferred to a Fund account with a
different owner or name
- Shares are redeemed by someone other than the owners (such
as an Executor)
- Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business or as a fiduciary, you
must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling,
- The signatures of all registered owners exactly as the
account is registered, and
- Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.
Use the following address for Send courier or Express Mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Bldg.
D
Denver, Colorado 80217 Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer
representative of record may also sell your shares by telephone. To
receive the redemption price on a regular business day, your call
must be received by the Transfer Agent by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. You may not redeem shares held under a share
certificate by telephone.
- To redeem shares through a service representative, call
1-800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the
proceeds sent to that account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. 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 transfer to your bank is initiated on the business day after
the redemption. You do not receive dividends on the proceeds of
the shares you redeemed while they are waiting to be transferred.
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. If you previously signed a signature card to establish
Checkwriting in another Oppenheimer fund, simply call 1-800-525-
7048 to request Checkwriting for an account in this Fund with the
same registration as the previous Checkwriting account.
- 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 C shares, or Class A shares that
are subject to a contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you
should not write a check close to the total account value.
- You may not write a check that would require the Fund to
redeem shares that were purchased by check or Asset Builder Plan
payments within the prior 10 days.
- Don't use your checks if you changed your Fund account
number.
Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please call your dealer for more information about this
procedure. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:
- Shares of the fund selected for exchange must be available
for sale in your state of residence.
- The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege.
- You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day.
- You must meet the minimum purchase requirements for the fund
you purchase by exchange.
- Before exchanging into a fund, you should obtain and read
its prospectus.
Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. At present, Oppenheimer Money
Market Fund, Inc. offers only one class of shares, which are
considered to be "Class A" shares for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
- Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative at
1-800-852-8457, or by using PhoneLink for automated exchanges by
calling 1-800-533-3310. Telephone exchanges may be made only
between accounts that are registered with the same name(s) and
address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M., but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to seven days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.
- For tax purposes, exchanges of shares involve a redemption
of the shares of the Fund you own and a purchase of the shares of
the other fund, which may result in a capital gain or loss. For
more information about taxes affecting exchanges, please refer to
"How to Exchange Shares" in the Statement of Additional
Information.
- If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 p.m. but may be earlier on some days, on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that
are outstanding. The 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 and obligations for which market values cannot be
readily obtained. These procedures are described more completely
in the Statement of Additional Information.
- The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.
- The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring
callers to provide tax identification numbers and other account
data or by using PINs, and by confirming such transactions in
writing. If the Transfer Agent does not use reasonable procedures
it may be liable for losses due to unauthorized transactions, but
otherwise neither the Transfer Agent nor the Fund will be liable
for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may
not be able to complete a telephone transaction and should consider
placing your order by mail.
- Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.
- Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously or improperly.
- The redemption price for shares will vary from day to day
because the value of the securities in the Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
seven days after the Transfer Agent receives redemption
instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or
suspending such payments. For accounts registered in the name of
a broker dealer, payment will be forwarded within three business
days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares,
but only until the purchase payment has cleared. That delay may be
as much as 10 days from the date the shares were purchased. That
delay may be avoided if you purchase shares by certified check or
arrange with your bank to provide telephone or written assurance to
the Transfer Agent that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the
Fund if the account value has fallen below $500 for reasons other
than the fact that the market value of shares has dropped, and in
some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.
- Under unusual circumstances, shares of the Fund may be
redeemed "in kind," which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
"How to Sell Shares" in the Statement of Additional Information for
more details.
- "Backup Withholding" of Federal income tax may be applied at
the rate of 31% from taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail to furnish
the Fund a certified Social Security or employer identification
number when you sign your application, or if you violate Internal
Revenue Service regulations on tax reporting of income.
- The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How To Buy Shares," you may be subject to a contingent deferred
sales charges when redeeming certain Class A, Class B and Class C
shares.
- To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.
- Transfer Agent and Shareholder Servicing Agent. The transfer
agent and shareholder servicing agent is OppenheimerFunds Services.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent for former shareholders of the AMA Family of Funds
and clients of AMA Investment Advisers, L.P. who owned shares of
the Former Quest For Value Fund when it merged into the Fund on
November 24, 1995.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A,
Class B and Class C shares from net tax-exempt income and/or net
investment income each regular business day and pays such dividends
to shareholders monthly. Normally, dividends are paid on or about
the tenth business day of each month, but the Board of Trustees can
change that date. It is expected that distributions paid with
respect to Class A shares will generally be higher than for Class
B and Class C shares because expenses allocable to Class B and
Class C shares will generally be higher.
The Fund has adopted the practice, to the extent consistent
with the amount of the Fund's net investment income and other
distributable income, of attempting to pay dividends on Class A
shares at a constant level, although the amount of such dividends
may be subject to change 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 that Class. The practice
of attempting to pay dividends on Class A shares at a constant
level requires the Manager, consistent with the Fund's investment
objective and investment restrictions, to monitor the Fund's
portfolio and select higher yielding securities when deemed
appropriate to maintain necessary net investment income levels.
The Fund anticipates paying dividends at the targeted dividend
level from net investment income and other distributable income
without any impact on the Fund's net asset value per share. The
Board of Trustees may change the Fund's targeted dividend level at
any time, without prior notice to shareholders; the Fund does not
otherwise have a fixed dividend rate and there can be no assurance
as to the payment of any dividends or the realization of any
capital gains.
Capital Gains. Although the Fund does not seek capital gains, 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 (which ends December 31st). Long-term
capital gains will be separately identified in the tax information
the Fund sends you after the end of the year. Short-term capital
gains are treated as dividends for tax purposes. There can be no
assurance that the Fund will pay any capital gains distributions in
a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. You have
four options:
- Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
- Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.
Taxes. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you held your shares. Dividends paid from short-term
capital gains are taxable as ordinary income. Dividends paid from
net investment income earned by the Fund on Municipal Securities
will be excludable from your gross income for Federal income tax
purposes. Although exempt-interest dividends will not be subject
to federal income tax for Fund shareholders, a portion of such
dividends which is derived from interest on certain "private
activity" bonds will give rise to a tax preference item which could
subject a shareholder to, or increase a shareholder's liability
under, the federal alternative minimum tax, depending on the
shareholder's individual tax situation. Certain 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 each taxable distribution you received in the previous
year as well as the amount of your tax-exempt income.
- "Buying a Dividend". When a fund goes ex-dividend, its
share price is reduced by the amount of the distribution. If you
buy shares on or just before the ex-dividend date, or just before
the Fund declares a capital gains distribution, you will pay the
full price for the shares and then receive a portion of the price
back as a taxable dividend or a capital gain.
- Taxes on Transactions. Share redemptions, including
redemptions for exchanges, are subject to capital gains tax. Even
though the Fund seeks tax-exempt income for distribution to
shareholders, you may have a capital gain or loss when you sell or
exchange your shares. A capital gain or loss is the difference
between the price you paid for the shares and the price you
received when you sold them. Any capital gain is subject to
capital gains tax.
- Returns of Capital. In certain cases, distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax adviser about the effect of an
investment in the Fund on your particular tax situation.
<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for
Class A, Class B and Class C shares of the Fund described elsewhere
in this Prospectus are modified as described below for those
shareholders of (i) Quest for Value Fund, Inc., Quest for Value
Growth and Income Fund, Quest for Value Opportunity Fund, Quest for
Value Small Capitalization Fund and Quest for Value Global Equity
Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became
the investment adviser to those funds, and (ii) Quest for Value
U.S. Government Income Fund, Quest for Value Investment Quality
Income Fund, Quest for Value Global Income Fund, Quest for Value
New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund
and Quest for Value California Tax-Exempt Fund when those funds
merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the
"Former Quest for Value Funds." The waivers of initial and
contingent deferred sales charges described in this Appendix apply
to shares of the Fund (i) acquired by such shareholder pursuant to
an exchange of shares of one of the Oppenheimer funds that was one
of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for
Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
- Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
- Purchases by Groups and Associations. The following table
sets forth the initial sales charge rates for Class A shares
purchased by members of "Associations" formed for any purpose other
than the purchase of securities if that Association purchased
shares of any of the Former Quest for Value Funds or received a
proposal to purchase such shares from OCC Distributors prior to
November 24, 1995.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales
Number of Charge as Charge as Commission
Eligible a Percentage a Percentage as Percentage
Employees of Offering of Amount of Offering
or Members Price Invested Price
- ---------------------------------------------------------------
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
- ---------------------------------------------------------------
At least 10 but
not more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Associations having 50 or more eligible
employees or members, there is no initial sales charge on purchases
of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on page 27 of this
Prospectus.
Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of members
of an Association or the sales charge rate that applies under the
Rights of Accumulation described above in the Prospectus.
Individuals who qualify under this arrangement for reduced sales
charge rates as members of Associations also may purchase shares
for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Fund's Distributor.
- Special Class A Contingent Deferred Sales Charge Rates
The contingent deferred sales charge applicable to Class A
shares of the Fund has been waived with respect to those shares of
the Fund issued in the reorganization on November 24, 1995 for
shares of Quest for Value California Tax-Exempt Fund. Class A
shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of
Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995 will be subject to a contingent
deferred sales charge at the following rates: if they are redeemed
within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs
within 12 months of their initial purchase and at a rate of 0.50 of
1.0% if the redemption occurs in the subsequent six months. Class
A shares of any of the Former Quest for Value Funds purchased
without an initial sales charge on or before November 22, 1995 will
continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
- Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following
investors are not subject to any Class A initial or contingent
deferred sales charges:
- Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.
- Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:
- Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
- Waivers for Redemptions of Shares Purchased Prior to March
6, 1995
In the following cases, the contingent deferred sales charge
will be waived for redemptions of Class A, B or C shares of the
Fund acquired by merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former
Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995 in connection with:
(i) withdrawals under an automatic withdrawal plan holding only
either Class B or C shares if the annual withdrawal does not exceed
10% of the initial value of the account, and (ii) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum value of such
accounts.
- Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge
will be waived for redemptions of Class A, B or C shares of the
Fund acquired by merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former
Quest For Value Fund or into which such fund merged, if those
shares were purchased on or after March 6, 1995, but prior to
November 24, 1995: (1) redemptions following the death or
disability of the shareholder(s) (as evidenced by a determination
of total disability by the U.S. Social Security Administration);
(2) withdrawals under an automatic withdrawal plan (but only for
Class B or C shares) where the annual withdrawals do not exceed 10%
of the initial value of the account; and (3) liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum account
value. A shareholder's account will be credited with the amount of
any contingent deferred sales charge paid on the redemption of any
Class A, B or C shares of the Fund described in this section if
within 90 days after that redemption, the proceeds are invested in
the same Class of shares in this Fund or another Oppenheimer fund.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
Graphic material included in Prospectus of Oppenheimer
California Municipal Fund: "Comparison of Total Return of
Oppenheimer California Municipal Fund and the Lehman Brothers
Municipal Bond Index - Change in Value of a $10,000 Hypothetical
Investment"
A linear graph will be included in the Prospectus of
Oppenheimer California Municipal Fund (the "Fund") depicting the
initial account value and subsequent account value of a
hypothetical $10,000 investment in the Fund. In the case of the
Fund's class A shares, that graph will cover the period from the
commencement of the Fund's operations (November 3, 1988) through
July 31, 1996, in the case of the Fund's Class B shares will cover
the period from the inception of the class (May 1, 1993) through
July 31, 1996, and in the case of the Fund's Class C shares will
cover the period from the inception of the class (November 1, 1995)
through July 31, 1996. The graph will compare such values with
hypothetical $10,000 investments over the same time periods in the
Lehman Brothers Municipal Bond Index. Set forth below are the
relevant data points that will appear on the linear graph.
Additional information with respect to the foregoing, including a
description of the Lehman Brothers Municipal Bond Index, is set
forth in the Prospectus under "How Has the Fund Performed -
Management's Discussion of Performance."
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer California Lehman Brothers
(Period) Ended Municipal Fund A Municipal Bond Index
<S> <C> <C>
11/3/88 $9,525 $10,000
12/31/88 $9,661 $10,217
12/31/89 $10,783 $11,090
12/31/90 $11,471 $11,898
12/31/91 $12,724 $13,343
12/31/92 $13,777 $14,519
12/31/93 $15,604 $16,302
12/31/94 $14,279 $15,458
12/31/95 $17,100 $18,160
7/31/96 $17,158 $18,241
Fiscal Year Oppenheimer California Lehman Brothers
(Period) Ended Municipal Fund B Municipal Bond Index
5/1/93 $10,000 $10,000
12/31/93 $10,666 $10,718
12/31/94 $ 9,664 $10,163
12/31/95 $11,497 $11,939
7/31/96 $11,290 $11,993
Fiscal Year Oppenheimer California Lehman Brothers
(Period) Ended Municipal Fund C Municipal Bond Index
8/29/95 $10,000 $10,000
12/31/95 $10,290 $10,264
7/31/96 $10,171 $10,310
</TABLE>
<PAGE>
Oppenheimer California Municipal Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
One Citicorp Center
New York, New York 10154
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus or the Statement of
Additional Information and, if given or made, such information and
representations must not be relied upon as having been authorized
by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc., or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy
any of the securities offered hereby in any state to any person to
whom it is unlawful to make such offer in such state.
PR0790.001.0495 Printed on recycled paper
<PAGE>
Oppenheimer California Municipal Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated October 31, 1996
This Statement of Additional Information is not a Prospectus.
This document contains additional information about the Fund and
supplements information in the Prospectus dated October 31, 1996.
It should be read together with the Prospectus which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services at P.O. Box 5270, Denver, Colorado 80217 or by calling the
Transfer Agent at the toll free number shown above.
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 Service Plans
About Your Account
How To Buy Shares
How To Sell Shares
How To Exchange Shares
Dividends, Capital Gains and Taxes
Additional Information About the Fund
Financial Information About the Fund
Financial Statements
Independent Auditors' Report
Appendix A: Municipal Bond Ratings A-1
Appendix B: Equivalent Yield Chart B-1
Appendix C: Industry Classifications C-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are discussed in the Prospectus. Set forth
below is supplemental information about those policies and the type
of securities in which the Fund may invest, as well as the
strategies the Fund may use to try to achieve its objective.
Capitalized terms used in this Statement of Additional Information
have the same meanings as those terms have in the Prospectus.
The Fund will 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 general 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. 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
"Investment Objective and Policies." A discussion of the general
characteristics of types of Municipal Securities follows below.
- Municipal Bonds. The principal classifications of long-term
municipal bonds in which the Fund may invest 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 the money from which 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 or other 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.
- Municipal Lease Obligations. While some municipal lease
obligations purchased by the Fund may be deemed to be illiquid
securities (the purchases of which will be limited as described in
the Prospectus), 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. Projects financed with certificates of participation
generally are not subject to state constitutional debt limitations
or other statutory requirements that may be applicable to Municipal
Securities. Payments by the public entity on the obligation
underlying the certificates are derived from available revenue
sources; such revenue may be diverted to the funding of other
municipal service projects. Payments of interest and/or principal
with respect to the certificates are not guaranteed and do not
constitute an obligation of the State of California or any of its
political subdivisions.
In addition to the risk of "non-appropriation," municipal
lease securities do not yet have a highly developed market to
provide the degree of liquidity of conventional municipal bonds.
Municipal leases, like other municipal debt obligations, are
subject to the risk of non-payment. The ability of issuers of
municipal leases to make timely lease payments may be adversely
affected in general economic downturns and as relative governmental
cost burdens are reallocated among federal, state and local
governmental units. Such non-payment would result in a reduction
of income to the Fund, and could result in a reduction in the value
of the municipal lease experiencing non-payment and a potential
decrease in the net asset value of the Fund.
- 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 adviser, OppenheimerFunds, Inc. (the
"Manager"), may determine that an unrated floating rate or variable
rate demand obligation meets the Fund's quality standards by reason
of being backed by a letter of credit or guarantee issued by a bank
that meets those quality standards.
- Inverse Floaters and Other Derivative Investments. Some
inverse floaters have a feature known as an interest rate "cap" as
part of the terms of the investment. Investing in inverse floaters
that have interest rate caps might be part of a portfolio strategy
to try to maintain a high current yield for the Fund when the Fund
has invested in inverse floaters that expose the Fund to the risk
of short-term interest rate fluctuation. Embedded caps hedge a
portion of the Fund's exposure to rising interest rates. When
interest rates exceed the pre-determined rate, the cap generates
additional cash flows that offset the decline in interest rates on
the inverse floater, and the hedge is successful. However, the
Fund bears the risk that if interest rates do not rise above the
pre-determined rate, the cap (which is purchased for additional
cost) will not provide additional cash flows and will expire
worthless.
- Private Activity Municipal Securities. The Tax Reform Act
of 1986 (the "Tax Reform Act") reorganized, as well as amended, the
rules governing tax exemption for interest on Municipal Securities.
The Tax Reform Act generally does not change the tax treatment of
bonds issued in order 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 Tax Reform Act revised
downward that limitations as to the amount of private activity
bonds which each state may issue, which will reduce the supply of
such bonds. The value of the Fund's portfolio could be affected if
there is a reduction in the availability of such bonds. That value
may also be affected by a 1988 U.S. Supreme Court decision
upholding the constitutionality of the imposition of a Federal tax
on the interest earned on Municipal Securities issued in bearer
form.
A Municipal Security is treated as a taxable private activity
bond under a test for (a) a trade or business use and security
interest, or (b) a private loan restriction. Under the trade or
business use and security interest test, an obligation is a private
activity bond if (i) more than 10% of bond proceeds are used for
private business purposes and (ii) 10% or more of the payment of
principal or interest on the issue is directly or indirectly
derived from such private use or is secured by the privately used
property or the payments related to the use of the property. For
certain types of uses, a 5% threshold is substituted for 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 of municipal governmental unit.) Under
the private loan restriction, the amount of bond proceeds which may
be used to make private loans is limited to the lesser of 5% or $5
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.
- Ratings of Municipal Securities. Ratings by Moody's, S&P
and Fitch (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, S&P, 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 1986, California voters approved an initiative known as
Proposition 62, which, among other things, requires that any tax
for general governmental purposes imposed by a local government be
approved by a two-thirds vote of the governmental entity's
legislative body and by a majority of its electorate and that any
special tax imposed by a local government be approved by a two-
thirds vote of the electorate. In September 1995 the California
Supreme Court upheld the constitutionality of Proposition 62,
creating uncertainty as to the legality of certain local taxes
enacted by non-charter cities in California without voter approval.
It is not possible to predict the impact of the decision.
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's economic recovery from the recent recession is
continuing at a strong pace, and recent economic reports indicate
that California is on a stronger economic upturn than the rest of
the country. However, some sectors continue to feel the effects of
the recession. Unemployment, particularly in Southern California,
has remained above the national average since 1990, although the
State experienced strong job growth in 1995 and through the second
quarter of 1996. In addition, 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 in
1996.
On July 15, 1996, the Governor signed into law a new $63
billion budget which, among other things, significantly increases
education spending from the previous fiscal year and reduces taxes
for corporations and banks. Although the state's budget projects
an operating surplus, it continues to rely on federal actions which
are not certain of occurring. Accordingly, the surplus may not be
realized unless the economy outperforms expectations or spending
falls below planned levels.
Because of the State of California's continuing budget
problems, the state's General Obligation bonds were downgraded in
July 1994 from Aa to A1 by Moody's, from A+ to A by S&P and from AA
to A by Fitch. All three rating agencies expressed uncertainty in
the state's ability to balance its budget by 1996. However, in
1996, citing California's improving economy and budget situation,
both Fitch and Standard & Poor's raised their ratings from A to A+.
On December 6, 1994, Orange County (California) became the
largest municipality in the United States to file for protection
under the Federal bankruptcy laws. The filing stemmed from
approximately $1.7 billion in losses suffered by the County's
investment pool due to investments in high risk "derivative"
securities. In September 1995 the state legislature approved
legislation permitting Orange County to use for bankruptcy recovery
$820 million over 20 years in sales taxes previously earmarked for
highways, transit and development. In June 1996 the County
completed an $880 million bond offering secured by real property
owned by the County. On June 12, 1996, the County emerged from
bankruptcy.
Los Angeles County, the nation's largest county, is also
experiencing financial difficulty. In August 1995 the credit
rating of the country's long-term bonds was downgraded for the
third time since 1992 as a result of, among other things, severe
operating deficits for the county's health care system. In
September 1995, federal and state aid to Los Angeles County
totalling $514 million was pledged, providing a short-term solution
to the country's budget problems. Despite such efforts, the County
is facing a potential budget gap of $1.0 billion in the 1996-1997
fiscal year.
Other Investment Techniques and Strategies
- Puts and Standby Commitments. 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. 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. The Fund may
purchase Municipal Securities on a "when-issued" basis, and may
purchase or sell such securities on a "delayed delivery" basis.
Although the Fund will enter into such transactions for the purpose
of acquiring securities for its portfolio or for delivery pursuant
to options contracts it has entered into, the Fund may dispose of
a commitment prior to settlement. "When-issued" or "delayed
delivery" refers to securities whose terms and indenture are
available and for which a market exists, but which are not
available for immediate delivery. When such transactions are
negotiated, the price (which is generally expressed in yield terms)
is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. During the
period between commitment by the Fund and settlement (generally
within two months but usually not to exceed 120 days), no payment
is made for the securities purchased by the purchaser, and no
interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation; the value at delivery
may be less than the purchase price. The Fund's Custodian will
identify liquid assets of the Fund having a value equal to the
aggregate amount of the Fund's commitment under Forward Contracts
to cover its short positions.
The Fund will engage in when-issued transactions in order to
secure what is considered to be an advantageous price and yield at
the time of entering into the obligation. When the Fund engages in
when-issued or delayed delivery transactions, it relies on the
buyer or seller, as the case may be, to consummate the transaction.
Failure to do so may result in the Fund losing the opportunity to
obtain a price and yield considered to be advantageous. If the
Fund chooses to (i) dispose of the right to acquire a when-issued
security prior to its acquisition or (ii) dispose of its right to
deliver or receive against a forward commitment, it may incur a
gain or loss. At the time the Fund makes a commitment to purchase
or sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security
purchased, or, if a sale, the proceeds to be received in
determining its net asset value.
To the extent the Fund engages in when-issued and delayed
delivery transactions, it will do so for the purpose of acquiring
or selling securities consistent with its investment objective and
policies and not for the purposes of investment leverage. However,
the Fund may sell when-issued securities and forward commitments
prior to settlement date. In addition, changes in interest rates
in a direction other than that expected by the Manager before
settlement will affect the value of such securities and may cause
a loss to the Fund.
When-issued transactions and forward commitments allow the
Fund a technique to use against anticipated changes in interest
rates and prices. For instance, in periods of rising interest
rates and falling prices, the Fund might sell securities in its
portfolio on a forward commitment basis to attempt to limit its
exposure to anticipated falling prices. In periods of falling
interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-
issued or forward commitment basis, thereby obtaining the benefit
of currently higher cash yields.
- Repurchase Agreements. The Fund may acquire securities
subject to repurchase agreements for liquidity purposes to meet
anticipated redemptions, or pending the investment of the proceeds
from sales of Fund shares, or pending the settlement of purchases
of portfolio securities. In a repurchase transaction, the Fund
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 having total domestic assets of at least $1 billion or
a broker-dealer with a net worth of at least $50 million and which
has been designated a primary dealer in government securities which
must meet audit requirements set by the Fund's Board of Trustees
from time to time) 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 repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's
value.
- Illiquid and Restricted Securities. To enable the Fund to
sell restricted securities not registered under the Securities Act
of 1933, the Fund may have to cause those securities to be
registered. The expenses of registration of restricted securities
may be negotiated by the Fund with the issuer at the time such
securities are purchased by the Fund, if such registration is
required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would
be permitted to sell them. The Fund would bear the risks of any
downward price fluctuation during that period. The Fund may also
acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability
to dispose of such securities and might lower the amount realizable
upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of restricted
securities that are eligible for sale to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by
the Board of Trustees of the Fund or by the Manager under Board-
approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the
Fund's holding of that security may be deemed to be illiquid.
- 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, 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 pay reasonable finder's,
administrative and other fees in connection with the loan. The
terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
- Hedging. As described in the Prospectus, the Fund may
employ one or more types of hedging instruments. 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 Index Futures, (ii) buy puts on such Futures or securities, or
(iii) write covered calls on securities, Interest Rate Futures or
Municipal Bond Index Futures (as described in the Prospectus).
Covered calls may also be written on debt securities to attempt to
increase the Fund's income. When hedging to permit the Fund to
establish a position in the debt securities market as a temporary
substitute for purchasing individual 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 investment activities in
the underlying cash market. In the future, the Fund may employ
hedging instruments and strategies that are not presently
contemplated, but which may be developed, to the extent such
investment methods are consistent with the Fund's investment
objective and are legally permissible and disclosed in the
Prospectus. Additional information about the Hedging Instruments
the Fund may use is provided below.
- Writing Covered Call Options. When the Fund writes a call
on a security, it receives a premium and agrees to sell the
underlying 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. The Fund has retained the risk of loss should the
price of the underlying security decline during the call period,
which may be offset to some extent by the premium.
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 the option transaction costs and
the premium received on the call written was 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 underlying investment and the premium received. Any such
profits are considered short-term capital gains for Federal tax
purposes, as are premiums on lapsed calls, and when distributed by
the Fund are taxable as ordinary income. An option position may be
closed out only on a market that provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option. If the Fund
could not effect a closing purchase transaction due to a lack of a
market, it would have to hold the underlying investment securities
until the call lapsed or were 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.
- 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"). Initial margin payments will be deposited with the
Fund's Custodian in an account registered in the futures broker's
name; however, the futures broker can gain access to that account
only under certain specified conditions. As the Future is marked
to market to reflect changes in its market value, (that is, its
value on the Fund's books is changed) subsequent margin payments,
called variation margin, will be paid to or by the futures broker
on a daily basis.
The Fund may concurrently buy and sell Futures contracts in an
attempt to benefit from any outperformance of the Future purchased
relative to the performance of the Future sold. For example, the
Fund might buy Municipal Bond Futures and sell U.S. Treasury Bond
Futures (a type of Interest Rate Future). This type of transaction
would generally be profitable to the Fund if municipal bonds
outperform U.S. Treasury bonds after duration has been considered.
Duration is a volatility measure that refers to the expected
percentage change in the value of a bond resulting from a change in
general interest rates (measured by each 1% change in the rates on
U.S. Treasury securities). For example, if a bond has an effective
duration of three years, a 1% increase in general interest rates
would be expected to cause the bond to decline about 3%. Risks of
this type of Futures transaction, using the example above, would
include (1) outperformance of U.S. Treasuries relative to municipal
bonds, on a duration-adjusted basis, and (2) duration mismatch,
with duration of municipal bonds relative to U.S. Treasuries being
greater than anticipated.
Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment, in cash or U.S.
Treasury bills, with the futures commission merchant (the "futures
broker"). The initial margin payments will be deposited with the
Fund's Custodian in an account registered in the futures broker's
name; however, the futures broker can gain access to that account
only under 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.
At any time prior to expiration of the Future, the Fund may
elect to close out its position by taking an opposite position at
which time a final determination of variation margin is made and
additional cash is required to be paid by or released to the Fund.
At that time the Fund will realize a gain or a loss. Although
Interest Rate Futures, by their terms, call for settlement by
delivery or acquisition of debt securities, in most cases the
obligation is fulfilled 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. A "municipal bond index"
assigns relative values to the municipal bonds included in that
index, and is used to serve as the basis for trading long-term
municipal bond futures contracts. Municipal Bond Index Futures are
similar to Interest Rate Futures except that settlement is made in
cash. The obligation under such contracts may also be satisfied by
entering into an offsetting contract to close out the futures
position. Net gain or loss on options on 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 exercise 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 purchases a put, it pays a premium and, except
as to puts on municipal bond indices, has the right to sell the
underlying investment to a seller of a corresponding put on the
same investment during the put period at a fixed exercise price.
Buying a put on a debt security, Interest Rate Future or Municipal
Bond Index Future the Fund owns 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 portfolio turnover
rate and brokerage commissions. The exercise of calls written by
the Fund may cause the Fund to sell related portfolio securities,
thus increasing its portfolio turnover rate. The exercise by the
Fund of puts on securities will cause the sale of related
investments, increasing portfolio turnover. Although such exercise
is within the Fund's control, holding a put might cause the Fund to
sell the related investments 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 put, sells a call, or buys or sells an
underlying investment in connection with the exercise of a call or
put. Such commissions may be higher on a relative basis than those
which would apply to direct purchases or sales of such underlying
investments. Premiums paid for options as to underlying
investments are small in relation to the market value of such
investments and consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to
changes in the value of the underlying investment.
- 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." The Fund will not invest more than 25% of its
assets in interest rate swap transactions.
- Additional Information About Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written calls 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.
When the Fund writes an over-the-counter("OTC") option, it
intends to into an arrangement with a primary U.S. Government
securities dealer which would establish a formula price at which
the Fund would have the absolute right to repurchase that OTC
option. This formula price would generally be based on a multiple
of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying
security ("in-the-money"). For any OTC option the Fund writes, it
will treat as illiquid (for purposes of its restriction on illiquid
securities, stated in the Prospectus) the mark-to-market value of
any OTC option held by it. The Securities and Exchange Commission
is evaluating the general issue of whether or not OTC options
should be considered as liquid securities, and the procedure
described above could be affected by the outcome of that
evaluation.
- Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of futures and options thereon as established by
the Commodities Futures Trading Commission ("CFTC"). In
particular, the Fund is exempted from registration with the CFTC as
a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not
limit the percentage of the Fund's assets that may be used for
Futures margin and related option premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its
aggregate initial futures margin and related option premiums to no
more than 5% of the Fund's net assets for hedging strategies that
are not considered bona fide hedging strategies under the Rule.
Under the Rule, the Fund also must use short futures and options on
Futures positions solely for "bona fide hedging purposes" within
the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by 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
adviser that is an affiliate of the Fund's adviser). The exchanges
also impose position limits also apply to Futures transactions. 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 (although it reserves the right not to
qualify). 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. To comply
with that 30% cap, the Fund will limit the extent to which it
engages in the following activities, but will not be precluded from
them: (i) selling investments, including Interest Rate Futures and
Municipal Bond Index Futures, held for less than three months,
whether or not they were purchased on the exercise of a call held
by the Fund; (ii) 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 associated with hedging that are 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
portfolio 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 the debt securities being hedged is more than the
historical volatility of the applicable index. It is also possible
that if the Fund has used hedging instruments in a short hedge, the
market may advance and the value of the debt securities held in the
Fund's portfolio may decline. If that occurred, the Fund would
lose money on the hedging instruments and also experience a decline
in value 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 individual debt securities (long hedging) by buying
Interest Rate Futures, Municipal Bond Index Futures and/or calls on
such Futures or on 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 most significant investment restrictions are set
forth in the Prospectus. The following additional investment
restrictions are fundamental policies. Fundamental policies,
including the Fund's investment objective, can be changed only by
the vote of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act, such a "majority"
vote is defined as the vote of the holders of the lesser of (i) 67%
or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the
outstanding shares are present, or (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot do any of
the following:
- 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;
- 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;
- make short sales of securities;
- underwrite securities or invest in securities subject to
restrictions on resale;
- 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
- invest in securities of any other investment company, except
in connection with a merger with another investment company.
In connection with the qualification of its shares in certain
states, the Fund has undertaken that in addition to the above, as
a non-fundamental policy, it will not invest (1) more than 5% of
its total assets in securities of unseasoned issuers, including
their predecessors, which have been in operation for less than
three years; (2) more than 5% of its total assets in equity
securities of issuers that are not readily marketable; (3) in
interests in oil, gas, or other mineral leases or exploration or
development programs; or (4) in real estate limited partnership
interests.
- Diversification. For purposes of diversification under the
Investment Company Act and the restrictions on investing in any
"issuer" above and in the Prospectus, 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.
For purposes of the Fund's policy not to concentrate its
assets, described in the Prospectus, the Fund has adopted the
industry classifications set forth in Appendix C to the Statement
of Additional Information. These industry classifications are not
a fundamental policy. In applying the Fund's policy not to
concentrate its assets, 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. 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 (except Ms. Macaskill who is not a director of Oppenheimer
Money Market Fund, Inc.) are also trustees or directors of
Oppenheimer Fund, Oppenheimer Growth Fund, Oppenheimer Global Fund,
Oppenheimer Money Market Fund, Inc., Oppenheimer U.S. Government
Trust, Oppenheimer Gold & Special Minerals Fund, Oppenheimer
Discovery Fund, Oppenheimer Enterprise Fund, Oppenheimer Target
Fund, Oppenheimer Asset Allocation Fund, Oppenheimer Global
Emerging Growth Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer International Growth Fund, Oppenheimer Municipal Bond
Fund, Oppenheimer New York Municipal Fund, Oppenheimer Multi-State
Municipal Trust, Oppenheimer Multi-Sector Income Trust, Oppenheimer
World Bond Fund and Oppenheimer Series Fund, Inc. (collectively,
the "New York-based Oppenheimer funds"). Ms. Macaskill and Messrs.
Spiro, Donohue, Bowen, Zack, Bishop and Farrar respectively, hold
the same offices with the other New York-based Oppenheimer funds as
with the Fund. As of October 1, 1996, the Trustees and officers of
the Fund as a group owned of record or beneficially less than 1% of
each class of shares of the Fund. The foregoing statement does not
reflect ownership of shares held of record by an employee benefit
plan for employees of the Manager (for which plan one of the
Trustees and an officer listed below, Ms. Macaskill, and one of the
officers, Mr. Donohue, are trustees), other than the shares
beneficially owned under the plan by the officers of the Fund
listed above.
Leon Levy, Chairman of the Board of Trustees; Age 71
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings Inc. (real estate development).
Robert G. Galli, Trustee; Age 63
Vice Chairman of OppenheimerFunds, Inc. (the "Manager"); formerly
he held the following positions: Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding
company; Executive Vice President & General Counsel and a director
of the Manager and OppenheimerFunds Distributor, Inc. (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, and an officer of other
Oppenheimer funds.
Benjamin Lipstein, Trustee; Age 73
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a Director of Sussex
Publishers, Inc. (Publishers of Psychology Today and Mother Earth
News) and of Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee; Age 48*
President, Chief Executive Officer and a Director of the Manager,
Chairman and a Director of SSI, President and a Director of OAC,
HarbourView, and Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real
Asset Management, Inc.; formerly an Executive Vice President of the
Manager.
Elizabeth B. Moynihan, Trustee; Age 67
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institution), the Institute of Fine Arts (New
York University), and the National Building Museum; a member of the
Trustees Council, the Preservation League of New York State, and of
the Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil and gas
producer), Enron-Dominion Cogen Corp. (cogeneration company),
Kemper Corporation (insurance and financial services company),
Fidelity Life Association (mutual life insurance company); formerly
President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research) and a director of
Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
____________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Edward V. Regan, Trustee; Age 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New
York; Senior Fellow of Jerome Levy Economics Institute, Bard
College; 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; Age 64
200 Park Avenue, New York, New York 10166
Founder, Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship, Inc. (consulting and
publishing); a director of XYAN Inc. (printing), Professional Staff
Limited and American Scientific Resources, Inc.; a trustee of
Mystic Seaport Museum, International House, Greenwich Historical
Society and Greenwich Hospital.
Sidney M. Robbins, Trustee; Age 84
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting
Professor of Finance, University of Hawaii; Emeritus Funding
Director of The Korea Fund, Inc. (a closed-end investment company);
a member of the Board of Advisors, Olympus Private Placement Fund,
L.P.; Professor Emeritus of Finance, Adelphi University.
Donald W. Spiro, Vice Chairman and Trustee; Age 69*
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and OppenheimerFunds Distributor, Inc. (the
"Distributor").
Pauline Trigere, Trustee; Age 83
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee; Age 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar,
Inc. (machinery), ConAgra, Inc. (food and agricultural products),
Farmers Insurance Company (insurance), FMC Corp. (chemicals and
machinery), IMC Global Inc. (chemicals and animal feed) and Texas
Instruments, Inc. (electronics); formerly (in descending
chronological order) 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.
Jerry A. Webman, Vice President and Portfolio Manager; Age 46
Senior Vice President of the Manager; an officer of other
Oppenheimer funds; previously an officer and analyst with
Prudential Mutual Funds -- Investment Management, Inc..
____________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Andrew J. Donohue, Secretary; Age 46
Executive Vice President and General Counsel of the Manager and the
Distributor; President and a director of Centennial; Executive Vice
President, General Counsel and a director of HarbourView, SSI,
SFSI, and Oppenheimer Partnership Holdings, Inc.; President and
director of Oppenheimer Real Asset Management, Inc.; General
Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (a broker-dealer); an
officer of other Oppenheimer funds; 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),
and a director and an officer of First Investors Family of Funds
and First Investors Life Insurance Company.
George C. Bowen, Treasurer; Age 60
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; Senior Vice President, Treasurer and Secretary of SSI;
Vice President, Treasurer and Secretary of SFSI; Treasurer of OAC;
Vice President and Treasurer of Oppenheimer Real Asset Management,
Inc.; Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc. (a broker-dealer); an officer of other
Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age 48
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI; an officer of other Oppenheimer
funds.
Robert Bishop, Assistant Treasurer; Age 37
3410 South Galena Street, Denver, Colorado, 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age 31
3410 South Galena Street, Denver, Colorado, 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; previously a Fund Controller for the
Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and
previously a Senior Fund Accountant for State Street Bank & Trust
Company.
- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager. They and the Trustees of the Fund who
are affiliated with the Manager (Ms. Macaskill and Messrs. Galli
and Spiro) receive no salary or fee from the Fund. The remaining
Trustees of the Fund received the compensation shown below from the
Fund, during its fiscal year ended December 31, 1995 and from all
of the New York-based Oppenheimer funds (including the Fund) for
which they served as Trustee or Director. Compensation is paid for
services in the positions below their names:
<TABLE>
<CAPTION>
Aggregate Retirement Benefits Total Compensation
Compensation Accrued as Part From All
Name and from of Fund New York-based
Position Fund Expenses Oppenheimer funds1
<S> <C> <C> <C>
Leon Levy $3,636 $10,453 $141,000.00
Chairman and
Trustee
Benjamin Lipstein $2,223 $ 6,390 $ 86,200.00
Study Committee
Chairman, Audit
Committee Member
and Trustee
Elizabeth B. Moynihan $2,223 $ 6,390 $ 86,200.00
Study
Committee
Member and
Trustee
Kenneth A. Randall $2,022 $ 5,812 $ 78,400.00
Audit
Committee
Chairman and
Trustee
Edward V. Regan $1,774 $ 5,100 $ 68,800.00
Proxy Committee
Chairman,
Audit
Committee
Member and
Trustee(2)
Russell S.
Reynolds, Jr. $1,344 $ 3,862 $ 52,100.00
Proxy Committee
Member and
Trustee(2)
Sidney M. Robbins $3,149 $ 9,052 $122,100.00
Study Committee
Advisory Member,
Audit Committee
Advisory Member,
and Trustee
Pauline Trigere $1,344 $ 3,862 $ 52,100.00
Trustee
Clayton K. Yeutter $1,344 $ 3,862 $ 52,100.00
Proxy Committee
Member and
Trustee(2)
</TABLE>
The officers of the Fund are affiliated with the Manager.
They and the Trustees of the Fund who are affiliated with the
Manager (Ms. Macaskill and Messrs. Galli and Spiro) receive no
salary or fee from the Fund. The remaining Trustees of the Fund
received the compensation shown below from the Fund, during its
fiscal period January 1, 1996 to July 31, 1996, and from all of the
New York-based Oppenheimer funds (including the Fund) for which
they served as Trustee or Director. Compensation is paid for
services in the positions below their names:
<TABLE>
<CAPTION>
Aggregate Retirement Benefits Total Compensation
Compensation Accrued as Part From All
Name and from of Fund New York-based
Position Fund Expenses Oppenheimer funds1
<S> <C> <C> <C>
Leon Levy $4,820 $7,371 $141,000.00
Chairman and
Trustee
Benjamin Lipstein $2,948 $4,506 $ 86,200.00
Study Committee
Chairman, Audit
Committee Member
and Trustee
Elizabeth B. Moynihan $2,948 $4,506 $ 86,200.00
Study
Committee
Member and
Trustee
Kenneth A. Randall $2,680 $4,099 $ 78,400.00
Audit
Committee
Chairman and
Trustee
Edward V. Regan $2,352 $3,597 $ 68,800.00
Proxy Committee
Chairman,
Audit
Committee
Member and
Trustee(2)
Russell S.
Reynolds, Jr. $1,781 $2,724 $ 52,100.00
Proxy Committee
Member and
Trustee(2)
Sidney M. Robbins $4,174 $6,383 $122,100.00
Study Committee
Advisory Member,
Audit Committee
Advisory Member
and Trustee
Pauline Trigere $1,781 $2,724 $ 52,100.00
Trustee
Clayton K. Yeutter $1,781 $2,724 $ 52,100.00
Proxy Committee
Member and
Trustee(2)
</TABLE>
[FN]
______________________
1 For the 1995 calendar year (prior to the inception of the Proxy
Committee), during which the New York-based Oppenheimer funds,
listed in the first paragraph of this section, included Oppenheimer
Mortgage Income Fund and Oppenheimer Time Fund (which ceased
operation following the acquisition of their assets by certain
other Oppenheimer funds) but excluded Oppenheimer International
Growth Fund, which had not yet commenced operations.
2 Committee positions held during a portion of the period shown.
The Study and Audit Committees meet for all of the New York-based
Oppenheimer funds and the fees are allocated among the funds by the
Board.
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 Oppenheimer funds
for at least 15 years to be eligible for the maximum payment.
Because each Trustee's retirement benefits will depend on the
amount of the Trustee's future compensation and length of service,
the amount of those benefits cannot be determined at this time, nor
can the Fund estimate the number of years of credited service that
will be used to determine those benefits. During the fiscal year
ended July 31, 1996, $45,122 was accrued for the Fund's projected
retirement benefit obligations.
- Major Shareholders. As of October 1, 1996, no person owned
of record or was known by the Fund to own beneficially 5% or more
of the Fund's oustanding Class A, Class B or Class C shares, except
as follows:
<TABLE>
<CAPTION>
Percentage of
Outstanding
Number Shares of
Name & Address of Shares the Class
<S> <C> <C>
Class C
NFSC FEBO 23,450.992 10.27%
Becker Family Trust
Sam Becker
U/A 9/1/92
509 N. Roxbury Drive
Beverly Hills, CA 90210
Merrill Lynch Pierce Fenner 22,134.000 9.69%
& Smith, Inc.
Attn.: Book Entry Dept.
4800 Deer Lake Drive E FL 3
Jacksonville, FL 32246-6484
NFSC FEBO 21,077.180 9.23%
Jasmine Yadegar
Saeed Yadegar
1125 Maytor Place
Beverly Hills, CA 90210
NFSC FEBO 16,384.416 7.17%
Alfred Goren TTEE
Goren Family Living Trust
U/A 3/21/85
1483 S. Rexford Drive
Los Angeles, CA 90035
</TABLE>
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom may also serve as officers of the Fund, and three of whom (Ms.
Macaskill and Messrs. Galli and Spiro) serve as Trustees of the
Fund.
The Manager and the Fund have a Code of Ethics. It is
designed to detect and prevent improper personal trading by certain
employees, including portfolio managers, that would compete with or
take advantage of the Fund's portfolio transactions. Compliance
with the Code of Ethics is carefully monitored and strictly
enforced by the Manager.
- 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 corporate administration for the Fund, including
the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
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, including
litigation cost.
The advisory agreement contains no provision limiting the
Fund's expenses. However, independently of the advisory agreement,
the Manager has undertaken that the total expenses of the Fund in
any fiscal year (including the management fee, but excluding taxes,
interest, brokerage commissions, distribution assistance payments
and extraordinary expenses such as litigation costs) shall not
exceed the most stringent expense limitation imposed under state
law applicable to the Fund. Pursuant to the undertaking, the
Manager's fee will be reduced at the end of a month so that there
will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense
limitation is imposed by California, and limits the Fund's expenses
(with specified exclusions) to 2.5% of the first $30 million of
average annual net assets, 2% of the next $70 million of average
annual net assets, and 1.5% of average annual net assets in excess
of $100 million. The Manager reserves the right to terminate or
amend the undertaking at any time. Any assumption of the Fund's
expenses under this limitation would lower the Fund's overall
expense ratio and increase its total return during any period in
which expenses are limited. Prior to 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 years ended December 31, 1993, 1994, 1995 and
July 31, 1996, there were no assumption of expenses, and the
management fees paid by the Fund to the Manager were $1,467,574,
$1,560,360, $1,638,210 and $1,097,974, 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
other investment 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, Class B and Class C shares, but is not obligated to sell a
specific number of shares. Expenses normally attributable to
sales, excluding payments under the Distribution and Service Plans
but including advertising and the cost of printing and mailing
prospectuses (other than those furnished to existing shareholders),
are borne by the Distributor. During the Fund's fiscal years ended
December 31, 1993, 1994, 1995 and July 1996, the aggregate sales
charges on sales of the Fund's Class A shares were $1,831,469,
$999,822, $984,851 and $611,757, respectively, of which the
Distributor and an affiliated broker-dealer retained $368,898,
$193,221, $165,771 and $110,074 in those respective years. During
the Fund's fiscal year ended July 31, 1996, the contingent deferred
sales charge collected on the Fund's Class B shares and Class C
shares totaled $102,835 and $0, respectively, all of which was
retained by the Distributor. 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. The Fund's Transfer Agent,
OppenheimerFunds Services, a division of the Manager, 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 Investment Advisory
Agreement is to arrange the portfolio transactions for the Fund.
The Investment 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 Investment Advisory Agreement to employ such 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 that
the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment
companies managed by the Manager or its affiliates as a factor in
the selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager.
Subject to the provisions of the advisory agreement and the
procedures and rules described above, allocations of brokerage are
generally made by the Manager's portfolio traders upon
recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the
Investment Advisory Agreement and the procedures and rules
described above. In either case, brokerage is allocated under the
supervision of the Manager's executive officers. As most purchases
made by the Fund are principal transactions at net prices, the Fund
does not incur substantial 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 a 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 prices. 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 Board has also permitted the Manager to use
stated commissions on secondary fixed-income agency trades to
obtain research where the broker has represented to Manager that:
(i) the trade is not from or for the broker's own inventory, (ii)
the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broadens the scope
and supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and
by enabling the Manager to obtain market information for the
valuation of securities held in the Fund's portfolio or being
considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who
are not "interested persons" as defined in the Investment Company
Act, and who have no direct or indirect financial interest in the
operation of the Investment 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.
Other funds advised by the Manager have investment objectives
and policies similar to those of the Fund. Such other funds may
purchase or sell the same securities at the same time as the Fund,
which could affect the supply and price of such securities. If two
or more of such funds purchase the same security on the same day
from the same dealer, the Manager may average the price of the
transactions and allocate the average among such funds.
Performance of the Fund
Yield and Total Return Information. As described in the
Prospectus, from time to time the "standardized yield," "tax-
equivalent yield," "dividend yield," "average annual total return",
"cumulative total return," "average annual total return at net
asset value" and "total return at net asset value" of an investment
in a 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.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of
shares of the Fund for the 1, 5, and 10-year periods (or the life
of the class, if less) ending as of the most recently-ended
calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a
basis for comparison with other investments. An investment in the
Fund is not insured; its yield and total returns are not guaranteed
and normally will fluctuate on a daily basis. When redeemed, an
investor's shares may be worth more or less than their original
cost. Yield and total returns for any given past period are not a
prediction or representation by the Fund of future yields or rates
of return. The yield and total returns of each class of shares of
the Fund are affected by portfolio quality, portfolio maturity, the
type of investments the Fund holds, and its operating expenses
allocated to the particular class.
- Standardized Yields
- Yield. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is
calculated using the following formula set forth in rules adopted
by the Securities and Exchange Commission that apply to all funds
that quote yields:
Standardized Yield = 2 [ ( a-b 6
--- + 1 ) - 1 ]
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
assumptions).
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, 1995
the standardized yields for the Fund's Class A, Class B and Class
C shares were 4.37%, 3.82% and 3.82%, respectively. For the 30-day
period ended July 31, 1996, the standardized yields for the Fund's
Class A, Class B and Class C shares were 4.65%, 4.12% and 4.05%,
respectively.
- Tax-Equivalent Yield. The "tax-equivalent yield" of a class
of shares adjusts the Fund's current yield, as calculated above, by
a stated combined Federal, state and city tax rate. The tax
equivalent yield is based on a 30-day period, and is computed by
dividing the tax-exempt portion of the Fund's current yield (as
calculated above) by one minus a stated income tax rate and adding
the result to the portion (if any) of the Fund's current yield that
is not tax exempt. The tax equivalent yield may be used to compare
the tax effects of income derived from the Fund with income from
taxable investments at the tax rates stated. Appendix B includes
a tax equivalent yield table, based on various effective tax
brackets for individual taxpayers. Such tax brackets are
determined by a taxpayer's Federal and state taxable income (the
net amount subject to Federal, state and city 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 and that state income tax payments are fully
deductible for income tax purposes. For taxpayers with income
above certain levels, otherwise allowable itemized deductions are
limited. For the 30-day period ended December 31, 1995, the Fund's
tax-equivalent yield for an investor in the California/Federal
46.24% effective tax bracket for its Class A, Class B and Class C
shares was 8.13%, 7.11% and 7.11%, respectively. For the 30-day
period ended July 31, 1996, the Fund's tax-equivalent yield for an
investor in the California/Federal 46.24% effective tax bracket for
its Class A, Class B and Class C shares was 8.65%, 7.66% and 7.53%,
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 dividends paid on
shares of a class from dividends derived from net investment income
during a stated period. Distribution return includes dividends
derived from net investment income and from realized capital gains
declared during a stated period. Under those calculations, the
dividends and/or distributions for that class declared during a
stated period of one year or less (for example, 30 days) are added
together, and the sum is divided by the maximum offering price per
share of that class on the last day of the period. When the result
is annualized for a period of less than one year, the "dividend
yield" is calculated as follows:
Dividend Yield of the Class = Dividends of the Class
-----------------------
Max. Offering Price of the Class
(last day of period)
+ Number of days (accrual period)
The maximum offering price for Class A shares includes the
maximum front-end sales charge. For Class B and Class C shares,
the maximum offering price is the net asset value per share,
without considering the effect of contingent deferred sales
charges. From time to time similar 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, 1995 were 4.98% and 5.38% when calculated at
maximum offering price and at net asset value respectively. The
dividend yields on Class B and Class C shares for the 30-day period
ended December 31, 1995 were 4.61% and 4.61% respectively, when
calculated at net asset value. The dividend yields on Class A
shares for the 30-day period ended July 31, 1996, were 5.04% and
5.30% when calculated at maximum offering price and at net asset
value, respectively. The dividend yields on Class B and Class C
shares for the 30-day period ended July 31, 1996, were 4.54% and
4.48%, respectively, when calculated at net asset value.
- Total Return Information
- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV")
of that investment, according to the following formula:
ERV 1/n
--- - 1 = Average Annual Total Return
P
- 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. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 4.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as described below). For Class
B shares, 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 year, 2.0% in the fifth year, 1.0% in the sixth year, and
none thereafter is applied, as described in the Prospectus. For
Class C shares, the payment of the 1% contingent deferred sales
charge for the first 12 months 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 July 31, 1996 and for
the period from November 3, 1988 (commencement of operations) to
July 31, 1996, were 2.04%, 6.28% and 7.22%, respectively. The
cumulative "total return" on Class A shares for the latter period
was 71.00%. The average annual total returns on an investment in
Class B shares for the fiscal year ended July 31, 1996 and for the
period May 1, 1993 (date Class B shares were first publicly
offered) to July 31, 1996 were 1.31% and 3.80%. For the fiscal
period from May 1, 1993 through July 31, 1996, the cumulative total
return on an investment in Class B shares of the Fund was 12.91%.
The cumulative total return on an investment in Class C shares for
the period November 1, 1995 (date Class C shares were first
publicly offered) through July 31, 1996 was 1.71%.
- Total Returns At Net Asset Value. From time to time the
Fund may also quote an average annual total return at net asset
value for Class A, Class B or Class C shares. Each is based on the
difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of
shares (without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The average annual total return
at net asset value of the Fund's Class A shares for the one and
five year periods ended December 31, 1995 and for the period from
November 3, 1988 (commencement of operations) through December 31,
1995 were 19.76%, 8.31% and 8.52%, respectively. In addition, the
average annual total return at net asset value of the Fund's Class
A shares for the one and five year period ended July 31, 1996 and
for the period from November 3, 1988 (commencement of operations)
through July 31, 1996 were 7.14%, 7.32% and 7.90%, respectively.
The average annual total returns at net asset value on the Fund's
Class B shares for the fiscal year ended December 31, 1995 and for
the period from May 3, 1993 (date Class B shares were first
publicly offered) through December 31, 1995 were 18.97% and 5.37%,
respectively. Further, the average annual total returns at net
asset value on the Fund's Class B shares for the fiscal year ended
July 31, 1996 and for the period from May 3, 1993 (date Class B
shares were first publicly offered) through July 31, 1996 were
6.31% and 4.35%, respectively.
The cumulative total return at net asset value on Class C
shares for the period from November 1, 1995 (date Class C shares
were first publicly offered) through December 31, 1995 was 2.90%.
The cumulative total return at net asset value on Class C shares
for the period from November 1, 1995 (date Class C shares were
first publicly offered) through July 31, 1996 was 2.70%.
Total return information may be useful to investors in
reviewing the performance of the Fund's Class A, Class B or Class
C shares. However, when comparing total return of an investment in
Class A, Class B or Class C shares of the Fund, a number of factors
should be considered before using such information as a basis for
comparison with other investments.
- Other Performance Comparisons. From time to time the Fund
may publish the ranking of its Class A, Class B or Class C shares
by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent mutual fund monitoring service. Lipper monitors the
performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is
ranked against (i) all other bond funds, other than 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 gain distributions and income dividends
but do not take sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of the
performance of its Class A, Class B or Class C 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 on risk-adjusted investment return. Investment
return measures a fund's three, five and ten-year average annual
total returns (when available) in excess of 90-day U.S. Treasury
bill returns after considering sales charges and expenses. Risk
reflects fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and return are combined to produce star rankings
reflecting performance relative to the average fund in a fund's
category. Five stars is the "highest" ranking (top 10%), four
stars is "above average" (next 22.5%), three stars is "average"
(next 35%), two stars is "below average" (next 22.5%) and one star
is "lowest" (bottom 10%). Morningstar ranks the Fund in relation
to other rated municipal bond funds. Rankings are subject to
change.
From time to time the Fund may include in its advertisements
and sales literature performance information about the Fund cited
in newspapers and other periodicals such as The New York Times,
which may include performance quotations from other sources,
including Lipper and Morningstar. The performance of the Fund's
Class A, Class B or Class C shares may be compared in publications
to (i) the performance of various market indices or to other
investments for which reliable performance data is available, and
(ii) to averages, performance rankings or other benchmarks prepared
by recognized mutual fund statistical services.
Total return information may be useful to investors in
reviewing the performance of the Fund's Class A, Class B or Class
C shares. However, when comparing total return of an investment in
Class A, Class B and Class C shares of the Fund, a number of
factors should be considered before using such information as a
basis for comparison with other investments. For example,
investors may also wish to compare the Fund's Class A, Class B or
Class C return to the returns on fixed-income investments available
from banks and thrift institutions, such as certificates of
deposit, ordinary interest-paying checking and savings accounts,
and other forms of fixed or variable time deposits, and various
other instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed or insured by the FDIC
or any other agency 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.
From time to time, the Fund's Manager may publish rankings or
ratings of the Manager (or Transfer Agent), or the investor
services provided by them to shareholders of the Oppenheimer funds,
other than performance rankings of the Oppenheimer funds
themselves. Those ratings or rankings of shareholder/investor
services by a third party may compare the Oppenheimer funds'
services to those of other mutual fund families selected by the
rating or ranking services, and may be based upon the opinions of
the rating or ranking service itself, based on its research or
judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares of
the Fund under Rule 12b-1 of the Investment Company Act, pursuant
to which the Fund makes payments to the Distributor in connection
with the distribution and/or servicing of the shares of that class
as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority
of the Independent Trustees, cast in person at a meeting called for
the purpose of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares
of each class. For the Distribution and Service Plan for Class C
shares, that vote was cast by the Manager as the sole initial
holder of Class C shares.
In addition, under the Plans the Manager and the Distributor,
in their sole discretion from time to time may use their own
resources (which, in the case of the Manager, may include profits
from the advisory fee it receives from the Fund) to make payments
to brokers, dealers or other financial institutions (each is
referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform at no cost to the Fund. The
Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of payments they make 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 its continuance is
specifically approved at least annually by the Fund's Board of
Trustees and its Independent Trustees by a vote cast in person at
a meeting called for the purpose of voting on such continuance.
Each Plan may be terminated at any time by the vote of a majority
of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. No 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. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to the Class A Plan that
would materially increase the amount to be paid by Class A
shareholders under that Class A Plan. Such approval must be by a
"majority" of the Class A and Class B shares (as defined in the
Investment Company Act), voting separately by Class. All material
amendments must be approved by the Board and 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 for its review, detailing the amount of all
payments made pursuant to each Plan, the identity of each Recipient
that received any such payment and the purpose of the payment. The
report for the Class B and Class C Plans shall also include the
Distributor's distribution costs for that quarter, and such costs
for previous fiscal periods that have been 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 as to
any such selection or nomination is approved by a majority of the
Independent Trustees.
Under the Plans, no payment will be made to any Recipient in
any quarter if the aggregate net asset value of all Fund shares
held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time
by a majority of the Fund's Independent Trustees. Initially, the
Board of Trustees has set the fees at the maximum rate allowed
under the Plans and set no minimum amount.
For the fiscal year ended December 31, 1995 and July 31, 1996,
payments under the Plan for Class A shares totaled $614,629 and
$399,061, respectively, all of which was paid by the Distributor to
Recipients, including $20,230 and $10,465 paid to an affiliate of
the Distributor. Any unreimbursed expenses by the Distributor
incurred with respect to Class A shares for any fiscal year 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 and Class C Plans allow the service fee payment to
be paid by the Distributor to Recipients in advance for the first
year such shares are outstanding, and thereafter on a quarterly
basis, as described in the Prospectus. The advance payment is
based on the net asset value of shares sold. An exchange of shares
does not entitle the Recipient to an advance service fee payment.
In the event Class B and Class C 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. Payments made under the Class B Plan for the
fiscal year ended December 31, 1995 and July 31, 1996, totalled
$298,592 and $269,950, respectively (including $1,197 and $0 paid
to an affiliate of the Distributor), of which $261,406 and $234,949
was retained by the Distributor. Payments made under the Class C
Plan for the fiscal year ended December 31, 1995 and July 31, 1996
totaled $149 and $6,697, respectively, all of which was retained by
the Distributor.
Although the Class B and Class C Plans permit the Distributor
to retain both the asset-based sales charges and the service fee on
such shares, or to pay Recipients the service fee on a quarterly
basis, without payment in advance, the Distributor presently
intends to pay the service fee to Recipients in the manner
described above. A minimum holding period may be established from
time to time under the Class B and Class C Plans 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 Conduct of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges
and service fees.
The Class B and Class C Plans provide for the Distributor to
be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the
Fund during that period. The Distributor retains the asset-based
sales charge on Class B shares. As to Class C shares, the
Distributor retains the asset-based sales charge during the first
year shares are outstanding, and pays the asset-based sales charge
as an ongoing commission to the dealer on Class C shares
outstanding for a year or more. Such payments are made to the
Distributor under the Plans in recognition that the Distributor (i)
pays sales commissions to authorized brokers and dealers at the
time of sale and pays service fees as described in the Prospectus,
(ii) may finance such commissions and/or the advance of the service
fee payment to Recipients under those Plans, or may provide such
financing from its own resources or from an affiliate, (iii)
employs personnel to support distribution of shares, and (iv) may
bear the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state
"blue sky" registration fees and certain other distribution
expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits an
investor to choose the method of purchasing shares that is more
beneficial to the investor depending on the amount of the purchase,
the length of time the investor expects to hold shares and other
relevant circumstances. Investors should understand that the
purpose and function of the deferred sales charge and asset-based
sales charge with respect to Class B and Class C shares are the
same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other.
The Distributor will not accept any order for $500,000 or more of
Class B shares or $1 million or more of Class C shares on behalf of
a single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on such Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are
subject.
The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax adviser, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to any 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 net 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 (a) Distribution and/or Service Plan
fees, (b) incremental transfer and shareholder servicing agent fees
and expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange on each day that the Exchange is open, by dividing the
value of the Fund's net assets attributable to that Class by the
number of shares of that class outstanding. The Exchange normally
closes at 4:00 P.M., New York time, but may close earlier on some
days (for example, in case of weather emergencies or on days
falling before a holiday). The Exchange's most recent annual
announcement (which is subject to change) states that it will close
on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
It may also close on other days. Dealers other than Exchange
members may conduct trading in Municipal Securities on certain days
on which the Exchange is closed (including weekends and holidays)
or after 4:00 P.M. on a regular business day. Because the Fund's
net asset value 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 having a remaining maturity in excess of
60 days are valued based on the mean between the "bid" and "asked"
prices determined by a portfolio pricing service approved by the
Fund's Board of Trustees or obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry;
(ii) debt instruments having a maturity of more than 397 days when
issued, and non-money market type instruments having a maturity of
397 days or less when issued, which have a remaining maturity of
60 days or less are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry;
(iii) money market debt securities that had a maturity of less than
397 days when issued that have a remaining maturity of 60 days or
less are valued at cost, adjusted for amortization of premiums and
accretion of discounts; and (iv) securities (including restricted
securities) not having readily-available market quotations are
valued at fair value determined under the Board's procedures. If
the Manager is unable to locate two market makers willing to give
quotes (see (i) and (ii) above), the security may be priced at the
mean between the "bid" and "asked" prices provided by a single
active market maker (which in certain cases may be the "bid" price
if no "ask" price is available.
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 Manager may use
pricing services approved by the Board of Trustees to price any of
the types of securities described above. The Manager will monitor
the accuracy of such pricing services, which may include 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 or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees
or by the Manager. If there were no sales that day, value shall be
the last sale price on the preceding trading day if it is within
the spread of the closing bid and asked prices on the principal
exchange or on NASDAQ on the valuation date, or, if not, the value
shall be the closing bid price on the principal exchange or on
NASDAQ on the valuation date. If the put, call or future is not
traded on an exchange or on NASDAQ, it shall be valued at the mean
between bid and asked prices obtained by the Manager from two
active market makers (which in certain cases may be the bid price
if no asked price is available). 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
credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value
of the option. In determining the Fund's gain on investments, if
a call or put written by the Fund is exercised, the proceeds are
increased by the premium received. If a call or put written by the
Fund expires, the Fund has a gain in the amount of the premium; if
the Fund enters into a closing purchase transaction, it will have
a gain or loss, depending on whether the premium received was more
or less than the cost of the closing transaction. If the Fund
exercises a put it holds, the amount the Fund receives on its sale
of the underlying investment is reduced by the amount of premium
paid by the Fund.
AccountLink. When shares are purchased through AccountLink,
each purchase must be at least $25. Shares will be purchased on
the regular business day the Distributor is instructed to initiate
the Automated Clearing House transfer to buy the shares. Dividends
will begin to accrue on shares purchased by the proceeds of ACH
transfers on the business day the Fund receives Federal Funds for
the purchase through the ACH system before the close of The New
York Stock Exchange. The Exchange normally closes at 4:00 P.M.,
but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the
shares will be purchased and dividends will begin to accrue on the
next regular business day. The proceeds of ACH transfers are
normally received by the Fund 3 days after the transfers are
initiated. The Distributor and the Fund are not responsible for
any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor or dealer or broker incurs
little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, grandparents, parents,
parents-in-law, brothers and sisters, sons-and daughters-in-law,
siblings, a spouse's siblings, a sibling's spouse, aunts, uncles,
nieces and nephews.
- The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and include the following:
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Bond Fund for Growth
Rochester Fund Municipals*
Rochester Portfolio Series - Limited-Term New York Municipal
Fund*
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax-Exempt Trust
Centennial Government Trust
Centennial New York Tax-Exempt Trust
Centennial California Tax-Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
_____________________
* Shares of the Fund are not presently exchangeable for shares of
these funds.
There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a contingent
deferred sales charge).
- Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor's statement in writing to the Distributor
of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month
period (the "Letter of Intent period"), which may, at the
investor's request, include purchases made up to 90 days prior to
the date of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases of shares which, when
added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count
toward satisfying the amount of the Letter. A Letter enables an
investor to count the Class A and Class B shares purchased under
the Letter to obtain the reduced sales charge rate on purchases of
Class A shares of the Fund (and other Oppenheimer funds) that
applies under the Right of Accumulation to current purchases of
Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales
charge) that applies to a single lump-sum purchase of shares in the
amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within
the Letter of Intent period, when added to the value (at offering
price) of the investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase amount, the
investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow,"
below (as those terms may be amended from time to time). The
investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and
if such terms are amended, as they may be from time to time by the
Fund, that those amendments will apply automatically to existing
Letters of Intent.
If the total eligible purchases made during the Letter of
Intent period do not equal or exceed the intended purchase amount,
the commissions previously paid to the dealer of record for the
account and the amount of sales charge retained by the Distributor
will be adjusted to the rates applicable to actual total purchases.
If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to
qualify for the next sales charge rate reduction set forth in the
applicable prospectus, the sales charges paid will be adjusted to
the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid
to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the
investor's account at the net asset value per share in effect on
the date of such purchase, promptly after the Distributor's receipt
thereof.
In determining the total amount of purchases made under a
Letter, shares redeemed by the investor prior to the termination of
the Letter of Intent period will be deducted. It is the
responsibility of the dealer of record and/or the investor to
advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All
of such purchases must be made through the Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in
value up to 5% of the intended purchase amount specified in the
Letter shall be held in escrow by the Transfer Agent. For example,
if the intended purchase amount is $50,000, the escrow shall be
shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited
to the investor's account.
2. If the 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 purchase amount specified in the Letter, the investor must
remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is
not paid within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and
fractional shares remaining after such redemption will be released
from escrow. If a request is received to redeem escrowed shares
prior to the payment of such additional sales charge, the sales
charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as attorney-in-fact to
surrender for redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class B
shares of other Oppenheimer funds acquired subject to a contingent
deferred sales charge, and (c) Class A or Class B shares acquired
in exchange for either (i) Class A shares of one of the other
Oppenheimer funds that were acquired subject to a Class A initial
or contingent deferred sales charge or (ii) Class B shares of one
of the other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is
requested, as described in the section of the Prospectus entitled
"How to Exchange Shares," and the escrow will be transferred to
that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for
monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Distributor, completed and returned,
and a prospectus of the selected fund(s) should be obtained from
the Distributor or your financial adviser 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,
the Board of Trustees of the Fund may determine 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. In that case, 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 its portfolio securities described above under "Determination
of Net Asset Values Per Share" and that 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 those 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 the shares
has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it
may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in
question (not less than 30 days), or the Board may set requirements
for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares
would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that you purchase subject to an initial sales
charge or Class A contingent deferred sales charge, or (ii) Class
B shares that were subject to the Class B contingent deferred sales
charge when redeemed. This privilege does not apply to Class C
shares. The reinvestment may be made without sales charge only in
Class A shares of the Fund or any of the other Oppenheimer funds
into which shares of the Fund are exchangeable as described in "How
to Exchange Shares" below, at the net asset value next computed
after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time
of reinvestment. Any capital gain that was realized when the
shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a
capital loss on the redemption, some or all of the loss may not be
tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any 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 or
Class C contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange this type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives an order placed by the dealer or broker, except that if
the Distributor receives a repurchase order from a dealer or broker
after the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset value if
the order was received by the dealer or broker from its customers
prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that
day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within
three business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners
guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning
shares of the Fund valued at $5,000 or more can authorize the
Transfer Agent to redeem shares (minimum $50) automatically on a
monthly, quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). 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 a payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans because of the imposition of the
contingent deferred sales charge on such withdrawals (except where
the contingent deferred sales charge is waived as described in the
Prospectus under "Waivers of Class B and Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such
plans, as stated below and in the provisions of the
OppenheimerFunds Application relating to such Plans, as well as the
Prospectus. These provisions may be amended from time to time by
the Fund and/or the Distributor. When adopted, such amendments
will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a
sales charge will be redeemed first and shares acquired with
reinvested dividends and capital gains distributions will be
redeemed next, followed by shares acquired with a sales charge, to
the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted.
Payments made under such plans should not be considered as a yield
or income on your investment. It may not be desirable to purchase
additional shares of Class A shares while maintaining automatic
withdrawals because of the sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the
"Planholder") who executed the Plan authorization and application
submitted to the Transfer Agent. Neither the Fund nor the Transfer
Agent shall incur any 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
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of the Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. Shares of Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money
Market Trust, Centennial Tax-Exempt Trust, Centennial Government
Trust, Centennial New York Tax-Exempt Trust, Centennial California
Tax-Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares, and
Oppenheimer Main Street California Municipal Fund which only offers
Class A and Class B shares, (Class B and Class C shares of
Oppenheimer Cash Reserves are generally available only by exchange
from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A current list showing
which funds offer which classes can be obtained by calling the
Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding
Class M shares of Oppenheimer Bond Fund for Growth, Class M shares
can be exchanged only for Class A shares of other Oppenheimer
funds, including Rochester Fund Municipals and Limited Term New
York Municipal Fund. Class A shares of Rochester Fund Municipals
or Limited Term New York Municipal Fund acquired on the exchange of
Class M shares of Oppenheimer Bond Fund for Growth may be exchanged
for Class M shares of that fund. For accounts of Oppenheimer Bond
Fund for Growth established after March 8, 1996, Class M shares may
be exchanged for Class A shares of other Oppenheimer funds except
Rochester Fund Municipals and Limited Term New York Municipals.
Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange
from Class M shares. Otherwise no exchanges of any class of any
Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund. Shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent
deferred sales charge). However, shares of Oppenheimer Money
Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or
its subsidiaries) redeemed within the 12 months prior to that
purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for
that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and,
if requested, must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends of
distributions from any of the other Oppenheimer funds or from any
unit investment trust for which reinvestment arrangements have been
made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred
sales charge is imposed on exchanges of shares of any class
purchased subject to a contingent deferred sales charge. However,
when Class A shares acquired by exchange of Class A shares of other
Oppenheimer funds purchased subject to a Class A contingent
deferred sales charge are redeemed within 18 months of the end of
the calendar month of the initial purchase of the exchanged Class
A shares, the Class A contingent deferred sales charge is imposed
on the redeemed shares (see "Class A Contingent Deferred Sales
Charge" in the Prospectus). The Class B contingent deferred sales
charge is imposed on Class B shares acquired by exchange if they
are redeemed within 6 years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B or Class C contingent
deferred sales charge will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one Class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either
have an existing account in, or obtain and acknowledge receipt of
a prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans and Automatic
Withdrawal Plans will be switched to the new account unless the
Transfer Agent is instructed otherwise. If all telephone lines are
busy (which might occur, for example, during periods of substantial
market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange
requests.
Shares to be exchanged are redeemed on the regular business
day the Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases
may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer
of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it
(for example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have
different investment objectives, policies and risks, and a
shareholder should assure that the Fund selected is appropriate for
his or her investment and should be aware of the tax consequences
of an exchange. For federal income tax purposes, an exchange
transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and
the Transfer Agent are unable to provide investment, tax or legal
advice to a shareholder in connection with an exchange request or
any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on
shares held of record at the time of the previous determination of
net asset value, or as otherwise described in "How to Buy Shares."
Daily dividends will not be declared or paid on newly purchased
shares 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. Shares purchased through dealers or brokers normally
are paid for by the third business day following the placement of
the purchase order. Shares redeemed through the regular redemption
procedure will be paid dividends through and including the day on
which the redemption request is received by the Transfer Agent in
proper form. Dividends will be declared on shares repurchased by a
dealer or broker for three business days following the trade date
(i.e., to and including the day prior to settlement of the
repurchase). If 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 in order to enable
the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C 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 and Class C shares are
expected to be lower as a result of the asset-based sales charge on
Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net
asset value between Class A, Class B and Class C shares.
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 1995 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; 9.3% of the Fund's dividends (excluding
distributions) paid during 1995 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. While it is
presently anticipated that the Fund will meet those requirements,
the Fund's Board of Trustees and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such 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. 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.
The Fund had an unused capital loss carryover of approximately
$874,000 at July 31, 1996. It will expire between 2002 and 2003.
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
Oppenheimer funds listed in "Reduced Sales Charges," above, at net
asset value without sales charge. To elect this option, the
shareholder must notify the Transfer Agent in writing and must
either have an existing account in the fund selected for
reinvestment or must obtain a prospectus for that fund and an
application from the Transfer Agent 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
Oppenheimer funds may be invested in shares of this Fund on the
same basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, 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. The Fund's cash balances
with the Custodian in excess of $100,000 are not protected by
Federal Deposit Insurance. Such uninsured balances may at times be
substantial.
Independent Auditors. The independent auditors of the Fund audit
the Manager's and the Fund's financial statements and perform other
related audit services. They also act as auditors for certain
other funds advised by the Manager and its affiliates.
<PAGE>
Independent Auditors' Report
================================================================================
The Board of Trustees and Shareholders of Oppenheimer California
Tax-Exempt Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer California Tax-Exempt Fund as of July 31, 1996, and
the statements of operations for the seven month period then ended and the year
ended December 31, 1995, the statements of changes in net assets for the seven
month period ended July 31, 1996 and the years ended December 31, 1995 and 1994,
and the financial highlights for the seven month period ended July 31, 1996 and
each of the years in the five year period ended December 31, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996, 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 July 31, 1996, the
results of its operations for the seven month period then ended and the year
ended December 31, 1995, the changes in its net assets for the seven month
period ended July 31, 1996 and the years ended December 31, 1995 and 1994, and
the financial highlights for the seven month period ended July 31, 1996 and each
of the years in the five year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
August 21, 1996
<PAGE>
Statement of Investments July 31, 1996
<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--97.3%
- -----------------------------------------------------------------------------------------------------------------------------------
California--85.7% Anaheim, California Public Financing Authority Tax
Allocation Revenue Bonds, MBIA Insured, 6.45%, 12/28/1 Aaa/AAA $6,000,000 $ 6,382,830
------------------------------------------------------------------------------------------------------------
Avalon, California Community Improvement Agency
Tax Allocation Bonds, Series A, 7.25%, 8/1/21 NR/A- 200,000 217,346
------------------------------------------------------------------------------------------------------------
Berkeley, California Health Facility Revenue Refunding
Bonds, Alta Bates Medical Center, Series A, 6.50%, 12/1/11 Baa/BBB+ 4,500,000 4,560,066
------------------------------------------------------------------------------------------------------------
Big Bear Lake, California Water Revenue Refunding
Bonds, FGIC Insured, 6.25%, 4/1/12 Aaa/AAA/AAA 400,000 416,242
------------------------------------------------------------------------------------------------------------
California Educational Facilities Authority
Revenue Refunding Bonds:
Pooled Educational Facilities Program,
MBIA Insured, 7%, 3/1/16 Aaa/AAA 100,000 108,191
Stanford University, Series J, 6%, 11/1/16 Aaa/AAA 750,000 762,007
------------------------------------------------------------------------------------------------------------
California Health Facilities Financing Authority Revenue:
Bonds:
Children's Hospital of Los Angeles,
Prerefunded, Series A, 7.125%, 6/1/21 Aaa/NR 1,000,000 1,126,856
Henry Mayo Newhall Project, Series A, 8%, 10/1/18 NR/A 3,000,000 3,230,445
La Palma Hospital Medical Center, 7.10%, 2/1/13 NR/A 1,875,000 1,959,467
Refunding Bonds:
Adventist Health System-West, Series B,
MBIA Insured, 6.50%, 3/1/07 Aaa/AAA 315,000 338,477
Catholic Health Care West, Series A,
MBIA Insured, 5%, 7/1/11(1) Aaa/AAA 7,500,000 7,019,812
Hospital of the Good Samaritan, 7%, 9/1/21 Baa/A- 1,000,000 1,052,830
------------------------------------------------------------------------------------------------------------
California Housing Finance Agency Home Mtg.
Revenue Bonds:
Series A, 7.35%, 8/1/11 Aa/AA- 80,000 85,594
Series C, 6.75%, 2/1/25 Aa/AA- 9,980,000 10,445,117
Series C, 7.60%, 8/1/30 Aa/AA- 1,580,000 1,676,871
Series E-1, 6.45%, 2/1/12 Aa/AA- 750,000 782,544
------------------------------------------------------------------------------------------------------------
California Housing Finance Agency Single Family
Mtg. Purchase Revenue Bonds, Series A-2, 6.45%, 8/1/25 Aaa/AAA 8,000,000 8,217,447
------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority:
Revenue Bonds, Pacific Gas & Electric Co. Project,
Series B, 8.875%, 1/1/10 A2/A 2,275,000 2,442,128
Revenue Refunding Bonds, San Diego Gas & Electric Co.
Project, Series A, 5.90%, 6/1/14 NR/NR 1,500,000 1,519,729
Solid Waste Disposal Revenue Refunding Bonds,
Escrowed to Maturity, North County Recycling
Center, Series A, 6.75%, 7/1/11 Aaa/AAA 500,000 564,137
------------------------------------------------------------------------------------------------------------
California State Department of Water Resources
Revenue Bonds, Central Valley Project,
Prerefunded, Series H, 6.90%, 12/1/25 Aaa/AA 3,595,000 3,950,200
------------------------------------------------------------------------------------------------------------
California State Franchise Tax Board Refunding
Certificates of Participation, 6.90%, 10/1/06 A/A- 1,000,000 1,073,853
------------------------------------------------------------------------------------------------------------
California State General Obligation Refunding Bonds,
AMBAC Insured, 5.15%, 10/1/19 Aaa/AAA/AAA 1,000,000 907,020
6 Oppenheimer California Tax-Exempt Fund
<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, Series A,
AMBAC Insured, 5.25%, 1/1/21 Aaa/AAA/AAA $10,000,000 $ 9,176,219
Department of Corrections-Madera State Prison,
Series E, 5.50%, 6/1/15 A1/A-/A- 3,000,000 2,854,566
Regents of the University of California, Prerefunded,
Series A, 7%, 9/1/15 Aaa/AAA/AAA 9,650,000 10,724,179
------------------------------------------------------------------------------------------------------------
Calleguas-Las Virgines, California Public Financing
Authority Installment Purchase Revenue Refunding Bonds,
Calleguas Municipal Water District, FGIC Insured,
5.125%, 7/1/14 Aaa/AAA/AAA 750,000 701,527
------------------------------------------------------------------------------------------------------------
Campbell, California Certificates of Participation,
Civic Center Project:
Prerefunded, 6.75%, 10/1/17 Aaa/NR 1,870,000 2,087,937
Unrefunded Balance, 6.75%, 10/1/17 A/A- 1,130,000 1,190,073
------------------------------------------------------------------------------------------------------------
Capistrano, California Unified School District
Community Facilities District Special Tax Bonds,
No. 87-1, 7.60%, 9/1/14 NR/NR 4,000,000 4,343,055
------------------------------------------------------------------------------------------------------------
Central California Joint Powers Health Financing
Authority Certificates of Participation, Community
Hospitals of Central California Project, 5%, 2/1/23 A/NR/A- 4,000,000 3,361,128
------------------------------------------------------------------------------------------------------------
Contra Costa, California Transportation
Authority Sales Tax Revenue Bonds,
Series A, FGIC Insured, 6.50%, 3/1/09 Aaa/AAA/AAA 750,000 826,037
------------------------------------------------------------------------------------------------------------
Corona, California Certificates of Participation,
Prerefunded, Series B, 10%, 11/1/20 Aaa/AAA 13,175,000 17,164,416
------------------------------------------------------------------------------------------------------------
East Bay, California Regional Park District General
Obligation Bonds, Series B, 6.375%, 9/1/10 Aa/AA- 500,000 524,825
------------------------------------------------------------------------------------------------------------
Fairfield, California Public Finance Authority Revenue
Refunding Bonds, Municipal Park Improvement
District No. 1, FGIC Insured, 6.25%, 7/1/14 Aaa/AAA/AAA 1,000,000 1,035,236
------------------------------------------------------------------------------------------------------------
Foothill/Eastern Transportation Corridor Agency
California Toll Road Revenue Bonds, Sr. Lien,
Series A, 6.50%, 1/1/32 Baa/BBB-/BBB 4,600,000 4,641,216
------------------------------------------------------------------------------------------------------------
Fresno, California Unified School District
Certificates of Participation, 7%, 5/1/12 A/BBB+ 250,000 265,111
------------------------------------------------------------------------------------------------------------
Fresno, California Water System Revenue Bonds,
Prerefunded, Series A, 7.30%, 6/1/20 NR/NR 1,500,000 1,614,726
------------------------------------------------------------------------------------------------------------
Industry, California Improvement Bond Act of 1915 Bonds,
Assessment District No. 91-1, 7.65%, 9/2/21 NR/NR 1,750,000 1,753,801
------------------------------------------------------------------------------------------------------------
Industry, California Urban Development Agency Tax
Allocation Bonds:
Transportation Distribution Industrial Redevelopment
Project No. 2, MBIA Insured, 6.50%, 11/1/07 Aaa/AAA 260,000 281,289
Transportation Distribution Project No. 3, 6.90%, 11/1/07 NR/A- 500,000 534,682
------------------------------------------------------------------------------------------------------------
Intermodal Container Transfer Facility Joint Power
Authority California Revenue Refunding Bonds, Southern
Pacific Transportation Co., Series A, 7.70%, 11/1/14 Aa3/A 1,000,000 1,064,668
7 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statement of Investments (Continued)
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
California (continued) La Quinta, California Redevelopment Agency Refunding
Tax Allocation Bonds, La Quinta Project, 8.40%, 9/1/12 Aaa/AAA $1,000,000 $1,163,065
------------------------------------------------------------------------------------------------------------
Long Beach, California Harbor Revenue Bonds,
5.125%, 5/15/18 Aa/AA- 5,000,000 4,502,100
------------------------------------------------------------------------------------------------------------
Los Angeles County, California Certificates of Participation:
6.50%, 3/1/10 Baa1/BBB 1,500,000 1,569,721
Correctional Facilities Project, MBIA Insured, 6.50%, 9/1/13 Aaa/AAA 3,600,000 3,757,348
Disney Parking Project, Zero Coupon:
6.924%, 9/1/10(2) Baa1/BBB/A- 5,960,000 2,362,388
6.95%, 9/1/11(2) Baa1/BBB/A- 2,900,000 1,068,557
7.03%, 9/1/13(2) Baa1/BBB/A- 4,500,000 1,426,342
------------------------------------------------------------------------------------------------------------
Los Angeles County, California Transportation
Commission Sales Tax Revenue Bonds,
Prerefunded, Series A, 6.75%, 7/1/11 Aaa/AA-/A+ 4,260,000 4,736,822
------------------------------------------------------------------------------------------------------------
Los Angeles, California Community Redevelopment Agency:
Financing Authority Revenue Bonds, Grand Central
Square Multifamily Housing, Series A, 5.90%, 12/1/13 Baa1/BBB+ 500,000 472,994
Financing Authority Revenue Bonds, Grand Central
Square Multifamily Housing, Series A, 5.90%, 12/1/26 Baa1/BBB+ 2,600,000 2,325,183
Tax Allocation Refunding Bonds, North Hollywood,
Series C, MBIA Insured, 7%, 7/1/15 Aaa/AAA 2,000,000 2,185,246
------------------------------------------------------------------------------------------------------------
Los Angeles, California Convention & Exhibition
Center Authority Refunding Certificates of
Participation, Prerefunded, Series A, 7.375%, 8/15/18 Aaa/AAA 7,400,000 8,149,213
------------------------------------------------------------------------------------------------------------
Los Angeles, California Unified School District
Certificates of Participation, Dr. Francisco
Bravo Medical Project, 6.60%, 6/1/06 A/A-/A 250,000 268,612
------------------------------------------------------------------------------------------------------------
M-S-R Public Power Agency of California Revenue:
Bonds, San Juan Project, Series C,
AMBAC Insured, 6.875%, 7/1/19 Aaa/AAA/AAA 2,000,000 2,059,202
Refunding Bonds, San Juan Project,
Series C, 6.875%, 7/1/19 A/A 760,000 781,050
------------------------------------------------------------------------------------------------------------
Merced, California Public Financing Authority Tax
Allocation Bonds, Series A-1, 5.50%, 12/1/10 NR/A-- 500,000 481,724
------------------------------------------------------------------------------------------------------------
Metropolitan Water District of Southern California
Waterworks Revenue Refunding Bonds, 5.55%, 10/30/20 Aa/AA 9,400,000 8,919,603
------------------------------------------------------------------------------------------------------------
Northern California Transmission Agency Revenue Bonds,
California-Oregon Transmission Project, Prerefunded,
Series A, MBIA Insured, 7%, 5/1/24 Aaa/AAA 7,300,000 8,033,905
------------------------------------------------------------------------------------------------------------
Oakland, California Redevelopment Agency Bonds,
MBIA Insured, Inverse Floater, 8.169%, 9/1/19(3) Aaa/AAA 4,300,000 4,206,152
------------------------------------------------------------------------------------------------------------
Oakland, California Revenue Refunding Bonds,
Series A, FGIC Insured, 7.60%, 8/1/21 Aaa/AAA/AAA 2,000,000 2,152,322
------------------------------------------------------------------------------------------------------------
Orange County, California Community Facilities
District Special Tax Bonds:
No. 87-3, Prerefunded, Series A, 8.05%, 8/15/08 NR/NR 3,000,000 3,292,143
No. 88-1, Aliso Viejo, Prerefunded, Series A, 7.10%, 8/15/05 NR/AAA 1,440,000 1,649,791
No. 88-1, Aliso Viejo, Prerefunded, Series A, 7.35%, 8/15/18 NR/AAA 8,000,000 9,256,119
8 Oppenheimer California Tax-Exempt Fund
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
California (continued) Pittsburg, California Improvement Bond Act of 1915 Bonds,
Assessment District 1990-01, 7.75%, 9/2/20 NR/NR $ 1,235,000 $ 1,256,579
------------------------------------------------------------------------------------------------------------
Pomona, California Single Family Mtg.
Revenue Refunding Bonds:
Escrowed to Maturity, Series A, 7.60%, 5/1/23 NR/AAA 4,500,000 5,445,643
Series B, 7.50%, 8/1/23 Aaa/AAA 500,000 605,052
------------------------------------------------------------------------------------------------------------
Rancho California Water District Financing Authority
Revenue Refunding Bonds, AMBAC Insured, 5%, 8/15/14 Aaa/AAA/AAA 4,500,000 4,152,532
------------------------------------------------------------------------------------------------------------
Redding, California Electric System Revenue
Certificates of Participation:
FGIC Insured, Inverse Floater, 7.484%, 6/1/19(3) Aaa/AAA/AAA 4,000,000 3,680,304
MBIA Insured, Inverse Floater, 8.802%, 7/8/22(3) Aaa/AAA 2,500,000 2,776,412
------------------------------------------------------------------------------------------------------------
Regents of the University of California Revenue
Bonds, Multiple Purpose Projects, Prerefunded,
Series A, 6.875%, 9/1/16 NR/A- 1,700,000 1,923,599
------------------------------------------------------------------------------------------------------------
Riverside County, California Community Facilities
District Special Tax Bonds, No. 88-12, 7.55%, 9/1/17 NR/NR 3,000,000 3,185,085
------------------------------------------------------------------------------------------------------------
Riverside County, California Single Family Mtg.
Revenue Bonds, Series A, 7.80%, 5/1/21 Aaa/AAA 300,000 369,121
------------------------------------------------------------------------------------------------------------
Sacramento County, California Single Family Mtg.
Revenue Bonds, Escrowed to Maturity, 8.125%, 7/1/16 Aaa/AAA 10,000,000 12,511,769
------------------------------------------------------------------------------------------------------------
Sacramento, California Cogeneration Authority Revenue
Bonds, Procter & Gamble Project, 6.50%, 7/1/14 NR/BBB- 5,000,000 5,061,995
------------------------------------------------------------------------------------------------------------
Sacramento, California Municipal Utility
District Electric Revenue:
Bonds, Prerefunded, Series W, 7.50%, 8/15/18 Aaa/AAA/A- 5,000,000 5,344,324
Refunding Bonds, FGIC Insured, Inverse Floater,
9.021%, 8/15/18(3) Aaa/AAA/AAA 5,500,000 5,689,931
------------------------------------------------------------------------------------------------------------
Sacramento, California Power Authority Revenue
Bonds, Cogeneration Project, 6%, 7/1/22 NR/BBB- 5,000,000 4,796,985
------------------------------------------------------------------------------------------------------------
Saddleback Community College District, California
Refunding Certificates of Participation,
BIG Insured, 7%, 8/1/19 Aaa/AAA 1,000,000 1,060,817
------------------------------------------------------------------------------------------------------------
San Bernardino County, California Certificates of
Participation, Medical Center Financing Project,
5.50%, 8/1/17 Baa1/A- 5,250,000 4,770,223
------------------------------------------------------------------------------------------------------------
San Diego County, California Certificates of Participation,
MBIA Insured, Inverse Floater, 8.996%, 11/18/19(3) A1/A 2,000,000 2,131,618
------------------------------------------------------------------------------------------------------------
San Diego County, California Water Authority Revenue
Certificates of Participation, Series 91-B,
MBIA Insured, Inverse Floater, 9.04%, 4/8/21(3) Aaa/AAA 3,000,000 3,229,680
------------------------------------------------------------------------------------------------------------
San Joaquin Hills, California Transportation Corridor
Agency Toll Road Revenue Bonds, Sr. Lien:
5%, 1/1/33 NR/NR/BBB 8,000,000 6,589,255
6.75%, 1/1/32 NR/NR/BBB 7,000,000 7,170,730
9 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statement of Investments (Continued)
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
California (continued) Santa Margarita/Dana Point, California Authority
Revenue Bonds, Improvement Districts 3-3A-4 & 4A,
Series B, MBIA Insured, 7.25%, 8/1/14 Aaa/AAA $ 680,000 $ 798,523
------------------------------------------------------------------------------------------------------------
Sonoma County, California Certificates of
Participation, 6.75%, 10/1/07 A1/A+ 150,000 161,369
------------------------------------------------------------------------------------------------------------
Southern California Home Financing Authority Single
Family Mtg. Revenue Bonds, Series A, 7.35%, 9/1/24 NR/AAA 1,670,000 1,749,462
------------------------------------------------------------------------------------------------------------
Southern California Public Power Authority Transmission
Project Revenue Bonds, Inverse Floater, 7.569%, 7/1/12(3) Aa/A+ 5,500,000 5,580,784
------------------------------------------------------------------------------------------------------------
Victorville, California Special Tax Bonds, Community
Facilities District No. 90-1, Series A, 8.30%, 9/1/16 NR/NR 1,265,000 1,064,879
------------------------------------------------------------------------------------------------------------
West & Central Basin Financing Authority California
Revenue Refunding Bonds, West Basin Refunding Project,
Series A, AMBAC Insured, 5%, 8/1/16 Aaa/AAA/AAA 3,000,000 2,704,950
-----------
291,615,123
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Possessions--11.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Guam Power Authority Revenue Bonds,
Series A, 6.625%, 10/1/14 NR/BBB 2,000,000 2,057,874
------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth General Obligation Bonds:
6.50%, 7/1/15 Baa1/A 3,000,000 3,271,791
MBIA Insured, Inverse Floater, 6.62%, 7/1/08(3) Aaa/AAA 3,500,000 3,628,040
------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue:
Bonds:
Prerefunded, Series T, 6.625%, 7/1/18 NR/AAA 1,995,000 2,217,861
Series Y, 5.50%, 7/1/36 Baa1/A 9,025,000 8,446,587
Unrefunded Balance, Series T, 6.625%, 7/1/18 NR/AAA 4,005,000 4,461,201
Refunding Bonds, Series X, 5.25%, 7/1/21 Baa1/A 500,000 453,595
------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue Bonds,
Series P, 7%, 7/1/21 Aaa/A- 4,000,000 4,489,440
------------------------------------------------------------------------------------------------------------
Puerto Rico Housing Bank & Finance Agency
Single Family Mtg. Revenue Bonds,
Affordable Housing Mtg.--Portfolio I, 6.25%, 4/1/29 Aaa/AAA 6,600,000 6,619,667
------------------------------------------------------------------------------------------------------------
Puerto Rico Housing Finance Corp. Single Family Mtg.
Revenue Bonds, Portfolio 1, Series B, 7.65%, 10/15/22 Aaa/AAA 910,000 946,011
------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical &
Environmental Pollution Control:
Facilities Tourist Revenue Bonds, Mennonite General
Hospital Project, Series A, 6.50%, 7/1/12 NR/BBB-/BBB 2,400,000 2,413,666
Revenue Bonds, American Home Products, 5.10%, 12/1/18 Aaa/NR 500,000 462,329
-----------
39,468,062
-----------
Total Municipal Bonds and Notes (Cost $324,159,878) 331,083,185
</TABLE>
10 Oppenheimer California Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
<S> <C> <C> <C>
===================================================================================================================================
Short-Term Tax-Exempt Obligations--1.3%
- -----------------------------------------------------------------------------------------------------------------------------------
San Bernardino County, California Housing Authority Multifamily
Housing Revenue Refunding Bonds:
Arrowview Park Apts. Project, Series A, 3.35%, 9/1/96(4) $2,380,000 $ 2,380,000
Monterey Villas Apts. Project, Series A, 3.35%, 10/1/96(4) 2,125,000 2,125,000
------------
Total Short-Term Tax-Exempt Obligations (Cost $4,505,000) 4,505,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $328,664,878) 98.6% 335,588,185
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.4 4,653,491
---------- ------------
Net Assets 100.0% $340,241,676
========== ============
1. Securities with an aggregate market value of $935,975 are held in collateralized accounts to cover initial
margin requirements on open futures sales contracts. See Note 5 of Notes to Financial Statements.
2. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase.
3. Represents the current interest rate for a variable rate bond. These bonds known as "inverse floaters"
pay interest at a rate that varies inversely with short-term interest rates. As interest rates rise, inverse
floaters produce less current income. Their price may be more volatile than the price of a comparable fixed-rate
security. Inverse floaters amount to $30,922,921 or 9.09% of the Fund's net assets at July 31, 1996.
4. 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
July 31, 1996. This instrument may also have a demand feature which allows the recovery of principal at any
time, or at specified intervals not exceeding one year, on up to 30 days' notice. Maturity date shown represents
effective maturity based on variable rate and, if applicable, demand feature.
As of July 31, 1996, securities subject to the alternative minimum tax amounted to $49,672,276 or 14.60%
of the Fund's net assets.
Distribution of investments by industry, as a percentage of total investments at value, is as follows:
</TABLE>
<TABLE>
<CAPTION>
Industry Market Value Percent
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utilities $76,605,802 22.8%
---------------------------------------------------------------------------------------------------------------
Lease/Rental 72,354,069 21.6
---------------------------------------------------------------------------------------------------------------
Housing 49,927,293 14.9
---------------------------------------------------------------------------------------------------------------
Special Tax Bonds 49,921,355 14.9
---------------------------------------------------------------------------------------------------------------
Transportation 39,828,502 11.9
---------------------------------------------------------------------------------------------------------------
Hospitals 25,062,745 7.5
---------------------------------------------------------------------------------------------------------------
General Obligation Bonds 9,366,912 2.8
---------------------------------------------------------------------------------------------------------------
Pollution Control 3,961,858 1.2
---------------------------------------------------------------------------------------------------------------
Education 2,793,797 0.8
---------------------------------------------------------------------------------------------------------------
Letters of Credit 2,380,000 0.7
---------------------------------------------------------------------------------------------------------------
Government Agencies 2,125,000 0.6
---------------------------------------------------------------------------------------------------------------
Revenue Bonds 798,523 0.2
---------------------------------------------------------------------------------------------------------------
Corporate-Backed Municipals 462,329 0.1
------------ -----
$335,588,185 100.0%
============ =====
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statement of Assets and Liabilities July 31, 1996
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C>
Assets Investments, at value (cost $328,664,878)--see accompanying statement $335,588,185
---------------------------------------------------------------------------------------------------------------
Cash 347,617
---------------------------------------------------------------------------------------------------------------
Receivables:
Interest 5,253,188
Shares of beneficial interest sold 765,814
---------------------------------------------------------------------------------------------------------------
Other 15,899
------------
Total assets 341,970,703
====================================================================================================================================
Liabilities Payables and other liabilities:
Dividends 1,040,221
Shares of beneficial interest redeemed 370,515
Trustees' fees 109,273
Distribution and service plan fees 70,347
Daily variation on futures contracts--Note 5 51,500
Transfer and shareholder servicing agent fees 6,250
Other 80,921
------------
Total liabilities 1,729,027
====================================================================================================================================
Net Assets $340,241,676
============
====================================================================================================================================
Composition of Paid-in capital $333,255,015
Net Assets ---------------------------------------------------------------------------------------------------------------
Undistributed net investment income 868,145
---------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (776,510)
---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 6,895,026
---------------------------------------------------------------------------------------------------------------
Net assets $340,241,676
============
====================================================================================================================================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets
of $286,032,922 and 27,539,996 shares of beneficial interest outstanding) $10.39
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $10.91
---------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $52,038,162 and 5,008,911 shares of beneficial interest outstanding) $10.39
---------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $2,170,592 and 209,190 shares of beneficial interest outstanding) $10.38
See accompanying Notes to Financial Statements.
12 Oppenheimer California Tax-Exempt Fund
</TABLE>
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Seven Months Year Ended
Ended July 31, December 31,
1996(1) 1995
====================================================================================================================================
<S> <C> <C> <C>
Investment Income Interest $12,390,825 $ 18,437,507
====================================================================================================================================
Expenses Management fees--Note 4 1,097,974 1,638,210
---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 399,061 614,629
Class B 269,950 298,592
Class C 6,697 149
---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 95,613 142,732
---------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 74,630 22,260
---------------------------------------------------------------------------------------------------------------
Shareholder reports 53,338 83,457
---------------------------------------------------------------------------------------------------------------
Legal and auditing fees 33,476 35,209
---------------------------------------------------------------------------------------------------------------
Insurance expenses 10,891 16,860
---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 6,450 12,060
---------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A -- 12,414
Class B 4,351 6,003
Class C 669 4
---------------------------------------------------------------------------------------------------------------
Other 5,655 5,783
----------- ------------
Total expenses 2,058,755 2,888,362
Less reimbursement of expenses by OppenheimerFunds, Inc.--Note 4 -- (9,646)
----------- ------------
Net expenses 2,058,755 2,878,716
====================================================================================================================================
Net Investment Income 10,332,070 15,558,791
====================================================================================================================================
Realized and Net realized gain (loss) on:
Unrealized Investments 183,414 (187,865)
Gain (Loss) Closing of futures contracts 166,933 --
----------- ------------
Net realized gain (loss) 350,347 (187,865)
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (9,638,403) 33,596,236
----------- ------------
Net realized and unrealized gain (loss) (9,288,056) 33,408,371
====================================================================================================================================
Net Increase in Net Assets Resulting From Operations $ 1,044,014 $ 48,967,162
=========== ============
</TABLE>
1. The Fund changed its fiscal year end from December 31 to
July 31. See accompanying Notes to Financial Statements.
13 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Seven Months
Ended July 31, Year Ended December 31,
1996(1) 1995 1994
====================================================================================================================================
<S> <C> <C> <C> <C>
Operations Net investment income $ 10,332,070 $ 15,558,791 $ 15,748,324
---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 350,347 (187,865) (999,410)
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (9,638,403) 33,596,236 (39,209,125)
------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations 1,044,014 48,967,162 (24,460,211)
------------
====================================================================================================================================
Dividends and Dividends from net investment income:
Distributions to Class A (8,865,165) (13,975,299) (14,920,148)
Shareholders Class B (1,260,228) (1,412,825) (857,567)
Class C (30,161) (556) --
---------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A -- (350,447) --
Class B -- (50,636) --
Class C -- (153) --
====================================================================================================================================
Beneficial Net increase (decrease) in net assets resulting from
Interest beneficial interest transactions--Note 2:
Transactions Class A 8,617,533 35,765,117 (8,912,194)
Class B 12,021,290 17,684,830 12,644,856
Class C 2,058,790 122,526 --
====================================================================================================================================
Net Assets Total increase (decrease) 13,586,073 86,749,719 (36,505,264)
---------------------------------------------------------------------------------------------------------------
Beginning of period 326,655,603 239,905,884 276,411,148
------------ ------------ ------------
End of period [including undistributed (overdistributed)
net investment income of $868,145, $756,370 and
$(170,011), respectively] $340,241,676 $326,655,603 $239,905,884
============ ============ ============
</TABLE>
1. The Fund changed its fiscal year end from December 31 to
July 31.
See accompanying Notes to Financial Statements.
14 Oppenheimer California Tax-Exempt Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------
Seven
Months
Ended
July 31, Year Ended December 31,
1996(2) 1995 1994 1993 1992 1991
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.69 $ 9.45 $10.97 $10.35 $10.22 $ 9.86
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .58 .60 .62 .61 .66
Net realized and unrealized
gain (loss) (.30) 1.25 (1.51) .72 .20 .38
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations .03 1.83 (.91) 1.34 .81 1.04
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.33) (.58) (.61) (.65) (.60) (.62)
Dividends in excess of net
investment income -- (.01) -- -- -- --
Distributions from net realized gain -- -- -- (.07) (.08) (.06)
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.33) (.59) (.61) (.72) (.68) (.68)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.39 $10.69 $ 9.45 $10.97 $10.35 $10.22
====== ====== ====== ====== ====== ======
======================================================================================================================
Total Return, at Net Asset
Value(4) 0.34% 19.76% (8.49)% 13.26% 8.28% 10.93%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $286,033 $285,307 $219,682 $266,490 $204,349 $145,163
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $279,796 $250,188 $248,850 $245,193 $174,055 $115,661
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.53%(5) 5.64% 5.99% 5.74% 6.07% 6.52%
Expenses, before voluntary
assumption by the Manager 0.97%(5) 0.95% 0.96% 0.97% 1.07% 1.05%
Expenses, net of voluntary
assumption by the Manager N/A N/A N/A N/A N/A 0.73%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 14.0% 23.0% 21.9% 13.7% 26.8% 26.6%
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Class B Class C
--------------------------------------- ----------------
Seven Seven
Months Months Period
Ended Ended Ended
July 31, Year Ended December 31, July 31, Dec. 31,
1996(2) 1995 1994 1993(3) 1996(2) 1995(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.69 $ 9.44 $10.98 $10.72 $10.68 $10.46
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 .51 .54 .35 .27 .08
Net realized and unrealized
gain (loss) (.30) 1.25 (1.55) .34 (.30) .22
------ ------- ------- ------ ------ ------
Total income (loss) from
investment operations (.02) 1.76 (1.01) .69 (.03) .30
- -----------------------------------------------------------------------------------------------------------
Dividends and distributionsto shareholders:
Dividends from net investment
income (.28) (.50) (.53) (.36) (.27) (.07)
Dividends in excess of net
investment income -- (.01) -- -- -- (.01)
Distributions from net realized gain -- -- -- (.07) -- --
------ ------- ------- ------ ------ ------
Total dividends and distributions
to shareholders (.28) (.51) (.53) (.43) (.27) (.08)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.39 $10.69 $ 9.44 $10.98 $10.38 $10.68
====== ======= ======= ====== ====== ======
===========================================================================================================
Total Return, at Net Asset
Value(4) (0.12)% 18.97% (9.39)% 6.66% (0.19)% 2.90%
===========================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $52,038 $41,224 $20,224 $9,921 $2,171 $125
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $46,422 $29,918 $16,552 $5,218 $1,156 $ 91
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.74%(5) 4.82% 5.17% 4.57%(5) 4.54%(5) 4.56%(5)
Expenses, before voluntary
assumption by the Manager 1.74%(5) 1.72% 1.73% 1.79%(5) 1.80%(5) 1.68%(5)
Expenses, net of voluntary
assumption by the Manager N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 14.0% 23.0% 21.9% 13.7% 14.0% 23.0%
</TABLE>
(END RESTUBBED TABLE)
1. For the period from November 1, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended July 31, 1996 were $63,536,324 and $45,046,400, respectively.
See accompanying Notes to Financial Statements.
15 Oppenheimer California Tax-Exempt Fund
<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. On June 6, 1996, the Board of Trustees elected to
change the fiscal year end of the Fund from December 31 to July 31. Accordingly,
these financial statements include information for the seven month period from
January 1, 1996 to July 31, 1996. The Fund's investment objective is to seek as
high a level of current interest income exempt from federal and California
income taxes for individual investors as is consistent with preservation of
capital. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge. Class B and Class C shares may be subject to a
contingent deferred sales charge. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to a particular
class and exclusive voting rights with respect to matters affecting a single
class. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
asked price or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio pricing
service approved by the Board of Trustees. Such securities which cannot be
valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by the
Board of Trustees to determine fair value in good faith. Short-term "money
market type" debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At July 31, 1996, the Fund
had available for federal income tax purposes an unused capital loss carryover
of $874,000, which expires in 2002 and 2003.
- --------------------------------------------------------------------------------
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 seven months
ended July 31, 1996, a provision of $45,122 was made for the Fund's projected
benefit obligations, and payments of $2,831 were made to retired trustees,
resulting in an accumulated liability of $106,276 at July 31, 1996.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of premium amortization for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from their ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund.
16 Oppenheimer California Tax-Exempt Fund
<PAGE>
================================================================================
1. Significant
Accounting Policies
(continued)
During the seven months ended July 31, 1996, the Fund changed the classification
of distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with
income tax regulations. Accordingly, during the seven months ended July 31,
1996, amounts have been reclassified to reflect an increase in paid-in capital
of $41,183, a decrease in undistributed net investment income of $64,741, and a
decrease in accumulated net realized loss on investments of $23,558.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Original issue discount on securities purchased
is amortized over the life of the respective securities, in accordance with
federal income tax requirements. For bonds acquired after April 30, 1993, on
disposition or maturity, taxable ordinary income is recognized to the extent of
the lesser of gain or market discount that would have accrued over the holding
period. 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. The Fund concentrates its investments in
California and, therefore, may have more credit risks related to the economic
conditions of California than a portfolio with a broader geographical
diversification.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
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>
Seven Months Ended Year Ended Year Ended
July 31, 1996(2) December 31, 1995(1) December 31, 1994
------------------------- -------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount
- ------ ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 3,209,059 $ 33,325,829 5,047,063 $ 51,814,441 4,682,338 $ 47,539,656
Issued in connection with the
acquisition of Quest California
Tax-Exempt Fund--Note 6 -- -- 1,757,696 18,455,811 -- --
Dividends and distributions reinvested 487,581 5,059,245 805,760 8,234,996 895,069 9,014,619
Redeemed (2,856,210) (29,767,541) (4,166,682) (42,740,131) (6,611,428) (65,466,469)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) 840,430 $ 8,617,533 3,443,837 $ 35,765,117 (1,034,021) $ (8,912,194)
========== ============ ========== ============ ========== ============
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,589,523 $ 16,574,775 1,996,884 $ 20,575,685 1,595,370 $ 16,152,328
Dividends and distributions
reinvested 69,259 717,798 80,329 824,085 52,979 528,961
Redeemed (506,438) (5,271,283) (362,263) (3,714,940) (410,584) (4,036,433)
---------- ------------ ---------- ------------ ---------- ------------
Net increase 1,152,344 $ 12,021,290 1,714,950 $ 17,684,830 1,237,765 $ 12,644,856
========== ============ ========== ============ ========== ============
- ------------------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 213,392 $ 2,220,863 11,729 $ 123,162 -- $ --
Dividends and distributions
reinvested 1,712 17,557 36 383 -- --
Redeemed (17,583) (179,630) (96) (1,019) -- --
---------- ------------ ---------- ------------ ---------- ------------
Net increase 197,521 $ 2,058,790 11,669 $ 122,526 -- $ --
========== ============ ========== ============ ========== ============
</TABLE>
1. For the year ended December 31, 1995 for both Class A and Class B shares and
for the period from November 1, 1995 (inception of offering) to December 31,
1995 for Class C shares.
2. The Fund changed its fiscal year end from December 31 to July 31.
17 Oppenheimer California Tax-Exempt Fund
<PAGE>
Notes to Financial Statements (Continued)
================================================================================
3. Unrealized Gains and
Losses on Investments
At July 31, 1996, net unrealized appreciation on investments of $6,923,307 was
composed of gross appreciation of $10,915,501, and gross depreciation of
$3,992,194.
- --------------------------------------------------------------------------------
4. Management Fees
And Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.60% on the first
$200 million of average annual net assets, 0.55% on the next $100 million, 0.50%
on the next $200 million, 0.45% on the next $250 million, 0.40% on the next $250
million and 0.35% 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.
In 1995, the Manager reimbursed the Fund for SEC fees incurred in
connection with the acquisition of Quest California Tax-Exempt Fund.
For the seven months ended July 31, 1996, commissions (sales charges
paid by investors) on sales of Class A shares totaled $611,757, of which
$110,874 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class B
and Class C shares totaled $594,090 and $21,117, of which $1,664 was paid to an
affiliated broker/dealer for Class B shares. During the seven months ended July
31, 1996, OFDI received contingent deferred sales charges of $102,835 upon
redemption of Class B shares as reimbursement for sales commissions advanced by
OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
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. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the seven months ended July 31, 1996, OFDI paid $10,465 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted compensation type Distribution and Service Plans
for Class B and Class C shares to compensate OFDI for its services and costs in
distributing Class B and Class C shares and servicing accounts. Under the Plans,
the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class
B shares that are outstanding for 6 years or less and on Class C shares, as
compensation for sales commissions paid from its own resources at the time of
sale and associated financing costs. If the Plans are terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it incurred before the Plans were
terminated. OFDI also receives a service fee of 0.25% per year as compensation
for costs incurred in connection with the personal service and maintenance of
accounts that hold shares of the Fund, including amounts paid to brokers,
dealers, banks and other financial institutions. Both fees are computed on the
average annual net assets of Class B and Class C shares, determined as of the
close of each regular business day. During the seven months ended July 31, 1996,
OFDI retained $234,947 and $6,697, respectively, as compensation for Class B and
Class C sales commissions and service fee advances, as well as financing costs.
At July 31, 1996, OFDI had incurred unreimbursed expenses of $2,170,622 for
Class B and $32,971 for Class C.
18 Oppenheimer California Tax-Exempt Fund
<PAGE>
================================================================================
5. Futures Contracts
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable or
payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include
the possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value of
the underlying securities.
At July 31, 1996, the Fund had outstanding futures contracts to sell debt
securities as follows:
Number of Valuation
Expiration Futures as of Unrealized
Date Contracts July 31, 1996 Depreciation
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 9/96 54 $5,892,750 $23,281
Municipal Bonds 9/96 20 2,258,125 5,000
---------- -------
$8,150,875 $28,281
========== =======
================================================================================
6. Acquisition of
Quest California
Tax-Exempt Fund
On November 24, 1995, Oppenheimer California Tax-Exempt Fund acquired all of the
net assets of Quest California Tax-Exempt Fund, pursuant to an Agreement and
Plan of Reorganization approved by the Quest California Tax-Exempt Fund
shareholders on November 16, 1995. The Fund issued 1,757,696 shares of
beneficial interest, valued at $18,455,811, in exchange for the net assets,
resulting in combined net assets of $319,511,243 on November 24, 1995. The net
assets acquired included net unrealized appreciation of $602,361. The exchange
was tax-free.
<PAGE>
APPENDIX A
Description of Ratings Categories
Municipal Bonds
- - Moody's Investor Services, Inc. The ratings of Moody's Investors
Service, Inc. ("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa,
Ba, B, Caa, Ca and C. 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. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds
in this class. Bonds which are rated "B" generally lack
characteristics of the desirable investment. Assurance of interest
and principal payments or of maintenance of other terms of the
contract over any long period of time may be small. Bonds which
are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest. Bonds which are rated "Ca" represent
obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings. Bonds
which are rated "C" are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing. Those bonds in the Aa, A,
Baa, Ba and B groups which Moody's believes possess the strongest
investment attributes are designated Aa1, A1, Baa1, Ba1 and B1
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 ratings of Standard & Poor's
Corporation ("S&P") for Municipal Bonds are AAA (Prime), AA (High
Grade), A (Good Grade), BBB (Medium Grade), BB, B, CCC, CC, and C
(speculative grade). Bonds rated in the top four categories (AAA,
AA, A, BBB) are commonly referred to as "investment 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 rating 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.
Bonds rated "BB" have less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which would lead to inadequate capacity to meet
timely interest and principal payments. Bonds rated "B" have a
greater vulnerability to default, but currently has the capacity to
meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. Bonds rated "CCC"
have a current identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay
interest and repay principal. Bonds noted "CC" typically are debt
subordinated to senior debt which is assigned on actual or implied
"CCC" debt rating.
Bonds rated "C" typically are debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition
has been filed, but debt service payments are continued. Bonds
rated "D" are in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during the
grace period. The "D" rating also will be used upon the filing of
a bankruptcy petition if debt service payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of
a plus or minus sign to show relative standing within the major
rating categories.
- - Fitch. The ratings of Fitch Investors Service, Inc. for
Municipal Bonds are AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD,
and D. 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. Bonds rated AAA, AA, A
and BBB are considered to be of investment grade quality. Bonds
rated below BBB are considered to be of speculative quality. The
ratings of "BB" is assigned to bonds considered by Fitch to be
"speculative." The rating of "B" is assigned to bonds considered
by Fitch to be "highly speculative." Bonds rated "CCC" have
certain identifiable characteristics which, if not remedied, may
lead to default. Bonds rated "CC" are minimally protected.
Default in payment of interest and/or principal seems probable over
time. Bonds rated "C" are in imminent default in payment of
interest or principal. Bonds rated "DDD", "DD" and "D" are in
default on interest and/or principal payments. DDD represents the
highest potential for recovery on these bonds, and D represents the
lowest potential for recovery.
- Duff & Phelps' The ratings of Duff & Phelps are as follows:
AAA which are judged to be the "highest credit quality". The risk
factors are negligible, being only slightly more than for risk-free
US Treasury debt. AA+, AA & AA- High credit quality protection
factors are strong. Risk is modest but may vary slightly from time
to time because of economic conditions. A+, A & A- Protection
factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress. BBB+, BBB &
BBB- Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in
risk during economic cycles. BB+, BB & BB- Below investment grade
but deemed to meet obligations when due. Present or prospective
financial protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up or
down frequently within the category. B+, B & B- Below investment
grade and possessing risk that obligations will not be met when
due. Financial protection factors will fluctuate widely according
to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher of lower rating grade. CCC Well below
investment grade securities. Considerable uncertainty exists as to
timely payment of principal interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic industry conditions, and/or with unfavorable
company developments. DD Defaulted debt obligations issuer failed
to meet scheduled principal and/or interest payments. DP Preferred
stock with dividend arreages.
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, SP-2, and SP-3. 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. SP-3 describes issues that have a speculative
capacity to pay principal and interest.
- Fitch's rating for Municipal Notes due in three years or
less are F-1+, F-1, F-2, F-3, F-S and D. 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. F-S describes notes with weak credit
quality. Issues rated D are in actual or imminent payment default.
Corporate Debt
The "other debt securities" included in the definition of
temporary investments are corporate (as opposed to municipal) debt
obligations. The Moody's, S&P and Fitch corporate debt ratings
shown do not differ materially from those set forth above for
Municipal Bonds.
Commercial Paper
- Moody's The ratings of commercial paper by Moody's are
Prime-1, Prime-2, Prime-3 and Not Prime. Issuers rated Prime-1
have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations. Issuers rated
Prime-3 have an acceptable capacity for repayment of short-term
promissory obligations. Issuers rated Not Prime do not fall within
any of the Prime rating categories.
- S&P The ratings of commercial paper by S&P are A-1, A-2, A-
3, B, C, and D. A-1 indicates that the degree of safety regarding
timely payment is strong. A-2 indicates capacity for timely
payment is satisfactory. However, the relative degree of safety is
not as high as for issues designated A-1. A-3 indicates an
adequate capacity for timely payments. They are, however, more
vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations. B indicates only
speculative capacity for timely payment. C indicates a doubtful
capacity for payment. D is assigned to issues in default.
- Fitch The ratings of commercial paper by Fitch are similar
to its ratings of Municipal Notes, above.
<PAGE>
APPENDIX B
Tax-Equivalent Yields
The equivalent yield tables below compare tax-free income with
taxable income under Federal individual income tax rates, and
California state individual income tax rates effective January 1,
1996. "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). For years
beginning after January 1, 1996 the top marginal California
personal tax rate will be reduced to 9.3% and the top combined
marginal tax rate will be 45.22%.
<TABLE>
<CAPTION>
Combined Taxable Income
Joint Return Effective Tax Bracket Oppenheimer California Tax-Exempt Fund Yield of:
But Cali- 2.00% 2.50% 3.00% 3.50% 3.82% 4.00% 4.37%
Over Not Over Federal fornia Combined Is Approximately Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 22,898 $ 36,138 15.00% 4.00% 18.40% 2.45% 3.06% 3.68% 4.29% 4.68% 4.90% 5.36%
$ 36,138 $ 40,100 15.00% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 4.78% 5.01% 5.47%
$ 40,100 $ 50,166 28.00% 6.00% 32.32% 2.96% 3.69% 4.43% 5.17% 5.64% 5.91% 6.46%
$ 50,166 $ 63,400 28.00% 8.00% 33.76% 3.02% 3.77% 4.53% 5.28% 5.77% 6.04% 6.60%
$ 63,400 $ 96,900 28.00% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 5.85% 6.13% 6.69%
$ 96,900 $147,700 31.00% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.10% 6.39% 6.98%
$147,700 $219,872 36.00% 9.30% 41.95% 3.45% 4.31% 5.17% 6.03% 6.58% 6.89% 7.53%
$219,872 $263,750 36.00% 10.00% 42.40% 3.47% 4.34% 5.21% 6.08% 6.63% 6.94% 7.59%
$263,750 $439,744 39.60% 10.00% 45.64% 3.68% 4.60% 5.52% 6.44% 7.03% 7.36% 8.04%
$439,744 and above 39.60% 11.00% 46.24% 3.72% 4.65% 5.58% 6.51% 7.11% 7.44% 8.13%
4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
Is Approximately Equivalent to a Taxable Yield of:
5.51% 6.13% 6.74% 7.35% 7.97% 8.58%
5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
6.65% 7.39% 8.13% 8.87% 9.60% 10.34%
6.79% 7.55% 8.30% 9.06% 9.81% 10.57%
6.89% 7.66% 8.42% 9.19% 9.95% 10.72%
7.19% 7.99% 8.79% 9.59% 10.39% 11.19%
7.75% 8.61% 9.47% 10.34% 11.20% 12.06%
7.81% 8.68% 9.55% 10.42% 11.28% 12.15%
8.28% 9.20% 10.12% 11.04% 11.96% 12.88%
8.37% 9.30% 10.23% 11.16% 12.09% 13.02%
</TABLE>
Single Return:
<TABLE>
<CAPTION>
But
Over Not Over 2.00% 2.50% 3.00% 3.50% 3.82% 4.00% 4.37%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 18,069 $ 24,000 15.00% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 4.78% 5.01% 5.47%
$ 24,000 $ 25,083 28.00% 6.00% 32.32% 2.96% 3.69% 4.43% 5.17% 5.64% 5.91% 6.46%
$ 25,083 $ 31,700 28.00% 8.00% 33.76% 3.02% 3.77% 4.53% 5.28% 5.77% 6.04% 6.60%
$ 31,700 $ 58,150 28.00% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 5.85% 6.13% 6.69%
$ 58,150 $109,936 31.00% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.10% 6.39% 6.98%
$109,936 $121,300 31.00% 10.00% 37.90% 3.22% 4.03% 4.83% 5.64% 6.15% 6.44% 7.04%
$121,300 $219,872 36.00% 10.00% 42.40% 3.47% 4.34% 5.21% 6.08% 6.63% 6.94% 7.59%
$219,872 $263,750 36.00% 11.00% 43.04% 3.51% 4.39% 5.27% 6.14% 6.71% 7.02% 7.67%
$263,750 and above 39.60% 11.00% 46.24% 3.72% 4.65% 5.58% 6.51% 7.11% 7.44% 8.13%
4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
Is Approximately Equivalent to a Taxable Yield of:
5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
6.65% 7.39% 8.13% 8.87% 9.60% 10.34%
6.79% 7.55% 8.30% 9.06% 9.81% 10.57%
6.89% 7.66% 8.42% 9.19% 9.95% 10.72%
7.19% 7.99% 8.79% 9.59% 10.39% 11.19%
7.25% 8.05% 8.86% 9.66% 10.47% 11.27%
7.81% 8.68% 9.55% 10.42% 11.28% 12.15%
7.90% 8.78% 9.66% 10.53% 11.41% 12.29%
8.37% 9.30% 10.23% 11.16% 12.09% 13.02%
</TABLE>
<PAGE>
APPENDIX C
Municipal Bond Industry Classifications
Electric Resource Recovery
Gas
Water Higher Education
Sewer Education
Telephone
Lease Rental
Adult Living Facilities Hospital
Non Profit Organization
General Obligation Highways
Special Assessment Marine/Aviation Facilities
Sales Tax
Multi Family Housing
Manufacturing, Non Durables Single Family Housing
Manufacturing, Durables
Pollution Control
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
<PAGE>
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements
--------------------
(1) Financial Highlights - See Parts A and B: Filed
herewith.
(2) Independent Auditors' Report - See Part B: Filed
herewith.
(3) Statement of Investments at 7/31/96 - See Part B:
Filed herewith.
(4) Statement of Assets and Liabilities 7/31/96 - See
Part B: Filed herewith.
(5) Statement of Operations at 7/31/96 - See Part B:
Filed herewith.
(6) Statements of Changes in Net Assets for the fiscal
years ended 12/31/95 and 7/31/96 - 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
September 16, 1996: Filed herewith.
(2) By-Laws of the Registrant: Previously filed with
Pre-Effective Amendment No. 1 to Registrant's Registration
Statement, 10/7/88, refiled with Registrant's Post-Effective
Amendment No. 10, 4/25/95, pursuant to Item 102 of Regulation S-T,
and incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed
herewith.
(ii) Specimen Class B Share Certificate: Filed
herewith.
(iii) Specimen Class C Share Certificate: Filed
herewith.
(5) Investment Advisory Agreement dated 10/22/90 between
the Registrant and Oppenheimer Management Corporation: Previously
filed with Post-Effective Amendment No. 3 to Registrant's
Registration Statement, 2/28/91, refiled with Registrant's Post-
Effective Amendment No. 10, 4/25/95, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(6) (1) General Distributor's Agreement dated 12/10/92
between the Registrant and Oppenheimer Fund Management, Inc.:
Previously filed with Post-Effective Amendment No. 6 to
Registrant's Registration Statement, 4/28/93, refiled with
Registrant's Post-Effective Amendment No. 10, 4/25/95, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(ii) Form of OppenheimerFunds Distributor, Inc.
Dealer Agreement: Filed with Post-Effective Amendment No. 14 to
the Registration Statement of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(iii) Form of OppenheimerFunds Distributor, Inc.
Agency Agreement: Filed with Post-Effective Amendment No. 14 to
the Registration Statement of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(iv) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities dated 10/1/86:
Previously filed with Post-Effective Amendment No. 25 of
Oppenheimer Growth Fund (Reg. No. 2-45272), 11/1/86, refiled with
Post-Effective Amendment No. 45 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(v) Form of OppenheimerFunds Distributor, Inc.
Broker Agreement: Filed with Post-Effective Amendment No. 14 to
the Registration Statement of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(7) Retirement Plan for Non-Interested Trustees or
Directors (adopted 6/7/90): Previously filed with Post-Effective
Amendment No. 97 of Oppenheimer Fund (Reg. No. 2-14586), 8/30/90,
refiled with Post-Effective Amendment No. 45 of Oppenheimer Growth
Fund (Reg. No. 2-45272), 8/22/94, pursuant to Item 102 of
Regulation S-T, 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, refiled with Registrant's Post-Effective Amendment No.
10, 4/25/95, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 10/6/88:
Previously filed with Pre-Effective Amendment No. 1 to Registrant's
Registration Statement, 10/7/88, refiled with Registrant's Post-
Effective Amendment No. 10, 4/25/95 pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(11) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) (i) Service Plan and Agreement for Class A shares
under Rule 12b-1 dated 6/10/93: Filed with Post-Effective
Amendment No. 8 to Registrant's Registration Statement, 4/29/94,
and incorporated herein by reference.
(ii) Form of Distribution Plan and Agreement for
Class B shares under Rule 12b-1 dated 9/12/95: Filed with Post-
Effective Amendment No. 11 to Registrant's Registration Statement,
8/31/95, and incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement
for Class C Shares under Rule 12b-1 dated 11/1/95: Filed with Post-
Effective Amendment No. 11 to Registrant's Registration Statement,
8/31/95, and incorporated herein by reference.
(16) Performance Computation Schedule: Filed herewith.
(17) (i) Financial Data Schedule for Class A Shares
for the fiscal year ended 7/31/96: Filed herewith.
(ii) Financial Data Schedule for Class B Shares
for the fiscal year ended 7/31/96: Filed herewith.
(ii) Financial Data Schedule for Class C Shares
for the fiscal period ended 7/31/96: Filed herewith.
-- Powers of Attorney: Previously filed with
Registrant's Post-Effective Amendment No. 13, 4/20/96 (Bridget A.
Macaskill); others previously filed (all other Trustees) with
Registrant's Post-Effective Amendment No. 7, 3/1/94, and
incorporated herein by reference.
(18) Oppenheimer Funds Multiple Class Plan under Rule
18f-3 dated 10/24/95: Filed with Registrant's Post-Effective
Amendment No. 12, 10/31/95, 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 of
Title of Class October 1, 1996
- -------------- ----------------
Class A Shares of Beneficial Interest 5,894
Class B Shares of Beneficial Interest 1,355
Class C Shares of Beneficial Interest 51
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 Registrant's Post-Effective Amendment No.
12, 10/31/95, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid
by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such trustee, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the
same capacity to other registered investment companies as described
in Parts A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other
business, profession, vocation or employment of a substantial
nature in which each officer and director of OppenheimerFunds, Inc.
is, or at any time during the past two fiscal years has been,
engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- ------------------------------
- -
<S> <C>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer
Real Asset Management, Inc.
("ORAMI"); formerly Vice
President of Equity
Derivatives at Salomon
Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; a
Chartered Financial Analyst;
Senior Vice President of
HarbourView; prior to March,
1996 he was the senior equity
portfolio manager for the
Panorama Series Fund, Inc.
(the "Company") and other
mutual funds and pension
funds managed by G.R.
Phelps & Co. Inc. ("G.R.
Phelps"), the Company's
former investment adviser,
which was a subsidiary of
Connecticut Mutual Life
Insurance Company; was also
responsible for managing the
common stock department and
common stock investments of
Connecticut Mutual Life
Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; formerly
a Vice President and Senior
Portfolio Manager at First of
America Investment Corp.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith
Barney, Inc.
David Bernard,
Vice President Previously a Regional Sales
Director for Retirement Plan
Services at Charles Schwab &
Co., Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the
Oppenheimer Funds (listed
below); previously a Fund
Controller for
OppenheimerFunds, Inc. (the
"Manager").
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-
based Oppenheimer Funds; Vice
President, Assistant
Secretary and Treasurer of
the Denver-based Oppenheimer
Funds. Vice President and
Treasurer of OppenheimerFunds
Distributor, Inc. (the
"Distributor") and
HarbourView Asset Management
Corporation ("HarbourView"),
an investment adviser
subsidiary of the Manager;
Senior Vice President,
Treasurer, Assistant
Secretary and a director of
Centennial Asset Management
Corporation ("Centennial"),
an investment adviser
subsidiary of the Manager;
Vice President, Treasurer and
Secretary of Shareholder
Services, Inc. ("SSI") and
Shareholder Financial
Services, Inc. ("SFSI"),
transfer agent subsidiaries
of the Manager; Director,
Treasurer and Chief Executive
Officer of MultiSource
Services, Inc.; Vice
President and Treasurer of
Oppenheimer Real Asset
Management, Inc.; President,
Treasurer and Director of
Centennial Capital
Corporation; Vice President
and Treasurer of Main Street
Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of
Educational Services for H.D.
Vest Investment Securities,
Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; Vice
President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed
Income for State Street
Research & Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President and
Director An officer and/or portfolio
manager of certain
Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the New York-
based Oppenheimer Funds; Vice
President and Secretary of
the Denver-based Oppenheimer
Funds; Secretary of the
Oppenheimer Quest and
Oppenheimer Rochester Funds;
Executive Vice President,
Director and General Counsel
of the Distributor; President
and a Director of Centennial;
Chief Legal Officer and a
Director of MultiSource
Services, Inc.; President and
a Director of Oppenheimer
Real Asset Management, Inc.;
Executive Vice President,
General Counsel and Director
of SFSI and SSI; formerly
Senior Vice President and
Associate General Counsel of
the Manager and the
Distributor.
George Evans,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
Scott Farrar,
Vice President Assistant Treasurer of the
New York-based and Denver-
based Oppenheimer funds.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary
of OppenheimerFunds
Distributor, Inc.; Secretary
of HarbourView Asset
Management Corporation,
MultiSource Services, Inc.
and Centennial Asset
Management Corporation;
Secretary, Vice President and
Director of Centennial
Capital Corporation; Vice
President and Secretary of
ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or
portfolio manager of certain
Oppenheimer funds. Formerly
Chairman of the Board and
Director of Rochester Fund
Distributors, Inc. ("RFD"),
President and Director of
Fielding Management Company,
Inc. ("FMC"), President and
Director of Rochester Capital
Advisors, Inc. ("RCAI"),
Managing Partner of Rochester
Capital Advisors, L.P.,
President and Director of
Rochester Fund Services, Inc.
("RFS"), President and
Director of Rochester Tax
Managed Fund, Inc.
John Fortuna,
Vice President None.
Jon S. Fossel,
Chairman of the Board Director of OAC, the
Manager's parent holding
company; President, CEO and
a director of HarbourView; a
director of SSI and SFSI;
President, Director, Trustee,
and Managing General Partner
of the Denver-based
Oppenheimer Funds; President
and Chairman of the Board of
Main Street Advisers, Inc.;
formerly Chief Executive
Officer of the Manager.
Patricia Foster,
Vice President An officer of certain
Oppenheimer funds; Secretary
and General Counsel of
Rochester Capital Advisors,
L.P. and Secretary of
Rochester Tax Managed Fund,
Inc.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice
President and Counsel of OAC;
formerly he held the
following positions: Vice
President and a director of
HarbourView and Centennial,
a director of SFSI and SSI,
an officer of other
Oppenheimer Funds.
Linda Gardner,
Assistant Vice President None.
Janelle Gellerman,
Assistant Vice President None.
Jill Glazerman, None.
Assistant Vice President
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President
/ Director of Graphic and
Print Communications for
Shearson Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private
Client Division of Merrill
Lynch.
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; formerly
Vice President of Fixed
Income Portfolio Management
at Bankers Trust.
Barbara Hennigar,
Executive Vice President and
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of
SFSI; President and Chief
Executive Officer of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate
with Robinson, Lake/Sawyer
Miller.
Ronald Jamison,
Vice President Formerly Vice President and
Associate General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds. Formerly
a Managing Director of Global
Equities at Paine Webber's
Mitchell Hutchins division.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
Vice President Formerly Senior Managing
Director of Van Eck Global.
Avram Kornberg,
Vice President Formerly a Vice President
with Bankers Trust.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds. Formerly
a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; a
Chartered Financial Analyst;
a Vice President of
HarbourView; prior to March,
1996 he was the senior bond
portfolio manager for
Panorama Series Fund, Inc.,
other mutual funds and
pension accounts managed by
G.R. Phelps; was also
responsible for managing the
public fixed-income
securities department at
Connecticut Mutual Life
Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and
Trustee of the New York-based
and the Denver-based
Oppenheimer funds; President
and a Director of OAC,
HarbourView and Oppenheimer
Partnership Holdings, Inc.;
Director of ORAMI; Chairman
and Director of SSI; a
Director of Oppenheimer Real
Asset Management, Inc.
Timothy Martin,
Assistant Vice President Formerly Vice President,
Mortgage Trading, at S.N.
Phelps & Co., Salomon
Brothers, and Kidder Peabody.
Sally Marzouk,
Vice President None.
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds. Formerly
a Portfolio Manager with
Phoenix Securities Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly a Vice President
with Cohane Rafferty
Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds. Formerly
Senior Investment Officer and
Portfolio Manager with
Chemical Bank.
Russell Read,
Vice President Consultant for Prudential
Insurance on behalf of the
General Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds. Formerly
a Securities Analyst for the
Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President Formerly a Product Manager
for Metropolitan Life
Insurance Company.
Michael S. Rosen
Vice President; President:
Rochester Division An officer and/or portfolio
manager of certain
Oppenheimer funds. Formerly
Vice President of RFS,
President and Director of
RFD, Vice President and
Director of FMC, Vice
President and director of
RCAI, General Partner of RCA,
an officer and/or portfolio
manager of certain
Oppenheimer funds.
David Rosenberg,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; formerly
Vice President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of
Dollar Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly Vice President of
Citicorp Investment Services.
Diane Sobin,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; formerly
a Vice President and Senior
Portfolio Manager for Dean
Witter InterCapital, Inc.
Richard A. Soper, None.
Assistant Vice President
Nancy Sperte,
Executive Vice President
None.
Donald W. Spiro,
Chairman Emeritus Vice Chairman and Trustee of
the New York-based
Oppenheimer Funds; formerly
Chairman of the Manager and
the Distributor.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of
U.S. Group Pension Strategy
and Marketing for Manulife
Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; a
Chartered Financial Analyst;
a Vice President of
HarbourView; prior to March,
1996 he was an equity
portfolio manager for
Panorama Series Fund, Inc.
and other mutual funds and
pension accounts managed by
G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee,
Director or Managing Partner
of the Denver-based
Oppenheimer Funds; President
and a Director
of Centennial; formerly
President and Director of
OAMC, and Chairman of the
Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the
Manager; Vice President and
Portfolio Manager of
Oppenheimer Discovery Fund,
Oppenheimer Global Emerging
Growth Fund and Oppenheimer
Enterprise Fund. Formerly
Managing Director of
Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds.
Jerry A. Webman,
Senior Vice President Director of New York-based
tax-exempt fixed income
Oppenheimer Funds; Formerly
Managing Director and Chief
Fixed Income Strategist at
Prudential Mutual Funds.
Christine Wells,
Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; a
Chartered Financial Analyst;
Vice President of
HarbourView; prior to March,
1996 he was an equity
portfolio manager for
Panorama Series Fund, Inc.
and other mutual funds and
pension funds managed by G.R.
Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and
Accounting and member of the
Board of Directors of the
Junior League of Denver, Inc.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of
the Manager; Assistant
Secretary of the Oppenheimer
Funds; Assistant Secretary of
SSI, SFSI; an officer of
other Oppenheimer Funds.
Arthur J. Zimmer,
Vice President An officer and/or portfolio
manager of certain
Oppenheimer funds; Vice
President of Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the Denver-based Oppenheimer Funds, and the Rochester-based
Oppenheimer Funds, set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Municipal Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer New York Municipal Fund
Oppenheimer Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Series Fund, Inc.
Oppenheimer Target Fund
Oppenheimer Municipal Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Rochester-based Oppenheimer Funds
- ---------------------------------
Bond Fund Series - Oppenheimer Bond Fund For
Growth
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, OppenheimerFunds Distributor, Inc., HarbourView
Asset Management Corp., Oppenheimer Partnership Holdings, Inc., and
Oppenheimer Acquisition Corp. is Two World Trade Center, New York,
New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., Oppenheimer Real Asset Management, Inc.,
MultiSource Services, Inc. and Oppenheimer Real Asset Management,
Inc. is 3410 South Galena Street, Denver, Colorado 80231.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
Item 29. Principal Underwriter
- -------- --------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the
other registered open-end investment companies for which
OppenheimerFunds, Inc. is the investment adviser, as described in
Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
Positions
and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- ------------
- -
<S> <C> <C>
Susan P. Bader ++ Assistant Vice President None
George Clarence Bowen+ Vice President & Treasurer Vice
President
and
Treasurer
of the
NY-based
Oppenheim
er funds
/ Vice
President
,
Secretary
and
Treasurer
of the
Denver-
based
Oppen-
heimer
funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce* Senior Vice President - None
Director - Financial
Institution Div.
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
3425-1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
Paul Delli-Bovi Vice President None
750 W. Broadway
Apt. 5M
Long Beach, NY 11561
E. Drew Devereaux ++ Assistant Vice President None
Andrew John Donohue* Executive Vice Secretary
of President, General the New
York-
Counsel and Director based
Oppen-
heimer
funds /
Vice
President
of the
Denver-
based
Oppen-
heimer
funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding++ Vice President; Chairman:
Rochester Division None
Reed F. Finley Vice President - None
320 E. Maple, Ste. 254 Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President None
139 Avant Lane
Cincinatti, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Ilene Kutno* Vice President - None
Director - Regional Sales
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Timothy G. Mulligan ++ Vice President None
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Wendy Murray Vice President None
114-B Larchmont Acres West
Larchmont, NY 10538
Joseph Norton Vice President None
2518 Fillmore Street
Apt. 1
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
Michael S. Rosen++ Vice President, President:
Rochester Division None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN 46240
James Ruff* President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Wasington, DC 20007
Mark Schon Vice President None
10483 E. Corrine Dr.
Scottsdale, AZ 85259
Michael Sciortino Vice President None
3114 Hickory Run
Sugarland, TX 77479
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
Michael Stenger Vice President None
8572 Saint Ives Place
Cincinnati, OH 45255
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
Gregory K. Wilson Vice President None
2 Side Hill Road
Westport, CT 06880
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester
Division")
</TABLE>
(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 of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of New York and State of New York on the 30th day of
October, 1996.
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
/s/ Bridget A. Macaskill
--------------------------------------
Bridget A. Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Leon Levy* Chairman of the October 30, 1996
- -------------- Board of Trustees
Leon Levy
/s/ Donald W. Spiro* Vice Chairman and October 30, 1996
- -------------------- Trustee
Donald W. Spiro
/s/ George Bowen* Treasurer and October 30, 1996
- ----------------- Principal Financial
George Bowen and Accounting
Officer
/s/ Robert G. Galli* Trustee October 30, 1996
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee October 30, 1996
- ----------------------
Benjamin Lipstein
/s/ Bridget A. Macaskill* President, October 30, 1996
- ------------------------ Principal Executive
Bridget A. Macaskill Officer, Trustee
/s/ Elizabeth B. Moynihan* Trustee October 30, 1996
- --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee October 30, 1996
- -----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee October 30, 1996
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee October 30, 1996
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins* Trustee October 30, 1996
- ----------------------
Sidney M. Robbins
/s/ Pauline Trigere* Trustee October 30, 1996
- --------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee October 30, 1996
- -----------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
<PAGE>
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
Post-Effective Amendment No. 14
Index to Exhibits
Exhibit No. Description
- ----------- -----------
24(b)(1) Amended and Restated Declaration of Trust
24(b)(4)(i) Specimen Class A Share Certificate
24(b)(4)(ii) Specimen Class B Share Certificate
24(b)(4)(iii) Specimen Class C Share Certificate
24(b)(11) Independent Auditors' Consent
24(b)(16) Performance Computation Schedule
24(b)(17)(i) Financial Data Schedule for Class A Shares
24(b)(17)(ii) Financial Data Schedule for Class B Shares
24(b)(17)(iii) Financial Data Schedule for Class C Shares
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
This AMENDED AND RESTATED DECLARATION OF TRUST, made as of September
16, 1996, by and among the individuals executing this Amended and Restated
Declaration of Trust as the Trustees.
WHEREAS, the Trustees established Oppenheimer California Tax-Exempt
Fund (the "Fund"), as a trust fund under the laws of the Commonwealth of
Massachusetts, for the investment and reinvestment of funds contributed
thereto, under a Declaration of Trust dated July 25, 1988, as amended by
Amended and Restated Declarations of Trust dated April 23, 1993 and
October 25, 1995;
WHEREAS, the Trustees desire to make certain permitted changes to
said Declaration of Trust;
WHEREAS, the Trustees desire to further amend such Declaration of
Trust, as amended, without shareholder approval, as permitted under
ARTICLE SEVENTH, to change the name of the Trust;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall henceforth be held and
managed under this Amended and Restated Declaration of Trust IN TRUST as
herein set forth below.
FIRST: This Trust shall be known as OPPENHEIMER CALIFORNIA
MUNICIPAL FUND. The address of Oppenheimer California Municipal Fund is
Two World Trade Center, New York, New York 10048-0203. The Registered
Agent for Service is Massachusetts Mutual Life Insurance Company, 1295
State Street, Springfield, Massachusetts 01111, Attention: Legal
Department.
SECOND: Whenever used herein, unless otherwise required by the
context or specifically provided:
1. All terms used in this Declaration of Trust that are defined in
the 1940 Act (defined below) shall have the meanings given to them in the
1940 Act.
2. "Board" or "Board of Trustees" or the "Trustees" means the Board
of Trustees of the Trust.
3. "By-Laws" means the By-Laws of the Trust as amended from time
to time.
4. "Class" means a class of a series of Shares of the Trust
established and designated under or in accordance with the provisions of
Article FOURTH.
5. "Commission" means the Securities and Exchange Commission.
6. "Declaration of Trust" shall mean this Amended and Restated
Declaration of Trust as it may be amended or restated from time to time.
7. The "1940 Act" refers to the Investment Company Act of 1940 and
the Rules and Regulations of the Commission thereunder, all as amended
from time to time.
8. "Series" refers to series of Shares of the Trust established and
designated under or in accordance with the provisions of Article FOURTH.
9. "Shareholder" means a record owner of Shares of the Trust.
10. "Shares" refers to the transferable units of interest into which
the beneficial interest in the Trust or any Series or Class of the Trust
(as the context may require) shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
11. The "Trust" refers to the Massachusetts business trust created
by this Declaration of Trust, as amended or restated from time to time.
12. "Trustees" refers to the individual trustees in their capacity
as trustees hereunder of the Trust and their successor or successors for
the time being in office as such trustees.
THIRD: The purpose or purposes for which the Trust is formed and the
business or objects to be transacted, carried on and promoted by it are
as follows:
1. To hold, invest or reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, sell short,
assign, negotiate, transfer, exchange or otherwise dispose of or turn to
account or realize upon, securities (which term "securities" shall for the
purposes of this Declaration of Trust, without limitation of the
generality thereof, be deemed to include any stocks, shares, bonds,
financial futures contracts, indexes, debentures, notes, mortgages or
other obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests therein,
or in any property or assets) created or issued by any issuer (which term
"issuer" shall for the purposes of this Declaration of Trust, without
limitation of the generality thereof be deemed to include any persons,
firms, associations, corporations, syndicates, business trusts,
partnerships, investment companies, combinations, organizations,
governments, or subdivisions thereof) and in financial instruments
(whether they are considered as securities or commodities); and to
exercise, as owner or holder of any securities or financial instruments,
all rights, powers and privileges in respect thereof; and to do any and
all acts and things for the preservation, protection, improvement and
enhancement in value of any or all such securities or financial
instruments.
2. To borrow money and pledge assets in connection with any of the
objects or purposes of the Trust, and to issue notes or other obligations
evidencing such borrowings, to the extent permitted by the 1940 Act and
by the Trust's fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such Series and Classes and
amounts and on such terms and conditions, for such purposes and for such
amount or kind of consideration (including without limitation thereto,
securities) now or hereafter permitted by the laws of the Commonwealth of
Massachusetts and by this Declaration of Trust, as the Trustees may
determine.
4. To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel its Shares, or to classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any
Series or Class into one or more Series or Classes that may have been
established and designated from time to time, all without the vote or
consent of the Shareholders of the Trust, in any manner and to the extent
now or hereafter permitted by this Declaration of Trust.
5. To conduct its business in all its branches at one or more
offices in New York, Colorado and elsewhere in any part of the world,
without restriction or limit as to extent.
6. To carry out all or any of the foregoing objects and purposes
as principal or agent, and alone or with associates or to the extent now
or hereafter permitted by the laws of Massachusetts, as a member of, or
as the owner or holder of any stock of, or share of interest in, any
issuer, and in connection therewith or make or enter into such deeds or
contracts with any issuers and to do such acts and things and to exercise
such powers, as a natural person could lawfully make, enter into, do or
exercise.
7. To do any and all such further acts and things and to exercise
any and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out
or attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to,
or inference from, the terms of any other clause of this or any other
Article of this Declaration of Trust, and shall each be regarded as
independent and construed as powers as well as objects and purposes, and
the enumeration of specific purposes, objects and powers shall not be
construed to limit or restrict in any manner the meaning of general terms
or the general powers of the Trust now or hereafter conferred by the laws
of the Commonwealth of Massachusetts nor shall the expression of one thing
be deemed to exclude another, though it be of a similar or dissimilar
nature, not expressed; provided, however, that the Trust shall not carry
on any business, or exercise any powers, in any state, territory, district
or country except to the extent that the same may lawfully be carried on
or exercised under the laws thereof.
FOURTH:
1. The beneficial interest in the Trust shall be divided into
Shares, all without par value. The Trustees shall have the authority from
time to time, without obtaining shareholder approval, to create one or
more Series of Shares (the proceeds of which may be invested in separate,
independently managed portfolios) in addition to the Series specifically
established and designated in Part 3 of this Article FOURTH, and to divide
the shares of any Series into two or more Classes pursuant to Part 2 of
this Article FOURTH, all as they deem necessary or desirable, to establish
and designate such Series and Classes, and to fix and determine the
relative rights and preferences as between the different Series of Shares
or Classes as to right of redemption and the price, terms and manner of
redemption, liabilities and expenses to be borne by any Series or Class,
special and relative rights as to dividends and other distributions and
on liquidation, sinking or purchase fund provisions, conversion on
liquidation, conversion rights, and conditions under which the several
Series or Classes shall have individual voting rights or no voting rights.
Except as aforesaid, all Shares of the different Series shall be
identical.
(a) The number of authorized Shares and the number of Shares
of each Series and each Class of a Series that may be issued is unlimited,
and the Trustees may issue Shares of any Series or Class of any Series for
such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without
action or approval of the Shareholders. All Shares when so issued on the
terms determined by the Trustees shall be fully paid and non-assessable.
The Trustees may classify or reclassify any unissued Shares or any Shares
previously issued and reacquired of any Series into one or more Series or
Classes of Series that may be established and designated from time to
time. The Trustees may hold as treasury Shares (of the same or some other
Series), reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Shares
of any Series reacquired by the Trust.
(b) The establishment and designation of any Series or any
Class of any Series in addition to that established and designated in Part
3 of this Article FOURTH shall be effective with the effectiveness of an
instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or such Class of such
Series or as otherwise provided in such instrument. At any time that
there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by an instrument executed by
a majority of their number abolish that Series and the establishment and
designation thereof. If and to the extent that the instrument referred
to in this paragraph shall be an amendment to this Declaration of Trust,
the Trustees may make any such amendment without shareholder approval.
(c) Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire, own, hold
and dispose of Shares of any Series or Class of any Series of the Trust
to the same extent as if such person were not a Trustee, officer or other
agent of the Trust; and the Trust may issue and sell or cause to be issued
and sold and may purchase Shares of any Series or Class of any Series from
any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or
purchase of Shares of such Series or Class generally.
2. The Trustees shall have the authority from time to time, without
obtaining shareholder approval, to divide the Shares of any Series into
two or more Classes as they deem necessary or desirable, and to establish
and designate such Classes. In such event, each Class of a Series shall
represent interests in the designated Series of the Trust and have such
voting, dividend, liquidation and other rights as may be established and
designated by the Trustees. Expenses related directly or indirectly to
the Shares of a Class of a Series may be borne solely by such Class (as
shall be determined by the Trustees) and, as provided in Article FIFTH,
a Class of a Series may have exclusive voting rights with respect to
matters relating solely to such Class. The bearing of expenses solely by
a Class of Shares of a Series shall be appropriately reflected (in the
manner determined by the Trustees) in the net asset value, dividend and
liquidation rights of the Shares of such Class of a Series. The division
of the Shares of a Series into Classes and the terms and conditions
pursuant to which the Shares of the Classes of a Series will be issued
must be made in compliance with the 1940 Act. No division of Shares of
a Series into Classes shall result in the creation of a Class of Shares
having a preference as to dividends or distributions or a preference in
the event of any liquidation, termination or winding up of the Trust, to
the extent such a preference is prohibited by Section 18 of the 1940 Act
as to the Trust. The Trustees may classify or reclassify any unissued
Shares or any Shares previously issued and reacquired of any Series into
one or more Series or Classes of Series that may be established and
designated from time to time. The Trustees may hold as treasury Shares
(of the same or some other Series), reissue for such consideration and on
such terms as they may determine, or cancel, at their discretion from time
to time, any Shares of any Series reacquired by the Trust.
The relative rights and preferences of Shares of different Classes
of a Series shall be the same in all respects except that, and unless and
until the Board of Trustees shall determine otherwise: (i) when a vote of
Shareholders is required under this Declaration of Trust or when a meeting
of Shareholders is called by the Board of Trustees, the Shares of a Class
shall vote exclusively on matters that affect that Class only; (ii) the
expenses and liabilities related to a Class shall be borne solely by such
Class (as determined and allocated to such Class by the Trustees from time
to time in a manner consistent with Parts 2 and 3 of Article FOURTH); and
(iii) pursuant to paragraph 10 of Article NINTH, the Shares of each Class
shall have such other rights and preferences as are set forth from time
to time in the then-effective prospectus and/or statement of additional
information relating to the Shares. Dividends and distributions on one
Class of Shares may differ from the dividends and distributions on another
Class of Shares of the Series, and the net asset value of one Class of
Shares may differ from the net asset value of another Class of Shares of
the Series.
3. Without limiting the authority of the Trustees set forth in Part
1 of this Article FOURTH to establish and designate any further Series,
the Trustees hereby establish one Series of Shares having the same name
as the Trust, and said Shares shall be divided into such number of Classes
as shall be set forth from time to time in the then-effective prospectus
and/or statement of additional information relating to the Trust. The
Shares of that Series and any Shares of any further Series or Classes that
may from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some further
Series or Classes at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that Series
for all purposes, subject only to the rights of creditors, and shall be
so recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds,
in whatever form the same may be, together with any General Items
allocated to that Series as provided in the following sentence, are
herein referred to as "assets belonging to" that Series. In the event
that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series (collectively "General Items"), the
Trustees shall allocate such General Items to and among any one or more
of the Series established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and
equitable; and any General Items so allocated to a particular Series shall
belong to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series for all
purposes. No holder of Shares of any Series shall have any claim on or
right to any assets allocated or belonging to any other Series.
(b) (1) Liabilities Belonging to Series. The liabilities,
expenses, costs, charges and reserves attributable to each Series shall
be charged and allocated to the assets belonging to each particular
Series. Any general liabilities, expenses, costs, charges and reserves
of the Trust which are not identifiable as belong to any particular Series
shall be allocated and charged by the Trustees to and among any one or
more of the Series established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to each Series are herein referred to
as "liabilities belonging to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall
be conclusive and binding upon the shareholders of all Series for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated
as income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(2) Liabilities Belonging to a Class. If a Series is
divided into more than one Class, the liabilities, expenses, costs,
charges and reserves attributable to a Class shall be charged and
allocated to the Class to which such liabilities, expenses, costs, charges
or reserves are attributable. Any general liabilities, expenses, costs,
charges or reserves belonging to the Series which are not identifiable as
belonging to any particular Class shall be allocated and charged by the
Trustees to and among any one or more of the Classes established and
designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The
allocations in the two preceding sentences shall be subject to the 1940
Act or any release, rule, regulation, interpretation or order thereunder
relating to such allocations. The liabilities, expenses, costs, charges
and reserves allocated and so charged to each Class are herein referred
to as "liabilities belonging to" that Class. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall
be conclusive and binding upon the holders of all Classes for all
purposes. No holder of Shares of any Class shall have any claim on or
right to any assets allocated or belonging to any other Class.
(c) Dividends. Dividends and distributions on Shares of a
particular Series or Class may be paid to the holders of Shares of that
Series or Class, with such frequency as the Trustees may determine, which
may be daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine,
from such of the income, capital gains accrued or realized, and capital
and surplus, from the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities belonging
to such Series or Class. All dividends and distributions on Shares of a
particular Series or Class shall be distributed pro rata to the
Shareholders of such Series or Class in proportion to the number of Shares
of such Series or Class held by such Shareholders at the date and time of
record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order
and/or payment have not been received by the time or times established by
the Trustees under such program or procedure. Such dividends and
distributions may be made in cash or Shares or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with paragraph 13 of
Article SEVENTH.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Series and all Classes
of each Series that has been established and designated shall be entitled
to receive, as a Series or Class, when and as declared by the Trustees,
the excess of the assets belonging to that Series over the liabilities
belonging to that Series or Class. The assets so distributable to the
Shareholders of any particular Class and Series shall be distributed among
such Shareholders in proportion to the number of Shares of such Class of
that Series held by them and recorded on the books of the Trust.
(e) Transfer. All Shares of each particular Series or Class
shall be transferable, but transfers of Shares of a particular Class and
Series will be recorded on the Share transfer records of the Trust
applicable to such Series or Class of that Series only at such times as
Shareholders shall have the right to require the Trust to redeem Shares
of such Series or Class of that Series and at such other times as may be
permitted by the Trustees.
(f) Equality. All Shares of each Series shall represent an
equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to such Series or any Class of that
Series), and each Share of any particular Series shall be equal to each
other Share of that Series and shares of each Class of a Series shall be
equal to each other Share of such Class; but the provisions of this
sentence shall not restrict any distinctions permissible under this
Article FOURTH that may exist with respect to Shares of the different
Classes of a Series. The Trustees may from time to time divide or combine
the Shares of any particular Class or Series into a greater or lesser
number of Shares of that Class or Series without thereby changing the
proportionate beneficial interest in the assets belonging to that Class
or Series or in any way affecting the rights of Shares of any other Class
or Series.
(g) Fractions. Any fractional Share of any Class and Series,
if any such fractional Share is outstanding, shall carry proportionately
all the rights and obligations of a whole Share of that Class and Series,
including those rights and obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares, and liquidation of the
Trust.
(h) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to
provide that (i) holders of Shares of any Series shall have the right to
exchange said Shares into Shares of one or more other Series of Shares,
(ii) holders of shares of any Class shall have the right to exchange said
Shares into Shares of one or more other Classes of the same or a different
Series, and/or (iii) the Trust shall have the right to carry out exchanges
of the aforesaid kind, in each case in accordance with such requirements
and procedures as may be established by the Trustees.
(i) Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for
the Trust, which books shall be maintained separately for the Shares of
each Class and Series that has been established and designated. No
certification certifying the ownership of Shares need be issued except as
the Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the issuance of Share
certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or
any transfer or similar agent, as the case may be, shall be conclusive as
to who are the Shareholders and as to the number of Shares of each Class
and Series held from time to time by each such Shareholder.
(j) Investments in the Trust. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as
they from time to time authorize. The Trustees may authorize any
distributor, principal underwriter, custodian, transfer agent or other
person to accept orders for the purchase or sale of Shares that conform
to such authorized terms and to reject any purchase or sale orders for
Shares whether or not conforming to such authorized terms.
(k) Shareholders of a Series shall not be entitled to
participate in a derivative or class action with respect to any matter
which only affects another Series of Shareholders.
FIFTH: The following provisions are hereby adopted with respect to
voting Shares of the Trust and certain other rights:
1. The Shareholders shall have the power to vote (a) for the
election of Trustees when that issue is submitted to them, (b) with
respect to the amendment of this Declaration of Trust except where the
Trustees are given authority to amend the Declaration of Trust without
shareholder approval, (c) to the same extent as the shareholders of a
Massachusetts business corporation, as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders, and (d) with
respect to those matters relating to the Trust as may be required by the
1940 Act or required by law, by this Declaration of Trust, or the By-Laws
of the Trust or any registration statement of the Trust filed with the
Commission or any State, or as the Trustees may consider desirable.
2. The Trust will not hold shareholder meetings unless required by
the 1940 Act, the provisions of this Declaration of Trust, or any other
applicable law. The Trustees may call a meeting of shareholders from time
to time.
3. At all meetings of Shareholders, each Shareholder shall be
entitled to one vote on each matter submitted to a vote of the
Shareholders of the affected Series for each Share standing in his name
on the books of the Trust on the date, fixed in accordance with the By-
Laws, for determination of Shareholders of the affected Series entitled
to vote at such meeting (except, if the Board so determines, for Shares
redeemed prior to the meeting), and each such Series shall vote separately
("Individual Series Voting"); a Series shall be deemed to be affected when
a vote of the holders of that Series on a matter is required by the 1940
Act; provided, however, that as to any matter with respect to which a vote
of Shareholders is required by the 1940 Act or by any applicable law that
must be complied with, such requirements as to a vote by Shareholders
shall apply in lieu of Individual Series Voting as described above. If
the shares of a Series shall be divided into Classes as provided in
Article FOURTH, the shares of each Class shall have identical voting
rights except that the Trustees, in their discretion, may provide a Class
of a Series with exclusive voting rights with respect to matters which
relate solely to such Classes. If the Shares of any Series shall be
divided into Classes with a Class having exclusive voting rights with
respect to certain matters, the quorum and voting requirements described
below with respect to action to be taken by the Shareholders of the Class
of such Series on such matters shall be applicable only to the Shares of
such Class. Any fractional Share shall carry proportionately all the
rights of a whole Share, including the right to vote and the right to
receive dividends. The presence in person or by proxy of the holders of
one-third of the Shares, or of the Shares of any Series or Class of any
Series, outstanding and entitled to vote thereat shall constitute a quorum
at any meeting of the Shareholders or of that Series or Class,
respectively; provided however, that if any action to be taken by the
Shareholders or by a Series or Class at a meeting requires an affirmative
vote of a majority, or more than a majority, of the shares outstanding and
entitled to vote, then in such event the presence in person or by proxy
of the holders of a majority of the shares outstanding and entitled to
vote at such a meeting shall constitute a quorum for all purposes. At a
meeting at which is a quorum is present, a vote of a majority of the
quorum shall be sufficient to transact all business at the meeting. If
at any meeting of the Shareholders there shall be less than a quorum
present, the Shareholders or the Trustees present at such meeting may,
without further notice, adjourn the same from time to time until a quorum
shall attend, but no business shall be transacted at any such adjourned
meeting except such as might have been lawfully transacted had the meeting
not been adjourned.
4. Each Shareholder, upon request to the Trust in proper form
determined by the Trust, shall be entitled to require the Trust to redeem
from the net assets of that Series and Class all or part of the Shares of
such Series and Class standing in the name of such Shareholder. The
method of computing such net asset value, the time at which such net asset
value shall be computed and the time within which the Trust shall make
payment therefor, shall be determined as hereinafter provided in Article
SEVENTH of this Declaration of Trust. Notwithstanding the foregoing, the
Trustees, when permitted or required to do so by the 1940 Act, may suspend
the right of the Shareholders to require the Trust to redeem Shares.
5. No Shareholder shall, as such holder, have any right to purchase
or subscribe for any Shares of the Trust which it may issue or sell, other
than such right, if any, as the Trustees, in their discretion, may
determine.
6. All persons who shall acquire Shares shall acquire the same
subject to the provisions of the Declaration of Trust.
7. Cumulative voting for the election of Trustees shall not be
allowed.
SIXTH:
1. The persons who shall act as initial Trustees until the first
meeting or until their successors are duly chosen and qualify are the
initial trustees executing this Declaration of Trust or any counterpart
thereof. However, the By-Laws of the Trust may fix the number of Trustees
at a number greater or lesser than the number of initial Trustees and may
authorize the Trustees to increase or decrease the number of Trustees, to
fill any vacancies on the Board which may occur for any reason including
any vacancies created by any such increase in the number of Trustees, to
set and alter the terms of office of the Trustees and to lengthen or
lessen their own terms of office or make their terms of office of
indefinite duration, all subject to the 1940 Act. Unless otherwise
provided by the By-Laws of the Trust, the Trustees need not be
Shareholders.
2. A Trustee at any time may be removed either with or without
cause by resolution duly adopted by the affirmative vote of the holders
of two-thirds of the outstanding Shares, present in person or by proxy at
any meeting of Shareholders called for such purpose; such a meeting shall
be called by the Trustees when requested in writing to do so by the record
holders of not less than ten per centum of the outstanding Shares. A
Trustee may also be removed by the Board of Trustees as provided in the
By-Laws of the Trust.
3. The Trustees shall make available a list of names and addresses
of all Shareholders as recorded on the books of the Trust, upon receipt
of the request in writing signed by not less than ten Shareholders (who
have been shareholders for at least six months) holding in the aggregate
shares of the Trust valued at not less than $25,000 at current offering
price (as defined in the then effective Prospectus and\or Statement of
Additional Information relating to the Shares under the Securities Act of
1933, as amended from time to time) or holding not less than 1% in amount
of the entire amount of Shares issued and outstanding; such request must
state that such Shareholders wish to communicate with other Shareholders
with a view to obtaining signatures to a request for a meeting to take
action pursuant to Part 2 of this Article SIXTH and be accompanied by a
form of communication to the Shareholders. The Trustees may, in their
discretion, satisfy their obligation under this Part 3 by either making
available the Shareholder list to such Shareholders at the principal
offices of the Trust, or at the offices of the Trust's transfer agent,
during regular business hours, or by mailing a copy of such communication
and form of request, at the expense of such requesting Shareholders, to
all other Shareholders, and the Trustees may also take such other action
as may be permitted under Section 16(c) of the 1940 Act.
4. The Trust may at any time or from time to time apply to the
Commission for one or more exemptions from all or part of said Section
16(c) of the 1940 Act, and, if an exemptive order or orders are issued by
the Commission, such order or orders shall be deemed part of said Section
16(c) for the purposes of Parts 2 and 3 of this Article SIXTH.
SEVENTH: The following provisions are hereby adopted for the purpose
of defining, limiting and regulating the powers of the Trust, the Trustees
and the Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or
the Trustees and shall have accepted this Trust, the Trust estate shall
vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance, and he or she shall be
deemed a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or
incapacity of the Trustees, or any one of them, shall not operate to annul
or terminate the Trust but the Trust shall continue in full force and
effect pursuant to the terms of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from
any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets
of the Trust shall at all times be considered as vested in the Trustees.
No Shareholder shall have, as a holder of beneficial interest in the
Trust, any authority, power or right whatsoever to transact business for
or on behalf of the Trust, or on behalf of the Trustees, in connection
with the property or assets of the Trust, or in any part thereof.
4. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute, and to authorize the officers and agents of the Trust to make and
execute, any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or future
laws or customs in regard to Trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Subject to any applicable limitation in this Declaration of
Trust or by the By-Laws of the Trust, the Trustees shall have power and
authority:
(a) to adopt By-Laws not inconsistent with this Declaration of
Trust providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to the
Shareholders;
(b) to elect and remove such officers and appoint and terminate
such officers as they consider appropriate with or without cause, and to
appoint and designate from among the Trustees such committees as the
Trustees may determine, and to terminate any such committee and remove any
member of such committee;
(c) to employ as custodian of any assets of the Trust a bank
or trust company or any other entity qualified and eligible to act as a
custodian, subject to any conditions set forth in this Declaration of
Trust or in the By-Laws;
(d) To retain a transfer agent and shareholder servicing agent,
or both;
(e) To provide for the distribution of Shares either through
a principal underwriter or the Trust itself or both;
(f) To set record dates in the manner provided for in the By-
Laws of the Trust;
(g) to delegate such authority as they consider desirable to
any officers of the Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property held in
Trust hereunder; and to execute and deliver powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such
person or persons such power and discretion with relation to securities
or property as the Trustees shall deem proper;
(i) to exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities held in trust
hereunder;
(j) to hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form,
either in its own name or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the
usual practice of Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern,
and to pay calls or subscriptions with respect to any security held in the
Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy including, but
not limited to, claims for taxes;
(m) to make, in the manner provided in the By-Laws,
distributions of income and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner permitted
by the 1940 Act and the Trust's fundamental policy thereunder as to
borrowing;
(o) to enter into investment advisory or management contracts,
subject to the 1940 Act, with any one or more corporations, partnerships,
trusts, associations or other persons;
(p) to change the name of the Trust or any Class or Series of
the Trust as they consider appropriate without prior shareholder approval;
and
(q) to establish officers' and Trustees' fees or compensation
and fees or compensation for committees of the Trustees to be paid by the
Trust or each Series thereof in such manner and amount as the Trustees may
determine.
5. No one dealing with the Trustees shall be under any obligation
to make any inquiry concerning the authority of the Trustees, or to see
to the application of any payments made or property transferred to the
Trustees or upon their order.
6. (a) The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription to any Shares or
otherwise. This paragraph shall not limit the right of the Trustees to
assert claims against any shareholder based upon the acts or omissions of
such shareholder or for any other reason. There is hereby expressly
disclaimed shareholder and Trustee liability for the acts and obligations
of the Trust. Every note, bond, contract or other undertaking issued by
or on behalf of the Trust or the Trustees relating to the Trust shall
include a notice and provision limiting the obligation represented thereby
to the Trust and its assets (but the omission of such notice and provision
shall not operate to impose any liability or obligation on any
Shareholder).
(b) Whenever this Declaration of Trust calls for or permits any
action to be taken by the Trustees hereunder, such action shall mean that
taken by the Board of Trustees by vote of the majority of a quorum of
Trustees as set forth from time to time in the By-Laws of the Trust or as
required by the 1940 Act.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein
contained such as may be necessary or convenient in the conduct of any
business or enterprise of the Trust, to do and perform anything necessary,
suitable, or proper for the accomplishment of any of the purposes, or the
attainment of any one or more of the objects, herein enumerated, or which
shall at any time appear conducive to or expedient for the protection or
benefit of the Trust, and to do and perform all other acts and things
necessary or incidental to the purposes herein before set forth, or that
may be deemed necessary by the Trustees.
(d) The Trustees shall have the power, to the extent not
inconsistent with the 1940 Act, to determine conclusively whether any
moneys, securities, or other properties of the Trust are, for the purposes
of this Trust, to be considered as capital or income and in what manner
any expenses or disbursements are to be borne as between capital and
income whether or not in the absence of this provision such moneys,
securities, or other properties would be regarded as capital or income and
whether or not in the absence of this provision such expenses or
disbursements would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into classes
and prescribe the tenure of office of the several classes, but no class
of Trustee shall be elected for a period shorter than that from the time
of the election following the division into classes until the next meeting
and thereafter for a period shorter than the interval between meetings or
for a period longer than five years, and the term of office of at least
one class shall expire each year.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable
regulations of the Trustees, not contrary to Massachusetts law, as to
whether and to what extent, and at what times and places, and under what
conditions and regulations, such right shall be exercised.
9. Any officer elected or appointed by the Trustees or by the
Shareholders or otherwise, may be removed at any time, with or without
cause, in such lawful manner as may be provided in the By-Laws of the
Trust.
10. The Trustees shall have power to hold their meetings, to have
an office or offices and, subject to the provisions of the laws of
Massachusetts, to keep the books of the Trust outside of said Commonwealth
at such places as may from time to time be designated by them. Action may
be taken by the Trustees without a meeting by unanimous written consent
or by telephone or similar method of communication.
11. Securities held by the Trust shall be voted in person or by
proxy by the President or a Vice-President, or such officer or officers
of the Trust as the Trustees shall designate for the purpose, or by a
proxy or proxies thereunto duly authorized by the Trustees, except as
otherwise ordered by vote of the holders of a majority of the Shares
outstanding and entitled to vote in respect thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee,
officer or employee, individually, or any partnership of which any
Trustee, officer or employee may be a member, or any corporation or
association of which any Trustee, officer or employee may be an officer,
partner, director, trustee, employee or stockholder, or otherwise may have
an interest, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Trust, and in the
absence of fraud no contract or other transaction shall be thereby
affected or invalidated; provided that in such case a Trustee, officer or
employee or a partnership, corporation or association of which a Trustee,
officer or employee is a member, officer, director, trustee, employee or
stockholder is so interested, such fact shall be disclosed or shall have
been known to the Trustees including those Trustees who are not so
interested and who are neither "interested" nor "affiliated" persons as
those terms are defined in the 1940 Act, or a majority thereof; and any
Trustee who is so interested, or who is also a director, officer, partner,
trustee, employee or stockholder of such other corporation or a member of
such partnership or association which is so interested, may be counted in
determining the existence of a quorum at any meeting of the Trustees which
shall authorize any such contract or transaction, and may vote thereat to
authorize any such contract or transaction, with like force and effect as
if he were not so interested.
(b) Specifically, but without limitation of the foregoing, the
Trust may enter into a management or investment advisory contract or
underwriting contract and other contracts with, and may otherwise do
business with any manager or investment adviser for the Trust and/or
principal underwriter of the Shares of the Trust or any subsidiary or
affiliate of any such manager or investment adviser and/or principal
underwriter and may permit any such firm or corporation to enter into any
contracts or other arrangements with any other firm or corporation
relating to the Trust notwithstanding that the Trustees of the Trust may
be composed in part of partners, directors, officers or employees of any
such firm or corporation, and officers of the Trust may have been or may
be or become partners, directors, officers or employees of any such firm
or corporation, and in the absence of fraud the Trust and any such firm
or corporation may deal freely with each other, and no such contract or
transaction between the Trust and any such firm or corporation shall be
invalidated or in any way affected thereby, nor shall any Trustee or
officer of the Trust be liable to the Trust or to any Shareholder or
creditor thereof or to any other person for any loss incurred by it or him
solely because of the existence of any such contract or transaction;
provided that nothing herein shall protect any director or officer of the
Trust against any liability to the trust or to its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) As used in this paragraph the following terms shall have
the meanings set forth below:
(i) the term "indemnitee" shall mean any present or
former Trustee, officer or employee of the Trust, any present or former
Trustee, partner, Director or officer of another trust, partnership,
corporation or association whose securities are or were owned by the Trust
or of which the Trust is or was a creditor and who served or serves in
such capacity at the request of the Trust, and the heirs, executors,
administrators, successors and assigns of any of the foregoing; however,
whenever conduct by an indemnitee is referred to, the conduct shall be
that of the original indemnitee rather than that of the heir, executor,
administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, to which an indemnitee
is or was a party or is threatened to be made a party by reason of the
fact or facts under which he or it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses
(including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by an indemnitee in connection
with a covered proceeding; and
(v) the term "adjudication of liability" shall mean,
as to any covered proceeding and as to any indemnitee, an adverse
determination as to the indemnitee whether by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any
covered expenses in any covered proceeding if there has been an
adjudication of liability against such indemnitee expressly based on a
finding of disabling conduct.
(e) Except as set forth in paragraph (d) above, the Trust
shall indemnify any indemnitee for covered expenses in any covered
proceeding, whether or not there is an adjudication of liability as to
such indemnitee, such indemnification by the Trust to be to the fullest
extent now or hereafter permitted by any applicable law unless the By-Laws
limit or restrict the indemnification to which any indemnitee may be
entitled. The Board of Trustees may adopt By-Law provisions to implement
sub-paragraphs (c), (d) and (e) hereof.
(f) Nothing herein shall be deemed to affect the right of
the Trust and/or any indemnitee to acquire and pay for any insurance
covering any or all indemnitees to the extent permitted by applicable law
or to affect any other indemnification rights to which any indemnitee may
be entitled to the extent permitted by applicable law. Such rights to
indemnification shall not, except as otherwise provided by law, be deemed
exclusive of any other rights to which such indemnitee may be entitled
under any statute now or hereafter enacted, By-Law, contract or otherwise.
13. The Trustees are empowered, in their absolute discretion, to
establish bases or times, or both, for determining the net asset value per
Share of any Class and Series in accordance with the 1940 Act and to
authorize the voluntary purchase by any Class and Series, either directly
or through an agent, of Shares of any Class and Series upon such terms and
conditions and for such consideration as the Trustees shall deem advisable
in accordance with the 1940 Act.
14. Payment of the net asset value per Share of any Class and
Series properly surrendered to it for redemption shall be made by the
Trust within seven days, or as specified in any applicable law or
regulation, after tender of such stock or request for redemption to the
Trust for such purpose together with any additional documentation that may
be reasonably required by the Trust or its transfer agent to evidence the
authority of the tenderor to make such request, plus any period of time
during which the right of the holders of the shares of such Class of that
Series to require the Trust to redeem such shares has been suspended. Any
such payment may be made in portfolio securities of such Class of that
Series and/or in cash, as the Trustees shall deem advisable, and no
Shareholder shall have a right, other than as determined by the Trustees,
to have Shares redeemed in kind.
15. The Trust shall have the right, at any time and without prior
notice to the Shareholder, to redeem Shares of the Class and Series held
by such Shareholder held in any account registered in the name of such
Shareholder for its current net asset value, if and to the extent that
such redemption is necessary to reimburse either that Series or Class of
the Trust or the distributor (i.e., principal underwriter) of the Shares
for any loss either has sustained by reason of the failure of such
Shareholder to make timely and good payment for Shares purchased or
subscribed for by such Shareholder, regardless of whether such Shareholder
was a Shareholder at the time of such purchase or subscription, subject
to and upon such terms and conditions as the Trustees may from time to
time prescribe.
EIGHTH: The name "Oppenheimer" included in the name of the Trust
and of any Series shall be used pursuant to a royalty-free, non-exclusive
license from Oppenheimer Management Corporation ("OMC"), incidental to and
as part of any one or more advisory, management or supervisory contracts
which may be entered into by the Trust with OMC. Such license shall allow
OMC to inspect and subject to the control of the Board of Trustees to
control the nature and quality of services offered by the Trust under such
name. The license may be terminated by OMC upon termination of such
advisory, management or supervisory contracts or without cause upon 60
days' written notice, in which case neither the Trust nor any Series or
Class shall have any further right to use the name "Oppenheimer" in its
name or otherwise and the Trust, the Shareholders and its officers and
Trustees shall promptly take whatever action may be necessary to change
its name and the names of any Series or Classes accordingly.
NINTH:
1. In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his being or having been a
Shareholder and not because of his acts or omissions or for some other
reason, the Shareholder or former Shareholder (or the Shareholders, heirs,
executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the Trust estate to be held harmless
from and indemnified against all loss and expense arising from such
liability. The Trust shall, upon request by the Shareholder, assume the
defense of any such claim made against any Shareholder for any act or
obligation of the Trust and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a
partnership is created hereby. No individual Trustee hereunder shall have
any power to bind the Trust, the Trust's officers or any Shareholder. All
persons extending credit to, doing business with, contracting with or
having or asserting any claim against the Trust or the Trustees shall look
only to the assets of the Trust for payment under any such credit,
transaction, contract or claim; and neither the Shareholders nor the
Trustees, nor any of their agents, whether past, present or future, shall
be personally liable therefor; notice of such disclaimer shall be given
in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. Nothing in this Declaration of Trust shall
protect a Trustee against any liability to which such Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
3. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances
then prevailing, shall be binding upon everyone interested. Subject to
the provisions of paragraph 2 of this Article NINTH, the Trustees shall
not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the
meaning and operations of this Declaration of Trust, applicable laws,
contracts, obligations, transactions or any other business the Trust may
enter into, and subject to the provisions of paragraph 2 of this Article
NINTH, shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. The Trustees shall
not be required to give any bond as such, nor any surety if a bond is
required.
4. This Trust shall continue without limitation of time but
subject to the provisions of sub-sections (a), (b), (c) and (d) of this
paragraph 4.
(a) The Trustees, with the favorable vote of the holders of
a majority of the outstanding voting securities, as defined in the 1940
Act, of any one or more Series entitled to vote, may sell and convey the
assets of that Series (which sale may be subject to the retention of
assets for the payment of liabilities and expenses) to another issuer for
a consideration which may be or include securities of such issuer. Upon
making provision for the payment of liabilities, by assumption by such
issuer or otherwise, the Trustees shall distribute the remaining proceeds
ratably among the holders of the outstanding Shares of the Series the
assets of which have been so transferred.
(b) The Trustees, with the favorable vote of the holders
of a majority of the outstanding voting securities, as defined in the 1940
Act, of any one or more Series entitled to vote, may at any time sell and
convert into money all the assets of that Series. Upon making provisions
for the payment of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of that Series, the Trustees shall
distribute the remaining assets of that Series ratably among the holders
of the outstanding Shares of that Series.
(c) The Trustees, with the favorable vote of the holders of
a majority of the outstanding voting securities, as defined in the 1940
Act, of any one or more Series entitled to vote, may otherwise alter,
convert or transfer the assets of that Series or those Series.
(d) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in sub-sections (a) and (b),
and in subsection (c) where applicable, the Series the assets of which
have been so transferred shall terminate, and if all the assets of the
Trust have been so transferred, the Trust shall terminate and the Trustees
shall be discharged of any and all further liabilities and duties
hereunder and the right, title and interest of all parties shall be
cancelled and discharged.
5. The original or a copy of this instrument and of each
restated declaration of trust or instrument supplemental hereto shall be
kept at the office of the Trust where it may be inspected by any
Shareholder. A copy of this instrument and of each supplemental or
restated declaration of trust shall be filed with the Secretary of the
Commonwealth of Massachusetts, as well as any other governmental office
where such filing may from time to time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such supplemental or restated declarations of trust
have been made and as to any matters in connection with the Trust
hereunder, and, with the same effect as if it were the original, may rely
on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such supplemental or restated declaration of trust.
In this instrument or in any such supplemental or restated declaration of
trust, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this instrument as
amended or affected by any such supplemental or restated declaration of
trust. This instrument may be executed in any number of counterparts,
each of which shall be deemed an original.
6. The Trust set forth in this instrument is created under and
is to be governed by and construed and administered according to the laws
of the Commonwealth of Massachusetts. The Trust shall be of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption
of the Shares held in any account if the aggregate net asset value of such
Shares has been reduced to $200 or less upon such notice to the
shareholder in question, with such permission to increase the investment
in question and upon such other terms and conditions as may be fixed by
the Board of Trustees in accordance with the 1940 Act.
8. In the event that any person advances the organizational
expenses of the Trust, such advances shall become an obligation of the
Trust subject to such terms and conditions as may be fixed by, and on a
date fixed by, or determined with criteria fixed by the Board of Trustees,
to be amortized over a period or periods to be fixed by the Board.
9. Whenever any action is taken under this Declaration of Trust
including action which is required or permitted by the 1940 Act or any
other applicable law, such action shall be deemed to have been properly
taken if such action is in accordance with the construction of the 1940
Act or such other applicable law then in effect as expressed in "no
action" letters of the staff of the Commission or any release, rule,
regulation or order under the 1940 Act or any decision of a court of
competent jurisdiction, notwithstanding that any of the foregoing shall
later be found to be invalid or otherwise reversed or modified by any of
the foregoing.
10. Any action which may be taken by the Board of Trustees under
this Declaration of Trust or its By-Laws may be taken by the description
thereof in the then effective prospectus and/or statement of additional
information relating to the Shares under the Securities Act of 1933 or in
any proxy statement of the Trust rather than by formal resolution of the
Board.
11. Whenever under this Declaration of Trust, the Board of
Trustees is permitted or required to place a value on assets of the Trust,
such action may be delegated by the Board, and/or determined in accordance
with a formula determined by the Board, to the extent permitted by the
1940 Act.
12. If authorized by vote of the Trustees and, if a vote of
Shareholders is required under this Declaration of Trust, the favorable
vote of the holders of a "majority" of the outstanding voting securities,
as defined in the 1940 Act, entitled to vote, or by any larger vote which
may be required by applicable law in any particular case, the Trustees may
amend or otherwise supplement this instrument, by making a Restated
Declaration of Trust or a Declaration of Trust supplemental hereto, which
thereafter shall form a part hereof; any such Supplemental or Restated
Declaration of Trust may be executed by and on behalf of the Trust and the
Trustees by an officer or officers of the Trust.
orgzn\790dot.996
IN WITNESS WHEREOF, the undersigned have executed this instrument
as of this 16th day of September, 1996.
/s/ Robert G. Galli
____________________________
Robert G. Galli
11-54 Shearwater Court
Jersey City, NJ 07305
/s/ Leon Levy
____________________________
Leon Levy
One Sutton Place South
New York, NY 10022
/s/ Russell S. Reynolds
____________________________
Russell S. Reynolds
39 Clapboard Ridge Road
Greenwich, CT 06830
/s/ Clayton K. Yeutter
____________________________
Clayton K. Yeutter
1325 Merrie Ridge Road
McLean, Virginia 22101
/s/ Benjamin Lipstein
____________________________
Benjamin Lipstein
591 Breezy Hill Road
Hillsdale, NY 2529
/s/ Bridget A. Macaskill
___________________________
Bridget A. Macaskill
160 East 81st Street
New York, NY 10028<PAGE>
/s/ Donald W. Spiro
____________________________
Donald W. Spiro
399 Ski Trail
Kinnelon, NJ 07405
/s/ Pauline Trigere
____________________________
Pauline Trigere
525 Park Avenue
New York, NY 10021
/s/ Kenneth A. Randall
____________________________
Kenneth A. Randall
6 Whittaker's Mill
Williamsburg, VA 23185
/s/ Elizabeth B. Moynihan
____________________________
Elizabeth B. Moynihan
801 Pennsylvania Avenue
Washington, D.C. 20004
/s/ Edward V. Regan
____________________________
Edward V. Regan
40 Park Avenue
New York, NY 10016
/s/ Sidney M. Robbins
____________________________
Sidney M. Robbins
50 Overlook Road
Ossining, NY 10562
orgzn\790dot.996
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
Class A Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: (upper right) box with heading:
NUMBER (OF SHARES) CLASS A SHARES
(certificate number above)
(centered below boxes)
Oppenheimer California Municipal Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) (at right)
THIS IS TO CERTIFY THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683912 10 9
(at left)
is the owner of
(centered)
FULLY PAID CLASS A SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
- ------------------------------------------------------------------------
(hereinafter called the "Fund"), transferable only on the books
of the Fund by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its
duly authorized officers.
(at left of seal) (at right of seal)
(signature) Dated:
/s/ George C. Bowen /s/ Bridget A. Macaskill
- --------------------- -------------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER CALFORNIA MUNICIPAL FUND
SEAL
1988
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo) Transfer Agent
By
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with rights of survivorship and not as
tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received __________________ hereby sell(s), and transfer(s) unto
(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)
- -------------------------------------------------------------------------
(Please print or type name and address of assignee)
<PAGE>
- ------------------------------------------------------------------------
- ----------------- Class A Shares of beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint.
- --------------------- Attorney to transfer the said shares on the books
of the within named Fund with full power of substitution in the premises.
Dated: ---------------------
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) --------------------------
guaranteed Name of Guarantor
by --------------------------
Signature of Officer/Title
(text printed vertically to right of above paragraph)
NOTICE: The signature(s) to this assignment must correspond with the
name(s) as written upon the face of the certificate in every particular
without alteration or enlargement or any change whatever.
(text printed in box to left of signature guarantee)
Signatures must be guaranteed by a financial institution of the type
described in the current prospectus of the Fund.
(at left) (at right)
PLEASE NOTE: This document contains OppenheimerFunds
a watermark when viewed at an angle. logotype
It is invalid without this watermark.
- -------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
certific\790.A
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
Class B Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: (upper right) box with heading:
NUMBER (OF SHARES) CLASS B SHARES
(certificate number above)
(centered below boxes)
Oppenheimer California Municipal Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) (at right)
THIS IS TO CERTIFY THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683912 20 8
(at left)
is the owner of
(centered)
FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
- ------------------------------------------------------------------------
(hereinafter called the "Fund"), transferable only on the books
of the Fund by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its
duly authorized officers.
(at left of seal) (at right of seal)
(signature) Dated:
/s/ George C. Bowen /s/ Bridget A. Macaskill
- --------------------- -------------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER CALFORNIA MUNICIPAL FUND
SEAL
1988
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo) Transfer Agent
By
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with rights of survivorship and not as
tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received __________________ hereby sell(s), and transfer(s) unto
(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)
- -------------------------------------------------------------------------
(Please print or type name and address of assignee)
<PAGE>
- ------------------------------------------------------------------------
- ----------------- Class A Shares of beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint.
- --------------------- Attorney to transfer the said shares on the books
of the within named Fund with full power of substitution in the premises.
Dated: ---------------------
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) --------------------------
guaranteed Name of Guarantor
by --------------------------
Signature of Officer/Title
(text printed vertically to right of above paragraph)
NOTICE: The signature(s) to this assignment must correspond with the
name(s) as written upon the face of the certificate in every particular
without alteration or enlargement or any change whatever.
(text printed in box to left of signature guarantee)
Signatures must be guaranteed by a financial institution of the type
described in the current prospectus of the Fund.
(at left) (at right)
PLEASE NOTE: This document contains OppenheimerFunds
a watermark when viewed at an angle. logotype
It is invalid without this watermark.
- -------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
certific\790.B
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
Class C Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: (upper right) box with heading:
NUMBER (OF SHARES) CLASS C SHARES
(certificate number above)
(centered below boxes)
Oppenheimer California Municipal Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) (at right)
THIS IS TO CERTIFY THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683912307
(at left)
is the owner of
(centered)
FULLY PAID CLASS C SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER CALIFORNIA MUNICIPAL FUND
- ------------------------------------------------------------------------
(hereinafter called the "Fund"), transferable only on the books
of the Fund by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the
Declaration of Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its
duly authorized officers.
(at left of seal) (at right of seal)
(signature) Dated:
/s/ George C. Bowen /s/ Bridget A. Macaskill
- --------------------- -------------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER CALFORNIA MUNICIPAL FUND
SEAL
1988
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo) Transfer Agent
By
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with rights of survivorship and not as
tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received __________________ hereby sell(s), and transfer(s) unto
(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)
- -------------------------------------------------------------------------
(Please print or type name and address of assignee)
<PAGE>
- ------------------------------------------------------------------------
- ----------------- Class A Shares of beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint.
- --------------------- Attorney to transfer the said shares on the books
of the within named Fund with full power of substitution in the premises.
Dated: ---------------------
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) --------------------------
guaranteed Name of Guarantor
by --------------------------
Signature of Officer/Title
(text printed vertically to right of above paragraph)
NOTICE: The signature(s) to this assignment must correspond with the
name(s) as written upon the face of the certificate in every particular
without alteration or enlargement or any change whatever.
(text printed in box to left of signature guarantee)
Signatures must be guaranteed by a financial institution of the type
described in the current prospectus of the Fund.
(at left) (at right)
PLEASE NOTE: This document contains OppenheimerFunds
a watermark when viewed at an angle. logotype
It is invalid without this watermark.
- -------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
certific\790.C
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer California Municipal Fund:
We consent to the use in this Registration Statement of Oppenheimer
California Municipal Fund (formerly known as California Tax-Exempt Fund)
of our reports dated August 21, 1996 and January 22, 1996 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to our firm under the heading "Financial
Highlights" in Part A of such Registration Statement.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Denver, Colorado
October 22, 1996
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
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
Oppenheimer California Tax-Exempt Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
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 0.0088 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 0.0721 10.940
01/10/94 0.0504000 0.0000 10.970
02/10/94 0.0504000 0.0000 10.950
03/10/94 0.0504000 0.0000 10.410
04/08/94 0.0504000 0.0000 10.060
05/10/94 0.0504000 0.0000 10.000
06/10/94 0.0504000 0.0000 10.270
07/08/94 0.0504000 0.0000 9.980
08/10/94 0.0504000 0.0000 10.070
09/09/94 0.0504000 0.0000 10.030
10/10/94 0.0504000 0.0000 9.770
11/10/94 0.0504000 0.0000 9.310
12/09/94 0.0504000 0.0000 9.320
01/10/95 0.0504000 0.0000 9.520
02/10/95 0.0504000 0.0000 9.930
03/10/95 0.0504000 0.0000 10.060
04/10/95 0.0504000 0.0000 10.190
05/10/95 0.0504000 0.0000 10.270
06/09/95 0.0504000 0.0000 10.400
07/10/95 0.0504000 0.0000 10.360
08/10/95 0.0473000 0.0000 10.150
09/08/95 0.0473000 0.0000 10.330
10/10/95 0.0473000 0.0000 10.380
11/10/95 0.0473000 0.0000 10.470
12/08/95 0.0473000 0.0000 10.680
01/10/96 0.0473000 0.0000 10.620
02/09/96 0.0473000 0.0000 10.740
03/08/96 0.0473000 0.0000 10.400
04/10/96 0.0473000 0.0000 10.250
05/10/96 0.0473000 0.0000 10.260
06/10/96 0.0473000 0.0000 10.150
07/10/96 0.0473000 0.0000 10.240
Oppenheimer California Tax-Exempt Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares
05/14/93 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 0.0721 10.950
01/10/94 0.0433856 0.0000 10.970
02/10/94 0.0430518 0.0000 10.960
03/10/94 0.0437232 0.0000 10.420
04/08/94 0.0430415 0.0000 10.070
05/10/94 0.0437753 0.0000 10.010
06/10/94 0.0430383 0.0000 10.280
07/08/94 0.0443040 0.0000 9.990
08/10/94 0.0437390 0.0000 10.080
09/09/94 0.0435645 0.0000 10.040
10/10/94 0.0443283 0.0000 9.770
11/10/94 0.0441458 0.0000 9.310
12/09/94 0.0443163 0.0000 9.320
01/10/95 0.0446212 0.0000 9.520
02/10/95 0.0437063 0.0000 9.940
03/10/95 0.0442693 0.0000 10.070
04/10/95 0.0441333 0.0000 10.200
05/10/95 0.0438432 0.0000 10.270
06/09/95 0.0432950 0.0000 10.400
07/10/95 0.0440313 0.0000 10.360
08/10/95 0.0406437 0.0000 10.160
09/08/95 0.0406531 0.0000 10.330
10/10/95 0.0408022 0.0000 10.380
11/10/95 0.0399622 0.0000 10.480
12/08/95 0.0409742 0.0000 10.690
01/10/96 0.0403520 0.0000 10.620
02/09/96 0.0400933 0.0000 10.740
03/08/96 0.0410200 0.0000 10.410
04/10/96 0.0404913 0.0000 10.250
05/10/96 0.0404042 0.0000 10.260
06/10/96 0.0410507 0.0000 10.150
07/10/96 0.0408974 0.0000 10.240
Class C Shares
11/10/95 0.0146109 0.0000 10.470
12/08/95 0.0409911 0.0000 10.670
01/10/96 0.0403407 0.0000 10.610
02/09/96 0.0387636 0.0000 10.730
03/08/96 0.0380735 0.0000 10.390
04/10/96 0.0379881 0.0000 10.240
05/10/96 0.0397224 0.0000 10.250
06/10/96 0.0409604 0.0000 10.140
07/10/96 0.0404996 0.0000 10.230
Oppenheimer California Tax-Exempt Fund
Page 4
1. Average Annual Total Returns for the Periods Ended 07/31/96:
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
$1,020.45 1 $1,355.79 .2
(---------) - 1 = 2.05% (---------) - 1 = 6.28%
$1,000 $1,000
Inception
$1,715.75 .1291
(---------) - 1 = 7.22%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 2.00% for the inception year:
One Year Inception
$1,013.11 1 $1,129.05 .3077
(---------) - 1 = 1.31% (---------) - 1 = 3.81%
$1,000 $1,000
Oppenheimer California Tax-Exempt Fund
Page 5
1. Average Annual Total Returns for the Periods Ended 07/31/96 (Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$1,071.35 1 $1,423.43 .2
(---------) - 1 = 7.14% (---------) - 1 = 7.32%
$1,000 $1,000
Inception
$1,801.39 .1291
(---------) - 1 = 7.90%
$1,000
Class B Shares
One Year Inception
$1,063.10 1 $1,148.45 .3077
(---------) - 1 = 6.31% (---------) - 1 = 4.35%
$1,000 $1,000
2. Cumulative Total Returns for the Periods Ended 07/31/96:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,020.45 - $1,000 $1,355.79 - $1,000
------------------ = 2.05% ------------------ = 35.58%
$1,000 $1,000
Inception
$1,715.75 - $1,000
------------------ = 71.58%
$1,000
Oppenheimer California Tax-Exempt Fund
Page 6
2. Cumulative Total Returns for the Periods Ended 07/31/96 (Continued):
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 2.00% for the inception year:
One Year Inception
$1,013.11 - $1,000 $1,129.05 - $1,000
------------------ = 1.31% ------------------ = 12.91%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00% for the
inception year:
Inception
$1,017.11 - $1,000
------------------ = 1.71%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year
$1,071.35 - $1,000 $1,423.43 - $1,000
------------------ = 7.14% ------------------ = 42.34%
$1,000 $1,000
Inception
$1,801.39 - $1,000
------------------ = 80.14%
$1,000
Class B Shares
One Year Inception
$1,063.10 - $1,000 $1,148.45 - $1,000
------------------ = 6.31% ------------------ = 14.85%
$1,000 $1,000
Class C Shares
Inception
$1,027.03 - $1,000
------------------ = 2.70%
$1,000
Oppenheimer California Tax-Exempt Fund
Page 7
3. Standardized Yield for the 30-Day Period Ended 07/31/96:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$1,362,382.73 - $224,308.54 6
2{(--------------------------- + 1) - 1} = 4.65%
27,168,968 x $10.91
Class B Shares
Example at NAV:
$ 245,512.25 - $ 72,424.41 6
2{(--------------------------- + 1) - 1} = 4.12%
4,894,693 x $10.39
Class C Shares
Example at NAV:
$ 9,286.28 - $ 2,845.60 6
2{(--------------------------- + 1) - 1} = 4.05%
185,370 x $10.38
Oppenheimer California Tax-Exempt Fund
Page 8
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 07/31/96:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share
on the last day of the period.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0452294/30 x 365
------------------ = 5.04%
$10.91
Dividend Yield
at Net Asset Value $.0452294/30 x 365
------------------ = 5.30%
$10.39
Class B Shares
Dividend Yield
at Net Asset Value $.0387608/30 x 365
------------------ = 4.54%
$10.39
Class C Shares
Dividend Yield
at Net Asset Value $.0382098/30 x 365
------------------ = 4.48%
$10.38
Oppenheimer California Tax-Exempt Fund
Page 9
4. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 07/31/96:
The Fund's tax-equivalent yields are calculated using the following
formula:
a
----- + b = Tax-Equivalent Yield
1 - c
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio.
b = 30-day SEC yield of taxable security positions in the portfolio.
c = Combined stated tax rate (e.g., federal and state income tax rates
for an individual in the 39.6% federal tax bracket filing singly).
Examples:
Class A Shares
.0465
----------- + 0 = 8.65%
1 - .4624
Class B Shares
.0412
----------- + 0 = 7.66%
1 - .4624
Class C Shares
.0405
----------- + 0 = 7.53%
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 11.00% state tax bracket filing singly).
Example: 1 - {(1 - .3960)(1 - 0.1100)} = 46.24%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
837441
<NAME> OPPENHEIMER CALIFORNIA TAX-EXEMPT A
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST>
328,664,878
<INVESTMENTS-AT-VALUE>
335,588,185
<RECEIVABLES>
6,019,002
<ASSETS-OTHER>
15,899
<OTHER-ITEMS-ASSETS>
347,617
<TOTAL-ASSETS>
341,970,703
<PAYABLE-FOR-SECURITIES>
0
<SENIOR-LONG-TERM-DEBT>
0
<OTHER-ITEMS-LIABILITIES>
1,729,027
<TOTAL-LIABILITIES>
1,729,027
<SENIOR-EQUITY>
0
<PAID-IN-CAPITAL-COMMON>
333,255,015
<SHARES-COMMON-STOCK>
27,539,996
<SHARES-COMMON-PRIOR>
26,699,566
<ACCUMULATED-NII-CURRENT>
868,145
<OVERDISTRIBUTION-NII>
0
<ACCUMULATED-NET-GAINS>
(776,510)
<OVERDISTRIBUTION-GAINS>
0
<ACCUM-APPREC-OR-DEPREC>
6,895,026
<NET-ASSETS>
286,032,922
<DIVIDEND-INCOME>
0
<INTEREST-INCOME>
12,390,825
<OTHER-INCOME>
0
<EXPENSES-NET>
2,058,755
<NET-INVESTMENT-INCOME>
10,332,070
<REALIZED-GAINS-CURRENT>
350,347
<APPREC-INCREASE-CURRENT>
(9,638,403)
<NET-CHANGE-FROM-OPS>
1,044,014
<EQUALIZATION>
0
<DISTRIBUTIONS-OF-INCOME>
8,865,165
<DISTRIBUTIONS-OF-GAINS>
0
<DISTRIBUTIONS-OTHER>
0
<NUMBER-OF-SHARES-SOLD>
3,209,059
<NUMBER-OF-SHARES-REDEEMED>
2,856,210
<SHARES-REINVESTED>
487,581
<NET-CHANGE-IN-ASSETS>
13,586,073
<ACCUMULATED-NII-PRIOR>
756,370
<ACCUMULATED-GAINS-PRIOR>
(1,150,415)
<OVERDISTRIB-NII-PRIOR>
0
<OVERDIST-NET-GAINS-PRIOR>
0
<GROSS-ADVISORY-FEES>
1,097,974
<INTEREST-EXPENSE>
0
<GROSS-EXPENSE>
2,058,755
<AVERAGE-NET-ASSETS>
279,796,000
<PER-SHARE-NAV-BEGIN>
10.69
<PER-SHARE-NII>
0.33
<PER-SHARE-GAIN-APPREC>
(0.30)
<PER-SHARE-DIVIDEND>
0.33
<PER-SHARE-DISTRIBUTIONS>
0.00
<RETURNS-OF-CAPITAL>
0.00
<PER-SHARE-NAV-END>
10.39
<EXPENSE-RATIO>
0.97
<AVG-DEBT-OUTSTANDING>
0
<AVG-DEBT-PER-SHARE>
0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
837441
<NAME> OPPENHEIMER CALIFORNIA TAX-EXEMPT B
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST>
328,664,878
<INVESTMENTS-AT-VALUE>
335,588,185
<RECEIVABLES>
6,019,002
<ASSETS-OTHER>
15,899
<OTHER-ITEMS-ASSETS>
347,617
<TOTAL-ASSETS>
341,970,703
<PAYABLE-FOR-SECURITIES>
0
<SENIOR-LONG-TERM-DEBT>
0
<OTHER-ITEMS-LIABILITIES>
1,729,027
<TOTAL-LIABILITIES>
1,729,027
<SENIOR-EQUITY>
0
<PAID-IN-CAPITAL-COMMON>
333,255,015
<SHARES-COMMON-STOCK>
5,008,911
<SHARES-COMMON-PRIOR>
3,856,567
<ACCUMULATED-NII-CURRENT>
868,145
<OVERDISTRIBUTION-NII>
0
<ACCUMULATED-NET-GAINS>
(776,510)
<OVERDISTRIBUTION-GAINS>
0
<ACCUM-APPREC-OR-DEPREC>
6,895,026
<NET-ASSETS>
52,038,162
<DIVIDEND-INCOME>
0
<INTEREST-INCOME>
12,390,825
<OTHER-INCOME>
0
<EXPENSES-NET>
2,058,755
<NET-INVESTMENT-INCOME>
10,332,070
<REALIZED-GAINS-CURRENT>
350,347
<APPREC-INCREASE-CURRENT>
(9,638,403)
<NET-CHANGE-FROM-OPS>
1,044,014
<EQUALIZATION>
0
<DISTRIBUTIONS-OF-INCOME>
1,260,228
<DISTRIBUTIONS-OF-GAINS>
0
<DISTRIBUTIONS-OTHER>
0
<NUMBER-OF-SHARES-SOLD>
1,589,523
<NUMBER-OF-SHARES-REDEEMED>
506,438
<SHARES-REINVESTED>
69,259
<NET-CHANGE-IN-ASSETS>
13,586,073
<ACCUMULATED-NII-PRIOR>
756,370
<ACCUMULATED-GAINS-PRIOR>
(1,150,415)
<OVERDISTRIB-NII-PRIOR>
0
<OVERDIST-NET-GAINS-PRIOR>
0
<GROSS-ADVISORY-FEES>
1,097,974
<INTEREST-EXPENSE>
0
<GROSS-EXPENSE>
2,058,755
<AVERAGE-NET-ASSETS>
46,422,000
<PER-SHARE-NAV-BEGIN>
10.69
<PER-SHARE-NII>
0.28
<PER-SHARE-GAIN-APPREC>
(0.30)
<PER-SHARE-DIVIDEND>
0.28
<PER-SHARE-DISTRIBUTIONS>
0.00
<RETURNS-OF-CAPITAL>
0.00
<PER-SHARE-NAV-END>
10.39
<EXPENSE-RATIO>
1.74
<AVG-DEBT-OUTSTANDING>
0
<AVG-DEBT-PER-SHARE>
0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
837441
<NAME> OPPENHEIMER CALIFORNIA TAX-EXEMPT C
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST>
328,664,878
<INVESTMENTS-AT-VALUE>
335,588,185
<RECEIVABLES>
6,019,002
<ASSETS-OTHER>
15,899
<OTHER-ITEMS-ASSETS>
347,617
<TOTAL-ASSETS>
341,970,703
<PAYABLE-FOR-SECURITIES>
0
<SENIOR-LONG-TERM-DEBT>
0
<OTHER-ITEMS-LIABILITIES>
1,729,027
<TOTAL-LIABILITIES>
1,729,027
<SENIOR-EQUITY>
0
<PAID-IN-CAPITAL-COMMON>
333,255,015
<SHARES-COMMON-STOCK>
209,190
<SHARES-COMMON-PRIOR>
11,669
<ACCUMULATED-NII-CURRENT>
868,145
<OVERDISTRIBUTION-NII>
0
<ACCUMULATED-NET-GAINS>
(776,510)
<OVERDISTRIBUTION-GAINS>
0
<ACCUM-APPREC-OR-DEPREC>
6,895,026
<NET-ASSETS>
2,170,592
<DIVIDEND-INCOME>
0
<INTEREST-INCOME>
12,390,825
<OTHER-INCOME>
0
<EXPENSES-NET>
2,058,755
<NET-INVESTMENT-INCOME>
10,332,070
<REALIZED-GAINS-CURRENT>
350,347
<APPREC-INCREASE-CURRENT>
(9,638,403)
<NET-CHANGE-FROM-OPS>
1,044,014
<EQUALIZATION>
0
<DISTRIBUTIONS-OF-INCOME>
30,161
<DISTRIBUTIONS-OF-GAINS>
0
<DISTRIBUTIONS-OTHER>
0
<NUMBER-OF-SHARES-SOLD>
213,392
<NUMBER-OF-SHARES-REDEEMED>
17,583
<SHARES-REINVESTED>
1,712
<NET-CHANGE-IN-ASSETS>
13,586,073
<ACCUMULATED-NII-PRIOR>
756,370
<ACCUMULATED-GAINS-PRIOR>
(1,150,415)
<OVERDISTRIB-NII-PRIOR>
0
<OVERDIST-NET-GAINS-PRIOR>
0
<GROSS-ADVISORY-FEES>
1,097,974
<INTEREST-EXPENSE>
0
<GROSS-EXPENSE>
2,058,755
<AVERAGE-NET-ASSETS>
1,156,000
<PER-SHARE-NAV-BEGIN>
10.68
<PER-SHARE-NII>
0.27
<PER-SHARE-GAIN-APPREC>
(0.30)
<PER-SHARE-DIVIDEND>
0.27
<PER-SHARE-DISTRIBUTIONS>
0.00
<RETURNS-OF-CAPITAL>
0.00
<PER-SHARE-NAV-END>
10.38
<EXPENSE-RATIO>
1.80
<AVG-DEBT-OUTSTANDING>
0
<AVG-DEBT-PER-SHARE>
0.00
</TABLE>
